The National Company Law Appellate Tribunal (NCLAT) has upheld orders from the National Company Law Tribunal (NCLT) directing the Bombay Stock Exchange (BSE) to defreeze the demat accounts of two companies in insolvency—Future Corporate Resources and Liz Traders and Agents. BSE had frozen these accounts due to the companies’ alleged non-payment of annual listing fees. Resolution professionals for the companies approached the NCLT, seeking to sell shares held in these accounts to recover funds for creditors.
BSE appealed the NCLT’s defreezing orders to NCLAT, challenging the tribunal’s jurisdiction to issue such directions during insolvency proceedings. Dismissing the appeals, NCLAT’s two-member bench ruled that the NCLT indeed possesses jurisdiction under Section 60(5) of the Insolvency and Bankruptcy Code (IBC) to entertain and pass orders on applications for defreezing demat accounts during insolvency or liquidation.
The appellate tribunal clarified that the ownership of the shares in the frozen accounts was not in dispute. It held that the dues leading to the freeze had transformed into a ‘debt’ under the insolvency process. Consequently, the NCLT has the jurisdiction to address this debt as it is directly connected to the companies’ insolvency, making its orders a valid exercise of power under the IBC framework.
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