The Turf War Settles: NCLAT Cements IBC Primacy Over SEBI, While Supreme Court Wields the Whip on NCLT Delays

For corporate insolvency practitioners, 2026 has opened with a resounding jurisprudential theme: The Insolvency and Bankruptcy Code (IBC) bows to no one. In a series of pivotal rulings, the National Company Law Appellate Tribunal (NCLAT) has aggressively reinforced the supremacy of the IBC over securities laws, effectively telling the Securities and Exchange Board of India (SEBI) and the stock exchanges to fall in line.

But while the appellate tribunals are busy fortifying the IBC’s statutory dominance, the Supreme Court has rightfully dragged the spotlight back to the ground reality: the systemic rot of National Company Law Tribunal (NCLT) delays that threaten to render the Code’s strict timelines meaningless.

Here is why the latest developments matter for your insolvency practice and how they reshape the boundaries between regulatory enforcement and corporate rescue.

Demolishing the BSE/SEBI Blockade: Section 60(5) Flexes its Muscle

If you have ever represented a Resolution Professional (RP) trying to take control of a Corporate Debtor’s assets, you know the headache of dealing with frozen demat accounts. Historically, stock exchanges like the BSE, acting under SEBI’s mandate, have frozen promoter and corporate demat accounts for non-compliance with the Securities Contracts (Regulation) Act (SCRA) Section 9(2) and SEBI LODR Regulations.

In a watershed ruling this April, the NCLAT unequivocally held that the NCLT possesses the jurisdiction under Section 60(5) of the IBC to direct the defreezing of these accounts. Dismissing the BSE’s challenges to earlier NCLT Mumbai orders, the Appellate Tribunal ruled that the IBC prevails over securities laws.

"These frozen demat accounts are undisputed assets of the Corporate Debtor. They are absolutely essential for the core objective of the IBC—value maximization—and fall squarely under the protective umbrella of the Section 14 Moratorium."

Practice Takeaway: This is a massive tactical victory for RPs. You no longer need to engage in protracted, parallel administrative battles with SEBI or the exchanges to release these assets. The ruling solidifies the interpretation that regulatory freezes are subservient to the Section 14 moratorium. When drafting applications for possession of assets, practitioners should heavily rely on this NCLAT ruling to bypass securities law bottlenecks directly through the Adjudicating Authority.

The Clock Doesn't Care if You're the Regulator

Regulators in India habitually operate under the assumption that limitation periods and procedural deadlines are mere suggestions when state revenue or penalties are involved. The NCLAT has just delivered a harsh reality check to SEBI regarding the sanctity of the liquidation commencement date.

In the matter of Annies Apparel, the NCLAT rejected SEBI's plea to recover a Rs 21.80 lakh penalty from the liquidator. Why? Because SEBI filed its claim a staggering 797 days after the commencement of the liquidation process.

The Appellate Tribunal held that the IBC freezes all claims as of the liquidation commencement date, with zero statutory flexibility for late filings. Furthermore, in a separate but related ruling, the NCLAT declared that any SEBI penalties levied post-liquidation commencement are inherently inadmissible as claims.

Why this matters: This is a textbook application of the "clean slate" doctrine extending into liquidation. For liquidators, this ruling is your shield against late-arriving regulatory claims that disrupt the stakeholder waterfall mechanism under Section 53. It sends a clear message: Statutory authorities are not special unsecured creditors. If they sleep on their rights, they lose them.

The Elephant in the Room: Supreme Court Calls Out NCLT Paralysis

While the NCLAT is handing out jurisprudential wins, the Supreme Court has voiced what every practicing insolvency lawyer complains about in the corridors: the excruciating delays at the NCLT level.

Taking strong exception to a resolution plan that had been pending approval for nearly two years, the Supreme Court termed the NCLT's delays as "very unfortunate." The Court didn't just stop at a reprimand; it directed a nationwide report from NCLT benches on the pendency of resolution plans.

Crucially, the Apex Court also clarified a vital point of law: The pendency of restructuring or defunct schemes under the Companies Act cannot be used as a shield to stall the initiation of Corporate Insolvency Resolution Process (CIRP) under Section 7 of the IBC.

The Reality Check: The IBC was sold on the promise of a 330-day strict timeline. Today, the period between the Committee of Creditors (CoC) approving a plan and the NCLT stamping it often exceeds the entire statutory lifespan of the CIRP. The Supreme Court's intervention is welcome, but until judicial infrastructure is expanded, these delays will continue to erode the value of the Corporate Debtor, hurting financial creditors and discouraging prospective resolution applicants.

Looking Ahead: Reforms on the Horizon

The friction between SEBI's market discipline mandate and the IBC's rescue mandate isn't going away, but the hierarchy is now crystal clear. The implicit application of Section 238 (the non-obstante clause) continues to be the judiciary's preferred tool to keep the IBC machinery moving.

On the horizon, the government's plan to establish a special NCLT bench for cross-border insolvency is the most anticipated development of 2026. Once the new rules are notified, having a specialized bench could finally bring India in line with the UNCITRAL Model Law, offering much-needed predictability for foreign creditors and multijurisdictional asset recoveries.

For now, corporate lawyers should ride the wave of these pro-IBC rulings. Assert the Section 14 moratorium aggressively against regulators, reject late claims without hesitation, and cite the Supreme Court's latest observations to push for expedited hearings in your Section 7 and Section 31 applications.