The NCLT’s Super-Regulator Era: Expanding Jurisdiction Under Section 60(5) and the Clash with Securities Law

The IBC is Eating Other Laws

For corporate litigators and Resolution Professionals (RPs), the defining narrative of 2026 is no longer just about haircuts and recovery rates. It is about turf. The National Company Law Tribunal (NCLT) is rapidly mutating from a specialized debt resolution forum into a single-window super-regulator during the Corporate Insolvency Resolution Process (CIRP). Recent rulings by the NCLAT heavily underscore a jurisprudential trend: when the objective is asset preservation and value maximization, the Insolvency and Bankruptcy Code (IBC) will bulldoze competing statutory restraints.

This expansion of power is anchored in Section 60(5)(c) of the IBC, which grants the NCLT residuary jurisdiction to entertain any question of law or fact arising out of or in relation to insolvency. When coupled with the non-obstante clause under Section 238, the NCLT is increasingly empowered to unblock assets that other regulators have locked down.

Defreezing Demat Accounts: The SEBI and BSE Pushback Fails

The most consequential development in this turf war is the NCLAT’s May 2026 ruling upholding the NCLT’s power to direct the de-freezing of demat accounts belonging to a corporate debtor. Dismissing pleas from the BSE, the appellate tribunal firmly established that securities law cannot paralyze the CIRP.

Why does this matter for your practice? Previously, RPs found their hands tied when taking over management under Section 17 of the IBC, only to discover that the corporate debtor’s securities were frozen by stock exchanges or SEBI due to prior compliance defaults. Depositories would refuse to transfer shares, citing strict regulatory embargoes. The NCLAT has now made it clear: where share ownership by the corporate debtor is undisputed, the NCLT can order the unfreezing of these accounts.

"The IBC’s mandate for effective insolvency administration and asset realization overrides securities-law restraints when they directly conflict with the duties of the Resolution Professional."

The takeaway for practitioners: Do not wait for SEBI or the exchanges to lift embargoes through their prolonged administrative mechanisms. File a Section 60(5) application immediately upon discovering frozen demat accounts. The NCLT has the jurisdictional muscle to order depositories to cooperate, ensuring the CIRP timeline is not derailed by secondary regulators.

Section 213 Probes: A Weapon, But Not a Blank Cheque

While the NCLAT has fortified the NCLT’s power against external regulators, it has also clarified the Tribunal’s internal powers to pierce the corporate veil. In a crucial May 15, 2026 update, the NCLAT ruled that the NCLT, while adjudicating IBC matters, can invoke powers under Section 213 of the Companies Act, 2013 to direct investigations into the company's affairs (such as by the SFIO).

However, the NCLAT introduced a vital procedural safeguard: audi alteram partem. The NCLT cannot issue blanket directions for statutory investigations based merely on the RP's transaction audit reports. The suspended board and concerned parties must be granted a reasonable opportunity to be heard.

This is a critical practice point for lawyers representing the Committee of Creditors (CoC) or RPs. It is common practice to use the threat of an SFIO probe as a pressure tactic against ex-promoters regarding preferential, undervalued, fraudulent, or extortionate (PUFE) transactions under Sections 43, 45, 66, and 50 of the IBC. The NCLAT has now signaled that NCLT observations in IBC proceedings do not automatically equate to an indictment warranting a Section 213 probe. You must meticulously build a prima facie case of fraud and strictly comply with procedural due process before the NCLT will unleash statutory investigative agencies.

Statutory Dues vs. The Moratorium: A Settled Debate

This expanding jurisdiction is built on the foundation of earlier Supreme Court precedents prioritizing the IBC over other statutes. The lingering ghost of the Customs Act clash remains a prime example. The apex court previously cemented that during the Section 14 moratorium, customs authorities can assess dues but absolutely cannot recover them by confiscating or selling the corporate debtor's assets.

Whether it is the Customs Department, SEBI, or the BSE, the legal hierarchy is now undeniable. The res (the assets of the corporate debtor) is fully protected under the umbrella of the NCLT until resolution or liquidation.

The Reality Check: Legal Supremacy Meets Operational Paralysis

Despite these sweeping jurisdictional victories, the IBC regime faces a severe operational crisis. The Ministry of Finance recently directed PSU bank CEOs to personally monitor the top 20 admission-stage cases and 10 accounts pending resolution. The IBBI is issuing strict circulars to enforce adherence to timelines.

The bitter irony for corporate lawyers is this: we now have a Tribunal with near-plenary powers over the corporate debtor's universe, but it lacks the bandwidth to exercise them efficiently. The government boasts that over 28,800 applications (worth Rs 10 lakh crore) were resolved before admission. While this is painted as a success of the IBC's credible threat, it is equally an indictment of the NCLT's backlog. Creditors are increasingly leveraging Section 12A withdrawals to settle outside the Tribunal simply because litigating a fully contested CIRP takes years, destroying the very asset value the IBC was designed to protect.

The Bottom Line: As a practitioner in 2026, your strategy must be dual-pronged. Use the NCLT’s expanded Section 60(5) powers aggressively to strip away external encumbrances (like frozen demat accounts) and protect the asset pool. But simultaneously, manage client expectations regarding timelines. The law is firmly on the side of the resolute creditor, but the infrastructure is still playing catch-up.