Trilegal successfully represented the NSE in appeals before the NCLAT

Trilegal successfully represented the NSE in appeals before the NCLAT

Trilegal advised and represented the National Stock Exchange (NSE) in appeals before the National Company Law Appellate Tribunal (NCLAT) against orders of the National Company Law Tribunal admitting certain stockbroking entities into insolvency under the Insolvency & Bankruptcy Code, 2016 (IBC).

NSE, as a first-level regulator of the securities market, contented that stockbroking entities would fall within the definition of 'financial service providers' and, thus, are excluded from the purview of the IBC. It was further submitted that the mechanism under the IBC would be incompatible with the mechanisms already in place to deal with defaulting stockbroking entities, and initiation of insolvency proceedings against stockbroking entities would affect the interests of investors/public at large.

The NCLAT's landmark decision upholds NSE's contention and settles the law on the issue that since stockbroking entities are regulated by the SEBI (in conjunction with stock exchanges), provisions of the IBC would not be applicable to such entities.

The NCLAT also observed that since specific mechanisms are in place to deal with defaulting stockbrokers, insolvency proceedings cannot be initiated against such entities unless there is a notification by the Central Government to this effect.

The Trilegal team advising on the matter was led by Dispute Resolution Partner Shankh Sengupta along with Shruti Rajan (Financial Regulatory). Other attorneys who were involved in the matter are Vividh Tandon, Aubert Sebastian, and Anubhav Ghosh, Counsels; Nishi Bhankaria and Ribhu Garg, Senior Associates.