Turf Wars and Time Dials: NCLAT Cements IBC's Primacy Over SEBI as Supreme Court Torches NCLT Delays

The Unstoppable Juggernaut of Section 238

For corporate litigators, the opening months of 2026 have delivered a stark, undeniable message: the Insolvency and Bankruptcy Code (IBC) bows to no one—not even the capital markets regulator. Yet, while the appellate tribunals are fiercely protecting the statutory supremacy of the IBC, the operational reality at the National Company Law Tribunal (NCLT) is buckling under institutional lethargy, finally drawing the ire of the Supreme Court.

The most consequential developments for practicing insolvency lawyers right now center on the expanding footprint of the IBC over securities law, and the Apex Court's desperate attempt to force the NCLT to adhere to its own statutory timelines.

Defreezing Assets: IBC Trumps SCRA and LODR

If you are representing a Resolution Professional (RP) managing a listed entity, the recent National Company Law Appellate Tribunal (NCLAT) rulings against the BSE and the Securities and Exchange Board of India (SEBI) are your new primary weapons. In a landmark expansion of jurisdiction under Section 60(5) of the IBC, the NCLAT has categorically ruled that the NCLT possesses the power to order the defreezing of demat accounts that were frozen by stock exchanges or SEBI for non-compliance with securities laws.

Historically, SEBI and the exchanges have argued that freezes initiated under Sections 9(2) or 21 of the Securities Contracts (Regulation) Act (SCRA), or under LODR Regulations 14 and 98, operate in a distinct regulatory silo. The NCLAT has firmly shut down this parallel-universe theory.

"The mandate of asset maximization and the moratorium under the IBC must take precedence over regulatory enforcement actions that trap value."

Why this matters for your practice: The non-obstante clause under Section 238 of the IBC is being interpreted with maximum amplitude. If a regulatory freeze impedes the CIRP or liquidation process, you no longer need to waste time filing appeals before the Securities Appellate Tribunal (SAT). The NCLT is your one-stop forum to unlock these assets. The policy position is clear: punitive regulatory freezes cannot be allowed to prejudice the recovery rights of financial and operational creditors.

State Machinery Gets No Free Pass on Limitation

Further bruising SEBI's ego, the NCLAT recently upheld the NCLT's rejection of SEBI's Rs 21.80 lakh penalty claim against Annies Apparel. The regulator had confidently filed its claim a staggering 797 days after the commencement of liquidation.

Statutory bodies in India often operate with an inherent sense of entitlement regarding condonation of delay, relying on the 'public money' argument. The NCLAT’s phrasing in rejecting this claim is a masterclass in statutory discipline, emphasizing the "inviolable sanctity" of the liquidation commencement date. There is absolutely no flexibility for late claims under the IBBI (Liquidation Process) Regulations, 2016. For liquidators, this is a green light to ruthlessly reject belated claims from government departments without fear of appellate reversal.

The Supreme Court Loses Patience with NCLT Delays

While the substantive law is sharpening its teeth, the procedural reality remains a nightmare. The Supreme Court has officially flagged the systemic delays in NCLT resolution plan approvals, terming them "very unfortunate."

In a recent hearing, the Apex Court noted a staggering instance where an approved resolution plan has been pending before the NCLT for nearly two years awaiting a final Section 31 sign-off. Consequently, the Supreme Court has directed the NCLT Principal Bench and the Insolvency and Bankruptcy Board of India (IBBI) to submit nationwide data on pending applications.

The practical reality: The 330-day mandate under Section 12 of the IBC has become a running joke in the corridors of the NCLT. When the Adjudicating Authority itself sits on a commercial wisdom-backed plan for 24 months, the time-value of money bleeds out, rendering the very objective of the Code moot. The Supreme Court’s demand for data is a precursor to judicial micromanagement of NCLT dockets—a necessary evil at this stage. Litigators should anticipate Practice Directions from the Principal Bench soon, likely imposing strict internal timelines for reserving and pronouncing orders.

No Stalling Tactics: Section 7 Stands Tall

In another crucial victory for creditors on February 24, 2026, the Supreme Court ruled that pending debt restructuring proposals or defunct schemes of arrangement under the Companies Act cannot be used as a shield to stall the initiation of CIRP under Section 7. Overturning previous NCLAT leniencies, the Court re-established that once default and debt are established, the NCLT’s discretion to deny admission is virtually non-existent. Corporate debtors can no longer wave a pending "master restructuring agreement" to delay the inevitable.

Looking Ahead: Reforms on Shaky Foundations

As we look toward the winter session of 2026, the legislature is preparing to introduce a voluntary framework for Group Insolvency and plans are afoot for a specialized NCLT bench for Cross-Border Insolvency.

While allowing creditor committees of group entities to coordinate resolutions is desperately needed (one only needs to recall the procedural nightmares of the Videocon or Amtek Auto cases), a harsh truth remains. Injecting the massive complexities of group and cross-border insolvency into an NCLT infrastructure that currently takes two years to approve a standard resolution plan is a recipe for disaster.

The takeaway: The jurisprudence of the IBC is maturing beautifully, consolidating power and shutting down parallel regulatory interference. But until the Supreme Court forces a massive administrative overhaul of the NCLT, insolvency lawyers must continue to aggressively manage client expectations regarding timelines, even as they wield Section 238 to bulldoze through regulatory roadblocks.