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M/s. Nirmal Ujjwal Credit Co-operative Society Ltd. v. Ravi Sethia and Ors.

Civil Appeal · 2026 INSC 338Decided 9 Apr 2026
C.A. No.-011193 - 2025
Justice J.B. Pardiwala · Justice K.V. Viswanathan

Background

The appellant, a multi-state credit co-operative society that also operated a textile unit, submitted a resolution plan in the insolvency proceedings of Morarji Textiles Ltd. (the corporate debtor). Both the NCLT and NCLAT held the appellant ineligible to submit the plan, finding that its bye-laws did not permit investment in the corporate debtor because it was not "in the same line of business" as required under Section 64(d) of the Multi-State Cooperative Societies Act, 2002. Before the Supreme Court could deliver its reserved judgment, the appellant sought to withdraw the appeal in light of developments; the Court agreed to permit withdrawal but, given the importance of the legal question, decided to still clarify the law without ruling on the merits of the appellant's own case.

Decision Breakdown

The Court held that Section 64(d) permits an MSCS to invest funds only in (a) a subsidiary institution, or (b) another institution in the "same line of business," a standard introduced to curb misuse of an earlier open-ended investment provision, and that this sameness must be assessed with reference to what the society's bye-laws actually permit as its objects and functions, not by comparing revenue or profit/loss figures, which the NCLAT had wrongly relied on. Examining the appellant's bye-laws, the Court found its permitted activities centred on financial intermediation, member welfare, and agro-product processing, which is materially different from the corporate debtor's synthetic/semi-synthetic textile manufacturing business, so the two were not in the same line of business. The Court also rejected the appellant's argument that a later amendment to its bye-laws (which merely copied the statutory language of Section 64(d) into its investment clause) cured the defect, holding that such an amendment does not change the society's actual objects clause and, in any event, had not even been placed before the NCLT/NCLAT at the relevant time. The appeal was ultimately dismissed as withdrawn, with the Court clarifying the corporate debtor's insolvency process would continue.

Lesson Learnt

Whether an entity is in the "same line of business" as another for regulatory investment-eligibility purposes is determined by what its governing bye-laws/objects actually permit it to do, not by its revenue figures or by cosmetically copying statutory language into an investment clause without changing its underlying business objects.

Official source (sci.gov.in)View Judgment (PDF)

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