The Supreme Court has clarified that a resolution plan submitted by a co-operative society can be held invalid if the proposed investment is not in the “same line of business” as mandated under the Multi-State Co-operative Societies Act, 2002.
The bench of Justice J.B. Pardiwala and Justice K.V. Viswanathan delivered this clarification while dealing with an appeal arising out of insolvency proceedings, even though the appellant ultimately chose to withdraw the matter.
The case revolved around a multi-state co-operative society that had submitted a resolution plan during the Corporate Insolvency Resolution Process (CIRP) of a textile company. The Resolution Professional (RP), however, declared the society ineligible on the ground that its bye-laws did not permit such an investment and that the corporate debtor did not fall within the same line of business. This finding was subsequently upheld by both the adjudicating authority and the appellate tribunal.
Before the Supreme Court, the appellant argued that its bye-laws had been amended in line with the 2023 amendment to Section 64(d) of the Multi-State Co-operative Societies Act, which allows investment in institutions operating in the “same line of business.” It further contended that its involvement in textile-related activities through an internal unit brought it within the scope of the corporate debtor’s business. The appellant also relied on the absence of any express statutory prohibition against co-operative societies participating as resolution applicants under the Insolvency and Bankruptcy Code (IBC).
Despite permitting withdrawal of the appeal, the Supreme Court proceeded to examine the issue in detail, noting the importance of the legal question involved. The Court emphasized that under Section 30(2)(e) of the IBC, a resolution plan must comply with all applicable laws. In this context, Section 64 of the 2002 Act imposes specific restrictions on how a multi-state co-operative society may invest its funds, including the requirement that such investment must be in a subsidiary institution or in an entity operating in the same line of business.
A key aspect of the judgment is the Court’s interpretation of the phrase “same line of business,” which is not defined in the statute. The Court observed that the expression must be understood in light of legislative intent, particularly the 2023 amendment that introduced this limitation. Referring to the Joint Parliamentary Committee (JPC) report, the Court noted that the earlier provision permitting investment in “any other institution” had been misused, leading to unsafe and unrelated investments by co-operative societies. The amendment was therefore intended to introduce financial discipline and protect members’ funds.
The Court further clarified that the line of business of a co-operative society is primarily determined by its bye-laws. Any investment must align with the objects and activities specified therein. Merely having an ancillary or incidental business activity, such as operating a textile unit, would not automatically bring the society within the same line of business as a corporate debtor engaged in a substantially different or more complex industrial activity.
The Court highlighted that the restriction is not merely procedural but substantive in nature. It is designed to prevent diversification into unrelated sectors that may expose the society’s funds to undue risk. The requirement ensures that investments remain within a domain where the society possesses expertise and operational alignment.
Case Details
Case Title: M/S Nirmal Ujjwal Credit Co-Operative Society Ltd. Versus Ravi Sethia & Ors.
Citation: JURISHOUR-697-SC-2026
Case No.: CIVIL APPEAL NO. 11193 OF 2025
Date: 09/04/2026
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