NCLT Mumbai Lifts Freeze on Future Group’s Demat Account, Rules SEBI Restrictions Cannot Override IBC Moratorium

NCLT Mumbai Lifts Freeze on Future Group’s Demat Account, Rules SEBI Restrictions Cannot Override IBC Moratorium

Introduction

The National Company Law Tribunal (NCLT), Mumbai Bench, directed the Bombay Stock Exchange (BSE) and Central Depository Services (India) Ltd. (CDSL) to lift the debit freeze imposed on the demat account of Future Corporate Resources Pvt. Ltd. (FCRL), a Kishore Biyani-led entity. The Tribunal found that the freeze obstructed the effective conduct of the Corporate Insolvency Resolution Process (CIRP) and violated the moratorium imposed under Section 14 of the Insolvency and Bankruptcy Code, 2016.

Factual Background

Future Corporate Resources Pvt. Ltd. (FCRL) was undergoing insolvency proceedings when its demat account was subjected to a debit freeze by CDSL on the instructions of BSE. The freeze was linked to SEBI’s directive against Future Retail Ltd. (FRL), another company in the Future Group, for defaulting on payment of annual listing fees. BSE, citing group association, extended the restriction to FCRL even though it was under CIRP. This action prevented the Interim Resolution Professional (IRP) from exercising control over FCRL’s securities, thereby impeding the resolution process.

Procedural Background

The Interim Resolution Professional (IRP) for FCRL filed an application before the NCLT seeking directions to BSE and CDSL to vacate the debit freeze. The IRP contended that the freeze contravened the moratorium imposed under Section 14 of the IBC, which prohibits any restriction or attachment over the assets of the corporate debtor. The application was heard by a Bench comprising Judicial Member Sushil Mahadeorao Kochey and Technical Member Prabhat Kumar.

Issues

1.  Whether the debit freeze imposed by BSE and CDSL on FCRL’s demat account was valid during the pendency of insolvency proceedings.
2.  Whether the imposition of such restrictions violated the moratorium provisions under Section 14 of the IBC.
3.  Whether SEBI’s Standard Operating Procedure permits stock exchanges to lift restrictions in cases where moratorium is in effect.

Contentions of the Parties

Applicant (IRP): The debit freeze prevented the IRP from taking control of the corporate debtor’s assets, thereby obstructing the CIRP. The freeze violated Section 14 of the IBC, which mandates a moratorium on all proceedings and restrictions against the assets of the corporate debtor. SEBI’s Standard Operating Procedure (SOP) of February 2021 permits exchanges to lift such restrictions when a moratorium is declared.

Respondents (BSE and CDSL): The freeze was imposed in compliance with SEBI’s directions following defaults by Future Retail Ltd. (FRL), part of the same group. The restriction was administrative and aimed at enforcing SEBI’s regulatory directions, not at interfering with the CIRP. Any modification should be made only upon specific directions from SEBI or the Tribunal.

Reasoning and Analysis

The Tribunal observed that the moratorium under Section 14 of the IBC overrides any conflicting regulatory actions that affect the assets of the corporate debtor. Once a moratorium is imposed, no authority—including stock exchanges or depositories—may restrict the debtor’s asset control. It further noted that the SEBI SOP issued in February 2021 explicitly provides that restrictions may be lifted in respect of companies undergoing insolvency, recognizing the primacy of the moratorium. The Bench held that extending the freeze to FCRL merely because it belonged to the Future Group, without considering its independent CIRP status, was inconsistent with the objectives of the IBC. The Tribunal stated that, “We have no hesitation to direct Respondent No. 2 (BSE) to vacate the debit freeze with immediate effect and issue necessary communication to Respondent No. 1 (CDSL) within 15 days from the date of this order.” It further directed that if no such communication was received within the specified time, CDSL must independently lift the freeze.

Implications

The NCLT’s decision reinforces the supremacy of the IBC moratorium over regulatory or administrative restrictions by market bodies such as SEBI, BSE, or CDSL. It affirms that once insolvency proceedings are initiated, the Resolution Professional must have unfettered access to all assets of the corporate debtor to ensure the effective conduct of CIRP. This judgment also highlights that group associations or regulatory actions against related entities cannot justify encroachments on the statutory moratorium applicable to an individual debtor under IBC.

In this case the appellant was represented by Mr. Dhrupad Vaghani along with Mr. M.K, Advocate. Meanwhile the respondent was represented by Mr. Suraj Chaudhary, Mr. Abhay Chauhan, Mr. Ajit Shah Parikshit Pania, Mr. Ajit Singh Tawar and Mr. Prakhar Tandon, Advocates.