The IBC Super-Statute: NCLAT Expands Residuary Powers to Defreeze Demat Accounts While Supreme Court Clamps Down on SRA 'Buyer's Remorse'

The NCLT’s Jurisdiction Creep Continues—And Practitioners Should Rejoice

If there is one undeniable trend in Indian corporate insolvency jurisprudence, it is the relentless expansion of the National Company Law Tribunal’s (NCLT) footprint. The Insolvency and Bankruptcy Code (IBC), 2016, was always designed as a complete code, but recent rulings from the NCLAT and the Supreme Court are aggressively cementing its status as a "super-statute," overriding regulatory silos that have historically frustrated asset realization.

For insolvency professionals and corporate litigators, the latest batch of appellate rulings delivers a clear message: The NCLT is your one-stop-shop, but you had better play by the strict procedural rules, because the Supreme Court is watching.

Defreezing Demat Accounts: Section 60(5) Flexes Its Muscle

One of the most persistent headaches for Resolution Professionals (RPs) and Liquidators has been dealing with assets frozen by other regulators, such as SEBI or the Enforcement Directorate. In a highly significant development, the NCLAT has upheld the NCLT’s power to defreeze demat accounts of corporate debtors in insolvency matters.

The legal anchor here is Section 60(5)(c) of the IBC, which grants the adjudicating authority residuary jurisdiction to entertain or dispose of "any question of priorities or any question of law or facts, arising out of or in relation to the insolvency resolution or liquidation proceedings."

Historically, depositories (like CDSL or NSDL) and stock exchanges have argued that freezing orders fall under securities law, requiring RPs to seek relief from the Securities Appellate Tribunal (SAT). The NCLAT has now firmly rejected this fragmented approach. The tribunal held that where the ownership of the shares is undisputed and the defreezing is strictly tied to asset realization for the insolvency estate, the NCLT is perfectly within its rights to intervene.

For practicing lawyers, this is a massive tactical shift. You no longer need to advise your liquidator clients to file parallel writ petitions or trudge to SAT to unlock undisputed securities. Draft your Section 60(5) application squarely focusing on maximizing asset value, and rely on the IBC's non-obstante clause (Section 238) to steamroll depository objections.

Investigations Under Section 213: A Warning Against Ex-Parte Enthusiasm

While the NCLAT expanded the NCLT’s powers on the asset realization front, it simultaneously pulled the reins on its procedural overreach regarding corporate investigations.

In recent insolvency proceedings, we have seen a growing trend of NCLT benches casually invoking Rule 11 of the NCLT Rules, 2016 (inherent powers) to direct investigations into the affairs of the corporate debtor, often at the behest of aggrieved creditors alleging fraud by the suspended management.

The NCLAT has stepped in to clarify the interface between the IBC and the Companies Act, 2013. It ruled that while the NCLT absolutely has the power to direct investigations into a company’s affairs under Section 213 of the Companies Act, it cannot use Rule 11 to bypass statutory preconditions. Section 213 mandates that affected parties be given a reasonable opportunity to be heard (audi alteram partem).

Practice Pointer: If you are defending suspended directors or promoters, this ruling is your shield. Any NCLT order directing a probe without issuing a show-cause notice or granting a hearing is now ripe for a stay at the NCLAT. The inherent powers of Rule 11 cannot override the express procedural safeguards of Section 213.

Supreme Court to SRAs: No Buyer’s Remorse Allowed

While the NCLAT handles the mechanics of the IBC, the Supreme Court is currently fixated on the sanctity of the Corporate Insolvency Resolution Process (CIRP) timeline and the finality of resolution plans.

The Apex Court has reiterated strict discipline regarding the enforcement of plans approved by the Committee of Creditors (CoC). We are seeing a zero-tolerance policy toward Successful Resolution Applicants (SRAs) who attempt to walk back, renegotiate, or indirectly withdraw their plans after CoC approval. Building on the landmark Ebix Singapore precedent, the Court is making it clear that the "commercial wisdom of the CoC" is a locked door. Once a plan is approved by the CoC, it becomes a binding contract, irrespective of whether the NCLT has formally stamped it yet under Section 31.

For transactional lawyers advising potential bidders: Conduct your due diligence exhaustively before submitting a binding resolution plan. The days of using the NCLT approval window as a period to renegotiate terms due to "changed commercial realities" are over. If your client tries to back out, they risk not only the forfeiture of their Earnest Money Deposit (EMD) but also prosecution under the IBC.

The Elephant in the Room: Systemic Delays

Ironically, while the Supreme Court demands strict adherence to timelines from creditors and SRAs, it has had to take suo motu cognizance of systemic delays in NCLT resolution-plan approvals. The average resolution time under the IBC has routinely breached the 330-day outer limit, severely eroding asset value.

The NCLT’s jurisdiction is expanding, but its infrastructural bandwidth is not keeping pace. Until the government appoints more technical and judicial members, practitioners will continue to face the frustrating reality of winning a hard-fought CoC vote, only to wait twelve months for a final NCLT seal of approval.

In the interim, corporate litigators must aggressively use the recent jurisprudence to cut through procedural red tape. Keep your Section 9 threshold arguments strictly to the existence of a "pre-existing dispute," leverage Section 60(5) to consolidate asset recovery before a single bench, and ensure your SRAs are fully committed before the CoC votes.