Full Judgment Text
REPORTABLE
2026 INSC 338
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 11193 OF 2025
M/S NIRMAL UJJWAL CREDIT
…APPELLANT
CO-OPERATIVE SOCIETY LTD.
VERSUS
RAVI SETHIA & ORS.
…RESPONDENTS
J U D G M E N T
Signature Not Verified
Digitally signed by
VISHAL ANAND
Date: 2026.04.09
16:15:58 IST
Reason:
J.B. PARDIWALA, J.:
For the convenience of exposition, this judgment is divided into the
following parts:-
INDEX
A. FACTUAL MATRIX ................................................................................ 2
B. SUBMISSIONS ON BEHALF OF THE APPELLANT ......................... 9
C. SUBMISSIONS ON BEHALF OF THE RESPONDENTS 11
.................
D. ANALYSIS .............................................................................................. 15
(I) Meaning and scope of the expression “any other institution in the
same line of business”. ............................................................. 15
(II) Applicability of the standard of “same line of business” to the
facts of the present case. .......................................................... 21
E. CONCLUSION 27
........................................................................................
1. At the outset, we must state that the present statutory appeal was
finally heard by us, and the judgment was reserved. Before we
could deliver the judgment, Mr. Amit Pai, the learned Advocate on
Record appearing for the appellant, orally mentioned the matter
and made a humble request that the appellant may be permitted to
withdraw the present appeal in the wake of some developments. We
expressed our willingness to permit the appellant to withdraw the
appeal in the wake of the developments highlighted. However, at
the same time, we also clarified that having regard to the
importance of the issue involved in the present litigation we would
be looking into the facts of the present appeal, the submissions
canvassed on either side, the provisions of IBC and other relevant
materials only with a view to explain the position of law or rather,
Civil Appeal No. 11193 of 2025 Page 1 of 29
the principles governing the pivotal issue in question without
returning any findings on the merits of the appeal.
2. For this limited purpose, as afore-stated, we have looked into the
facts, the submissions canvassed on either side and the provisions
of law for the purpose of explaining the position of law governing
the issue.
3. This statutory appeal arises from the judgment and order passed
by the National Company Law Appellate Tribunal, New Delhi
(hereinafter referred to as “ NCLAT ”), dated 21.08.2025, in
Company Appeal (AT)(Ins) No. 790 of 2025. The NCLAT had
affirmed the decision of the National Company Law Tribunal,
Mumbai (hereinafter referred to as “ NCLT ”) dated 09.04.2025 in CP
(IB) No. 1318 of 2025, wherein it was declared that the appellant
was ineligible to submit its resolution plan in the CIRP of Morarji
Textiles Ltd. (hereinafter referred to as “ Corporate Debtor ”) inter
alia on the ground that the bye-laws of the appellant cooperative
society did not permit it to invest in the corporate debtor.
A. FACTUAL MATRIX
4. The appellant is a co-operative society registered under the
provisions of the Multi-State Cooperative Societies Act, 2002
(hereinafter referred to as “ 2002 Act ”). The appellant operates a
textile unit named “Nirmal Textile” in Nagpur bearing a separate
GST registration dated 23.04.2021 and a factory licence dated
28.10.2022.
Civil Appeal No. 11193 of 2025 Page 2 of 29
5. On 03.08.2023, the Government of India brought an amendment
to Section 64 of the 2002 Act with a view to insert certain qualifying
terms in Clause (d) therein. The amended Section 64 provided in
Clause (d) that a Multi-State Co-operative Society (“ MSCS ”) may
invest or deposit its funds, among other things, in the shares,
securities, or assets of a subsidiary institution or any other
institution in the same line of business as the MSCS . The amended
Section 64(d) of the 2002 Act reads as under:
“64. Investment of funds.— A multi-State co-operative
society may invest or deposit its funds —
xxx xxx xxx
(d) in the shares, securities or assets of a subsidiary
institution or any other institution [in the same line of
business as the multi-State co-operative society] or”
(Emphasis Supplied)
6. Pursuant to the above, the appellant issued a notice dated
01.09.2023 for conducting the Annual General Meeting (AGM) with
an agenda to amend its bye-laws. Accordingly, an AGM was
conducted on 24.09.2023 proposing amendments to the various
clauses of its bye-laws. Among the amended clauses, Clause 52 was
also amended to include in its Clause (iv) the verbatim provision of
amended Section 64(d) of the 2002 Act as extracted above.
Proposed amendment to Clause 52 reads as follows:
“23. To make Amendment in Bye Laws Clause No. 52 of the
society to make amendment in the “Investment of Funds” to
comply with the Provisions of the MSCS (Amendment) Act
2023
The Chairman of the society informed that it is necessary to
make amendment in the bye laws of the society in
accordance with the provisions of The Multi State
Civil Appeal No. 11193 of 2025 Page 3 of 29
Cooperative Societies (Amendment) Act, 2023 and rules
made thereunder.
It was resolved that the clause number 52 of bye laws
related to Investments of funds is changed from;
The society may invest or deposit its funds in:
a)Co-operative Banks;
b) Securities specified in section 20 of the Indian Trust Act
1882;
c) shares and securities of any other co-operative
society/subsidiary institution;
To
a) the society may invest or deposit its funds in accordance
with Section 64 of the MSCS Act, 2002 in:
xxx xxx xxx
iv) in the shares, securities and assets of any subsidiary
institution or any other institution in the same line of
business as the Multi-State Co-operative Society;
xxx xxx xxx
vi) In such other manner as may be determined by the
Central Government,
c) any other Scheduled Bank/Nationalized Bank
“Further resolved that this change will come into effect from
the date of approval of clause in Bye laws from Central
Registrar”
“Further resolved that chairman is authorized to execute all
documents required for and to sign all documents required
to be filed with office of the Central Registrar Cooperative
Societies, New Delhi.”
(Emphasis Supplied)
7. Following this, a unanimous resolution was passed in the said AGM
on 24.09.2023 to carry out the amendment of the bye-laws.
Thereafter, the Chairman of the AGM issued a certificate of
compliance dated 25.10.2023 in terms of Section 11 of the 2002
Act pursuant to which the proposed amendment to Clause 52 was
placed before the Central Registrar. Pursuant to this, the Central
Registrar issued a certificate of registration of an amendment dated
Civil Appeal No. 11193 of 2025 Page 4 of 29
24.01.2024 and, thereby, approved the amendment to the bye-laws
of the appellant.
8. The CIRP proceedings of the corporate debtor were commenced vide
order dated 09.02.2024, passed by the NCLT. To carry out various
functions in accordance with the Insolvency and Bankruptcy Code,
2016 (“ IBC ”), the NCLT appointed respondent no. 1 as the IRP/RP.
9. On 01.05.2024, the respondent no. 1 – RP issued an invitation
seeking expression of interests (“ EOI ”) under Section 25(2)(h) of the
IBC inter alia, from various prospective resolution applicants
(“ PRA ”) by the end date 12.06.2024. The last date of submission of
the resolution plan was set as 19.07.2024.
10. Accordingly, the appellant, after receiving the resolution to bid in a
general meeting on 23.09.2024, submitted its EOI on 18.05.2024.
Thereafter, the respondent no. 1 – RP on 23.06.2024 circulated a
provisional list of PRAs to the Committee of Creditors (“ COC ”),
which included the appellant. On 25.06.2024, the respondent no.
1 – RP sought the constitutional documents and other documents
of the appellant in accordance with Regulation 36A(9) of the IBBI
(CIRP) Regulations, 2016. On 27.06.2024, the appellant submitted
all required documents, including the bye-laws. The appellant
further clarified the reason for investing in the corporate debtor,
specifically mentioning the details of its cotton ginning, pressing,
and spinning mill. The respondent no. 1 – RP then circulated a final
list of PRAs to COC on 02.07.2024, which also included the name
of the appellant.
11. In pursuance of the aforesaid, the appellant submitted its
resolution plan on 27.08.2024 for a total sum of Rs. 120 Crores.
Civil Appeal No. 11193 of 2025 Page 5 of 29
Upon receiving the resolution plan, the respondent no. 1 – RP
invited the appellant to the next meeting of the COC. The appellant
th
attended the 10 meeting of the COC on 01.10.2024, wherein the
COC negotiated with the appellant on the value of the resolution
plan. Thereafter, the respondent no. 1 – RP sent an email dated
11.11.2024 to the appellant, inter alia , seeking clarification on
whether the constitutional documents of the appellant permitted it
to acquire the corporate debtor under the regime of IBC. The
appellant vide its email dated 18.11.2024 clarified the following to
the above query:
“Since the IBC law came into effect recently, it was not
specifically mentioned. However, the constitutional
document/charter document allows collaboration, joint
ventures, partnerships with national and, international
companies. The charter document also mentioned that the
objective is to purchase and procure the agro-products,
modern techniques and other activities in the processing
sector. The corporate debtor is also engaged in the business
of processing of cotton into the spinning, weaving, printing
and finishing business in the textile segment. Hence, we are
well within the objectives of the charter document.”
(Emphasis Supplied)
th th
12. In the 10 and 17 COC meetings, respectively, the value of the
resolution plan was increased to Rs. 169 Cr. After perusing the
constitutional documents of the appellant, the respondent no. 1 –
RP vide its email dated 10.02.2025 declared the appellant to be
ineligible inter alia on the ground of the resolution plan being
against the provisions of the bye-laws of the appellant, hence in
contravention to Section 30(2)(e) of the IBC.
13. Aggrieved by the declaration of its ineligibility, the appellant filed
an Interlocutory Application No. 880 of 2025 before the NCLT in the
Civil Appeal No. 11193 of 2025 Page 6 of 29
pending CIRP proceedings. Pursuant to which, the NCLT passed its
order dated 09.04.2025 in the said IA inter alia holding that the
appellant was ineligible to submit the resolution plan in the CIRP
of the corporate debtor on the ground that the bye-laws of the
appellant do not allow it to invest in the corporate debtor. In this
respect, the NCLT found that the appellant is neither a subsidiary
institution of the corporate debtor nor in the same line of business
as the corporate debtor.
14. Thereafter, in order to challenge the aforesaid ruling of NCLT, the
appellant filed Company Appeal (AT) No. 790 of 2025 before NCLAT.
The NCLAT, after hearing the parties, kept the matter reserved for
judgment. The appellant, at this juncture, upon knowing that the
certificate of registration of the amendment of bye-laws was not
placed before the NCLT, sought to place the same before the NCLAT
on 21.07.2025 by e-filing an IA with e-filing no.
9910138/06622/2025 with a request to reopen the hearing.
However, on 22.07.2025, when the appellant mentioned the
matter, the request for reopening the hearing was declined by the
NCLAT.
15. Finally, the NCLAT vide the impugned judgment and order
dismissed the appeal of the appellant inter alia holding that the
appellant was not eligible to submit a resolution plan due to the
restriction under Section 64(d) of the 2002 Act; the limited objective
of the appellant’s production in “agro-product” ; and the bye-laws
were not amended on the date of submission of the resolution plan.
The relevant observations of the NCLAT in the impugned judgment
and order are as under:
Civil Appeal No. 11193 of 2025 Page 7 of 29
“61. We observe that although the co-operative society is
allowed to invest its funds or deposit in the shares, security
or assets of the subsidiary institution or any other
institution, this is qualified with the words i.e., it has to be
in the same line of business as a multistate co-operative
society like the Appellant herein. This implies that Section
64(d) of 2002 Act entitles as well as restricts the cooperative
society to invest its fund only in subsidiary institution or an
institution in the same line of the business or the multi state
co-operative society.
62. It is an undisputed fact that the Corporate Debtor was
not a subsidiary institution as of date of the submission of
the Resolution Plan. We have also noted that the Appellant
was indeed in business of agro-based textile under the
name and style of 'Nirmal Textiles', however, the business
of the Corporate Debtor was man-made fibre/ viscos which
Resolution Professional, CoC and Adjudicating Authority
differentiated with business of the Appellant as Agro based
textile processing.
63. We find logic as contained in the Impugned Order that
the Appellant was not in the same line of the business and
therefore was not entitled to invest in fund of the Corporate
Debtor to acquire the business as a going concern. We
further note that the objective and functions of the Appellant
as of society have been clearly mentioned in Clause (5). We
are conscious that Clause 5(s) of the bye-laws entitles the
Appellant society to purchase, produce, procure, distribute
like agro product for processing of product and by product
and further entitles to make available to its member modem
technique used in processing agro products and other
activity in processing. Thus, we find that the objectives of
the Appellant are clearly relative to agro based project
which is different from business of the Corporate Debtor.
64. […] We find that the CoC in, exercise of its commercial
wisdom has taken the legal opinions including independent
legal opinion before coming to conclusion that Appellant was
not eligible to submit the Resolution Plan, in view of the
relevant Sections of the 2002 Act as well as the restrictions
on the Appellant by its own bye-laws, which we have
already discussed at length in our earlier discussions.”
(Emphasis Supplied)
Civil Appeal No. 11193 of 2025 Page 8 of 29
16. In such circumstances referred to above, the appellant is here
before us with the present appeal.
B. SUBMISSIONS ON BEHALF OF THE APPELLANT
17. Mr. Mukul Rohatgi and Mr. Rajiv Shakdher, the learned senior
counsel appearing for the appellant, submitted that the appellant
is not barred from submitting a resolution plan or from investing
in the corporate debtor. They argued that, as per the object clause
in the bye-laws, the appellant is entitled to purchase, produce,
procure, and distribute the for the processing of the
“agro-products”
product and byproduct. It also proposes to make available to its
members the various modern techniques used in the processing of
agro-products and other activities in the processing sector.
18. The learned counsel argued that the appellant had carried out
certain amendments to its bye-laws, particularly to Clause 52, as
mentioned above, to include the investment in the shares,
securities, assets of any subsidiary institution or any other
institution in the same line of business as the appellant. It is
argued that the sole purpose of the amendment was to bring the
bye-laws of the appellant in consonance with the 2023 amendment
to Section 64 of the 2002 Act and permit the appellant to invest in
an entity “in the same line of business” .
19. The learned counsel also relied on the note submitted by the central
registrar before us in order to argue that the appellant is not barred
from submitting a resolution plan under Section 30(2)(e) of the IBC,
more particularly on the following submissions of the central
registrar in his note:
Civil Appeal No. 11193 of 2025 Page 9 of 29
(a) That there is no express or implied bar or blanket restriction
under the 2002 Act for any MSCS to invest its funds by
following the process provided in IBC;
(b) That the provisions of the 2002 Act do not per se prohibit an
MSCS from participating as a resolution applicant in a CIRP
for the purpose of acquiring shares, securities, and assets of a
corporate debtor, as long as it is in conformity with (i) Section
64 of the 2002 Act, (ii) the bye laws of the society, and (iii)
Section 29A of the IBC;
(c) That an MSCS registered under the 2002 Act functions as an
autonomous cooperative organisation and is required to
function as per the provisions of the 2002 Act and the
approved bye-laws of the society.
20. The learned counsel further contended that the principal ground
for the rejection of the resolution plan of the appellant by the
respondent no. 1 - RP was that the bye-laws of the appellant did
not permit it to invest in the corporate debtor, and that the
appellant was not in the same line of business as the corporate
debtor. They submitted that the expression “in the same line of
business” has not been defined in the Act, and so, resorting to the
ordinary meaning it would mean to engage in a business which is
the same or similar in nature. Developing on this context, the
learned counsel argued that in the present case, the appellant has
a textile vertical in the name and style of ‘Nirmal Textile’ which
would be within the phrase of “in the same line of business” for the
purpose of investment/acquisition of the corporate debtor, which
also is in the textile business, as a going concern. Further, it was
argued that the appellant’s bye-laws has the objective of being in
the business of purchase, process, procure in the “agro products” ,
Civil Appeal No. 11193 of 2025 Page 10 of 29
which would also include the textile business in it, and therefore
having amended Clause 52 of its bye-laws in line with the amended
Section 64(d) of the 2002 Act, the appellant cannot be said to be
not in the same line of business as the corporate debtor.
C. SUBMISSIONS ON BEHALF OF THE RESPONDENTS
21. Mr. Navin Pahwa, the learned senior counsel appearing for the
respondent no. 1 - RP, submitted that the resolution plan
submitted by the appellant did not meet the requirement of Section
32(2)(e) of IBC since the investments made by an MSCS are
governed by Section 64 of the 2002 Act, according to which an
MSCS can only invest in share securities or assets of:
(i) a subsidiary institution, or
(ii) any other institution in the same line of business
He submitted that prior to investing its resources, the appellant
must demonstrate that the institution it is investing in is either its
subsidiary or that it is “in the same line of business” .
22. In the aforesaid context, the learned senior counsel made a two-
fold argument: (i) that the corporate debtor is not an existing
subsidiary institution of the appellant and (ii) that the corporate
debtor is not in the same line of business as the appellant. While
dealing with the first argument, the learned counsel submitted that
the corporate debtor is admittedly not a subsidiary institution of
the appellant. He rebutted the appellant’s submission that upon
the approval of the resolution plan, 100% of the shares of the
corporate debtor would vest in the appellant, making the corporate
debtor a subsidiary (in the future), and consequently, investment
therein would be permissible under Section 64(d). According to the
Civil Appeal No. 11193 of 2025 Page 11 of 29
learned counsel, such an interpretation is untenable and against
the plain language of Section 64(d).
23. While dealing with the second fold of the argument, the learned
counsel submitted that as regards the appellant’s contention that
it is an investment in an institution in the “same line of business” ,
the appellant would not be eligible to invest in the corporate debtor
inasmuch as, the two entities i.e., the appellant and the corporate
debtor are not in the same line of business. The learned counsel
submitted that the appellant is predominantly involved in financial
services and that its textile unit is not a separate body corporate,
nor is the resolution plan submitted under the name of ‘Nirmal
Textile’. It was argued that, in terms of the appellant’s byelaws, it
is involved in the processing of agro-based products, and not in
their manufacturing. According to him, Nirmal Textiles is merely a
unit of the appellant cooperative society and that the textile
manufacturing is not the main line of business of the appellant.
24. Mr. Neeraj Kishan Kaul, the learned senior counsel appearing for
the respondent no. 2 - Successful Resolution Applicant, submitted
that the appellant lacks locus to maintain the present appeal as the
appellant was never a resolution applicant within the meaning of
Section 5(25) of IBC as its resolution plan was not legally capable
of being placed before the COC owing to clear statutory prohibition
under Section 64(d) of the 2002 Act and limitations under its bye-
laws.
25. Mr. Kaul submitted that the appellant is barred by Section 64(d) of
the 2002 Act, as the corporate debtor is neither a subsidiary
institution of the appellant nor will it come under the phrase “any
other institution in the same line of business” . It was submitted that
Civil Appeal No. 11193 of 2025 Page 12 of 29
the corporate debtor is engaged in the manufacturing and dyeing
of man-made fibre/viscose, which is substantially an industrial
and chemically driven manufacturing activity. Whereas the
appellant is a credit co-operative society whose predominant
business activity is in finance. The learned counsel submitted that
even the textile unit of the appellant, namely, Nirmal Textile, is
limited only to the processing of agro-products, and not industrial
manufacturing of the same.
26. The learned counsel further submitted that the appellant’s main
business is to render banking and financial services to its
members. Its agro-processing activity is incidental and carried out
through a small internal vertical called Nirmal Textiles. The learned
counsel also submitted that on one hand the appellant’s business
is agro based i.e., procured from agricultural sources, on the other
hand, the corporate debtor’s business is industrial manufacturing
of viscose/man-made fibre which is chemically processed synthetic
product. As per the learned counsel, this is entirely different in
nature, scale, technology, and regulatory environment as compared
to agro-processing, as is being undertaken by the appellant
through its internal vertical, Nirmal Textile. He contended that the
corporate debtor’s activities involve man-made fibres and
processing such fibres into fabrics, which processes are not agro-
based but industrial manufacturing of synthetic and blended
textiles. Thus, the corporate debtor’s industry does not align with
Clause 5(s) of the appellant’s byelaws.
27. Further, the learned counsel argued that the Financial Statements
of the appellant for FY 2023–24 would indicate that income
generated from the appellant co-operative society’s financial
services is to the tune of Rs. 194.27 crore, whereas the income
Civil Appeal No. 11193 of 2025 Page 13 of 29
generated from its agro-based processing unit i.e. Nirmal Textiles
is to the tune of a loss of Rs. 3.37 crore.
28. To further demonstrate that the appellant and the corporate debtor
are not in the same line of business, the learned counsel relied on
one SEBI Circular dated 06.07.2021, which defined the phrase “in
the same line of business” in context of the delisting of a listed
subsidiary company wherein it is required, inter alia , that both
entities must fall under the same digit NIC code. Under the NIC
code, the appellant would fall into NIC 649; Nirmal Textile would
fall under NIC 01632; and the corporate debtor would fall under
NIC 131/139/203. Thus, none of them would fall under the same
NIC code. The learned counsel submitted that while the SEBI
Circular applies specifically to listed companies, the underlying
principles, particularly the reliance on NIC Codes and
revenue/asset linkage, provide a useful, relevant and objective
benchmark.
29. Mr. Gopal Jain, the learned senior counsel, appearing for the
respondent no. 3 – COC submitted that the mere fact that the
appellant is running a textile unit cannot bind the CoC if the
appellant is otherwise ineligible in law to run the textile unit,
contrary to the provisions contained in its own bye-laws. He
submitted that the CoC, in its commercial wisdom, took a decision
by a majority to consider and approve the resolution plan
submitted by the respondent no. 2 and at the same time decided
not to consider the resolution plan submitted by the appellant,
being ineligible for the purpose of revival of the CD in its best
judgment. He further contended that the appellant is credit
cooperative society limited and is in the business of giving credit to
its members, therefore, the appellant as per the bye-laws and
Civil Appeal No. 11193 of 2025 Page 14 of 29
Section 64(d) of the 2002 Act cannot involve itself in any other line
of business other than giving credit to its members, its existing
subsidiary institution or any other institution which is in the same
line of business i.e., an MSCS that is giving credit to its own
members.
D. ANALYSIS
(I) Meaning and scope of the expression “any other institution in
the same line of business”.
30. Section 30 of the IBC deals with the submission of the resolution
plan. As per Section 30(2)(e), the RP is required to confirm that each
resolution plan inter alia does not contravene any provisions of the
law for the time being in force. Such a law, for the time being in
force in the present case, is Section 64 of the 2002 Act, which deals
with the investment of funds by an MSCS and certain restrictions
therein. As per Section 64(d), an MSCS may invest or deposit its
funds inter alia in shares, securities, or assets of a subsidiary
institution or “ any other institution in the same line of business as
the MSCS” . The relevant extract from Section 30 of the IBC and
Section 64 of the 2002 Act is as under:
“IBC 2016
30. Submission of resolution plan. — (1) A resolution
applicant may submit a resolution plan [along with an
affidavit stating that he is eligible under section 29A] to the
resolution professional prepared on the basis of the
information memorandum.
(2) The resolution professional shall examine each
resolution plan received by him to confirm that each
resolution plan—
xxx xxx xxx
Civil Appeal No. 11193 of 2025 Page 15 of 29
(e) does not contravene any of the provisions of the law for
the time being in force; […]
MSCS Act, 2002
64. Investment of funds.— A multi-State co-operative society
may invest or deposit its funds —
xxx xxx xxx
(d) in the shares, securities or assets of a subsidiary
institution or any other institution [in the same line of
business as the multi-State co-operative society] or […]
xxx xxx xxx
(f) in such other manner as may be determined by the
Central Government.]”
(Emphasis Supplied)
31. According to Section 64(d) of the 2002 Act, an MSCS may invest or
deposit in the shares, securities, or assets of:
(i) a subsidiary institution, or
(ii) any other institution in the same line of business
Thus, prior to investing its resources, an MSCS must demonstrate
that the institution it is investing in is either its subsidiary
institution or that, in the case of any other institution, it is in the
“same line of business” .
32. The plain reading of the interpretation clause in the 2002 Act,
indicates that it does not define the expression “same line of
business” . However, the deliberations of the parliamentary
committee around the aims and objectives of including this phrase
in the statute guide us to its meaning and scope.
33. The Joint Parliamentary Committee (JPC), while examining the
amendment to Section 64(d) of the 2002 Act, noted that the existing
provision permitting investment in was open-
“any other institution”
ended in nature and had given rise to concerns of misuse. The
Ministry of Cooperation, in its comments, specifically highlighted
Civil Appeal No. 11193 of 2025 Page 16 of 29
that the absence of any limiting standard had enabled certain
societies to deploy funds in a manner that did not align with
prudential considerations. The concern was expressed based on the
experience of improper and unsafe investments by MSCSs, thereby
necessitating discipline in the investment regime. The rationale of
the amendment was tied to the broader objective of ensuring the
safety and security of members’ funds and strengthening
governance standards. The Committee noted that several
provisions in Section 64 of the 2002 Act, including clause (d), were
susceptible to abuse due to their wide and undefined nature. The
introduction of restrictions, including the phrase “same line of
in Section 64(d), formed part of a larger legislative
business”
attempt to curb the misuse of society’s funds, prevent risky
investments, and bring about overall financial discipline in the
functioning of MSCSs. The relevant extract from the JPC report
dated 15.03.2023 is as under:
“In the existing MSCS Act, 2002, Section 64 (f) provides that
an MSCS may invest or deposit its funds ‘in such other
modes as may be provided in the bye-laws’. This leaves
scope for investment into dubious entities & fraudulent
investment. In the amendment bill, clause 25 (section 64) is
being proposed which will substitute in Section 64(f) the
words “in such other mode as may be provided in the bye-
laws” with “in such other manner as may be determined by
Central Govt.” This will prevent misuse and fraudulent
investments. Since the future emerging instruments
/avenues for investments may vary from time to time,
flexibility is required for the Central Government to
determine the manner in which such investments can be
made; keeping the overall interest of Cooperatives in mind.
The phrase ‘any other institution’ in 64(d) is open-ended
and has been misused by some societies for making
dubious investment [sic]. The proposed amendment will
help in preventing such kinds of investments”
(Emphasis Supplied)
Civil Appeal No. 11193 of 2025 Page 17 of 29
34. Further, during the consultation process, the stakeholders,
including one KRIBHCO, raised specific objections to the proposed
restriction. It was contended that limiting investments to the “same
line of business” would restrict the diversification and expansion
into new sectors, which, according to them, was contrary to the
Government’s broader policy objective of promoting growth in the
cooperative sector. They advocated for retention of flexibility by
allowing investments in any business permitted under the bye-laws
of the society. The Ministry of Cooperation, however, did not accept
this objection and clarified that the amendment was necessary to
address misuse arising from the unregulated nature of the earlier
provision, while still preserving the autonomy of societies through
their bye-laws in determining their business domain. It was
emphasised that the line of business of an MSCS is itself drawn
through its bye-laws, and therefore, the restriction operates within
the framework already chosen by the society. The relevant extract
from the JPC report dated 15.03.2023 is as under:
“Since the future emerging instruments/avenues for
investments may vary from time to time, flexibility is
required for the Central Government to determine the
manner in which such investments can be made; keeping
the overall interest of Cooperatives in mind. Therefore,
changes have been proposed in the interest of safety and
security of deposits of the members. The businesses to be
carried out by an MSCS are described in the bye-laws and
the societies can frame their bye-laws democratically and
autonomously to decide their line of business. There is no
contradiction as the subsidiary institution as per section 19
has also to be in furtherance of the stated objects of the
society which are in the bye-laws.”
(Emphasis Supplied)
Civil Appeal No. 11193 of 2025 Page 18 of 29
35. Upon considering the concerns expressed by stakeholders and the
response of the Ministry, the JPC finally accepted the amendment.
Thus, from the above, it appears that the insertion of the phrase
“in the same line of business” was intended to address the following:
(i) The earlier provision, i.e., “any other institution,” was open-
ended and had been misused by some societies for making
dubious investments in any other institution;
(ii) This had to be ensured by limiting the investments to
institutions falling within the line of business as reflected in
the bye-laws of the MSCS;
(iii) While at the same time preventing diversion of funds into
unrelated investments and securing the interest and safety of
deposits of the members.
(iv) However, an MSCS was still empowered to frame or amend its
bye-laws democratically and autonomously to decide its line of
business.
36. In light of the deliberations of the JPC, it is clear that the
determination of whether an institution operates in the same line
of business as an MSCS must be made with reference to its bye-
laws, which constitute the decisive charter document in this
regard. It is pertinent to note that every MSCS is required to frame
its bye-laws in accordance with the provisions of the 2002 Act and
the rules made thereunder, particularly Section 10(2), which, inter
alia , provides for the inclusion of an object clause in the bye-laws.
Further, the 2002 Act also empowers an MSCS under Section 11
to amend its bye-laws, including its objects, in accordance with the
prescribed procedure therein.
Civil Appeal No. 11193 of 2025 Page 19 of 29
37. In construing the expression “same line of business” , which is not
defined under the 2002 Act, some guidance may also be drawn from
analogous regulatory frameworks to discern its ordinary and
contextual meaning in addition to the JPC report. In this regard,
reference may be made to the approach adopted in the Securities
and Exchange Board of India (Delisting of Equity Shares)
Regulations, 2021, wherein the determination of the question
whether two entities are in the same line of business is assessed on
the basis of their principal or predominant economic activities,
including classification under the National Industrial Classification
(NIC) Code. This indicates that the expression “same line of
refers to a substantive sameness or close nexus in core
business”
business activities, and not a remote or incidental connection.
However, at this juncture, it is important to note that such
guidance to SEBI Regulation is only illustrative. In the present
context, the determination must ultimately be made with reference
to the objects and business activities as set out in the bye-laws of
the MSCS, which govern the inquiry.
In view of the aforesaid legislative intent underlying the 2023
amendment, and the guidance available from the JPC
deliberations, it becomes evident that the expression “any other
institution in the same line of business” under Section 64(d) is not
to be construed in an expansive manner. It requires that, before
deploying its funds, an MSCS must satisfy a threshold condition
that the proposed investment aligns with its own line of business
as reflected in its bye-laws. This requirement keeps a check on the
manner in which funds of members of MSCS are being utilised and
is intended to prevent diversion into activities that are unrelated or
only remotely connected to the core business that an MSCS is
Civil Appeal No. 11193 of 2025 Page 20 of 29
entitled to do as per its bye-laws. Consequently, the determination
of eligibility under Section 64(d) must involve an examination of the
objects and functions contained in the bye-laws of the MSCS and a
comparison thereof with the business activities of the target
institution, so as to ascertain whether there exists a predominant
or substantial sameness between the two.
(II) Applicability of the standard of “same line of business” to the
facts of the present case.
38. Adverting to the facts of the present case, it is imperative to first set
out the objects and functions as stated in the bye-laws of the
appellant, since the determination of “line of business” must
necessarily flow from the same. Clause 5 of the bye-laws of the
appellant deals with the objects and functions, which reads as
under:
“5. OBJECTIVES AND FUNCTIONS:
The following are the objectives & functions of the society:
a. To encourage the members to thrifty and abide by the
cooperative principles.
b. To Accept Deposit from Members and Nominal Members
and advancing Loans to Members.
c. To own land or building for the use of the society with
prior permission of Central Registrar of the society.
d. To arrange for the recovery of the loans by disposal of the
movable or immovable property that has been pledged
towards the society against loans receivables.
e. To manage the properties of the society, maintain it and
to run it smoothly.
f. To serve the interest of the poor and middle class of people
more than one state by admitting as members.
g. To solve the Housing Problems of the Members,
Employees and the Agents of the Society, for the purpose
Purchase Land and Construct Houses for them.
Civil Appeal No. 11193 of 2025 Page 21 of 29
h. To enhance or build the social, ethical and educational
level of the members and to bring about religious
awareness/movement amongst them.
i. To make available the services of health, nutrition and
diet, services shall be to the member, employees,
representatives and general public from the humanitarian
point of view of the society.
j. To arrange for the transportation or conveyance for the
members, employees, and representatives of every branch
of the society, also conveyance to and from school for their
wards and other children.
k. To provide for financial aid for the purposes of better
education of the wards out of Nagpur and also provide for
their accommodation in hostels and provide them with
Libraries.
l. To construct godowns for storage of farm produce and
sanction loans of 50% of the price of such stored produce.
m. To provide service of ambulance and funeral cortege
vans. To construct & run multi-specialty hospitals.
n. To form production and consumer programmes for the
farmer members of the society.
o. To organise Medical camps in the Rural & Urban Areas.
p. Opening Branches and Sub-Offices in the Area of
Operation.
q. To provide Safe Deposits Vaults to member.
r. To do all such acts for the promotion and enhancing the
Socio Economic Status of the members of the Society.
s. To purchase, produce, procure, distribute the “agro-
products” for the processing of product and by-product in
order to make the same available to its members.
t. To enter into Partnership with other co-operative societies
to promote or expand the society business.”
(Emphasis Supplied)
39. Further, Clause 6(B) of the bye-laws provides that the funds of the
appellant may be utilised for carrying out the aforesaid objects and
functions, which reads as under:
“6. RAISING OF FUNDS:
xxx xxx xxx
Civil Appeal No. 11193 of 2025 Page 22 of 29
B) The funds of the society shall be utilised for the
attainment of the objects of the society as specified in these
bye-laws.”
(Emphasis Supplied)
40. Having regard to the aforesaid objects and the permitted utilisation
of funds, the line of business of the appellant must be understood
from a cumulative reading of these clauses. It is in this background
that the second limb of Section 64(d), namely, whether the
corporate debtor is in the same line of business as the appellant, is
required to be examined.
41. For this purpose, the line of business of the appellant must be
understood from the objects as stated in its bye-laws as a whole.
Clauses 5(a) to 5(r) show that the appellant is primarily a co-
operative society engaged in accepting deposits, advancing loans,
and providing various facilities to its members, such as housing,
healthcare, education, and other welfare activities. These clauses
indicate that the main business activity that the appellant is
entitled to carry out as per the bye-laws is that of a financial service
provider and member-oriented co-operative, and not a standalone
industrial manufacturing entity.
42. A careful reading of the relevant clauses of objects and functions
further clarifies this position. Clause 5(b) provides for accepting
deposits from members and advancing loans, forming the core of
its financial activity. Clause 5(d) enables recovery of such loans
through the disposal of pledged assets, which is incidental to its
lending function. Clause 5(g) relates to solving housing problems of
members through acquisition of land and construction, while
Clauses 5(h), 5(i), 5(j) and 5(k) respectively deal with social,
educational, medical, transport and welfare services for members
Civil Appeal No. 11193 of 2025 Page 23 of 29
and their families. Clause 5(q), which provides for safe deposit
vaults, also falls within the domain of financial services. These
Clauses, when read together, show that the business activities that
the appellant is entitled to do as per the bye-laws are centred
around financial intermediation and member welfare, and not
industrial manufacturing.
43. Thus, when the bye-laws are read in their entirety, the appellant’s
line of business is predominantly that of a financial and member-
oriented co-operative, with limited engagement in agro-based
processing activities. It cannot be said that the appellant is engaged
in industrial manufacturing activities. This understanding
assumes significance while examining whether the business of the
corporate debtor bears a substantial or predominant sameness so
as to fall within the expression “same line of business” under
Section 64(d).
44. Clause 5(s) must be read in this backdrop as argued by the counsel
for both parties. It permits the appellant “to purchase, produce,
procure, distribute the agro-products for the processing of product
and by-product” . It further provides that “it is also proposed to make
available to members modern technique used in processing of agro
product and other activities in processing sector” . From a plain
reading, two aspects emerge. First, the permissible business
activity under Clause 5(s) of the appellant’s bye-laws is centred
around “agro-products” , i.e., products derived from agriculture.
Secondly, the role of the appellant is to facilitate the processing of
such agro-products and to support such processing by making
available modern techniques to its members. Thus, the clause does
not envisage standalone industrial manufacturing across all
Civil Appeal No. 11193 of 2025 Page 24 of 29
categories, but confines the activity to agro-products and allied
processing, coupled with technical support to its members within
that sector. Therefore, Clause 5(s) permits processing activity, but
only in connection with agro-products and within the processing
sector linked to such products. Further, Clause 5(t) permits the
appellant to enter into a partnership with other “co-operative
societies” to promote or expand its business. This provision is
restricted in terms of the nature of the entity, being confined to
other co-operative societies only and not companies like corporate
debtors.
45. In contrast, the corporate debtor is engaged in the business of man-
made fibre/viscose-based textiles, which involves synthetic or
semi-synthetic raw materials. This is distinct from agro-based
processing, which the appellant is permitted to undertake under
the bye-laws. Although both may broadly fall under the textile
sector, yet the actual nature of their activities is different. One is
agro-product processing, while the other is synthetic or semi-
synthetic fibre manufacturing. Under the second limb of Section
64(d), the requirement is for predominantly or substantially the
same or closely related business activities. Such sameness is not
present in the present case. Thus, it can be said that the processing
activity contemplated in Clause 5(s) is integrally linked to agro-
products and not to processing in general.
46. Therefore, applying the standard of the same line of business, it
cannot be said that the appellant and the corporate debtor are in
the same line of business. As far as the reasoning of the NCLAT on
the aforesaid aspect is concerned, we are in agreement with the
same, inasmuch as the appellant cannot be said to fall within the
Civil Appeal No. 11193 of 2025 Page 25 of 29
second limb of Section 64(d) on the touchstone of “same line of
business” . However, the NCLAT went one step further in observing
that the income earned from the financial business was Rs. 194.27
Cr., whereas Nirmal Textile incurred a loss of Rs. 3.37 Cr., to arrive
at the conclusion that the appellant is predominantly involved in
the financial business and not in the textile business. We must
clarify that the revenue earned or profit/loss incurred has no
relevance in determining the standard of the same line of business,
which necessarily has to be determined through the bye-laws of the
MSCS only.
47. At this juncture, it is also imperative for us to address one further
argument of the appellant, wherein it has been contended that it
had carried out certain amendments to its bye-laws, particularly to
Clause 52, so as to incorporate the verbatim language of Section
64(d) therein. It was argued that the object of such an amendment
was to bring the bye-laws in consonance with the 2023 amendment
to Section 64, thereby enabling the appellant to invest in an entity
in the same line of business. On this basis, it was submitted that
once Clause 52 stood amended, the appellant could not be held to
be outside the same line of business as the corporate debtor.
However, this contention does not merit acceptance.
48. In the first place, it is an admitted position that although the
certificate of registration of amendment dated 24.01.2024 was
available with the appellant, yet the same was not placed before the
NCLT or the NCLAT. In the absence of such material, both the
forums proceeded on the basis that the amendment had not come
into effect as on the date of submission of the resolution plan. The
appellant, having failed to place the said document at the
appropriate stage despite due opportunity, cannot now be
Civil Appeal No. 11193 of 2025 Page 26 of 29
permitted to rely upon it. The attempt to introduce the same at this
stage by way of an application for production of additional
documents dated 31.08.2025 does not satisfy the well-settled
requirements under Order XLI Rule 27 of the Code of Civil
Procedure, 1908, and is accordingly liable to be rejected.
49. Secondly, even assuming that such an amendment were to be
taken on record, though it is not, it would not advance the case of
the appellant on the issue of the same line of business. This is
because the amendment to Clause 52 merely reproduces the
language of Section 64(d) and governs the manner in which funds
may be invested. It does not, in any manner, amend, alter or
expand the objects and functions of the appellant as contained in
Clause 5 of the bye-laws, which in substance determines the nature
and scope of its business activities. In the absence of any
corresponding amendment to the object clause so as to bring the
appellant’s permissible activities in alignment with those of the
corporate debtor, the requirement of being in the same line of
business cannot be said to be satisfied merely by adopting the
statutory language of Section 64(d).
E. CONCLUSION
50. In view of the foregoing discussion and considering the totality of
the circumstances, the inevitable conclusion on the position of law
is that Section 64(d) of the 2002 Act permits an MSCS to invest or
deposit its funds in two distinct categories of institutions: (a) a
subsidiary institution, and (b) any other institution in the same line
Civil Appeal No. 11193 of 2025 Page 27 of 29
of business. As per the JPC Report dated 15.03.2023, the second
limb, i.e., “any other institution in the same line of business” , was
introduced as a restrictive standard to address the misuse of the
earlier open-ended provision and restrict the dubious or fraudulent
investments. This expression requires a substantial or
predominant, or closely related sameness in business activities,
which must be determined with reference to the objects and
functions contained in the bye-laws of an MSCS.
51. Accordingly, the application for withdrawal is allowed, and the
present appeal stands dismissed as withdrawn. It is needless to
clarify that the CIRP of the corporate debtor shall continue in
accordance with the provisions of IBC.
52. At this stage, after the Judgment was pronounced, Mr. Navin
Pahwa, the learned Senior counsel appearing for the Resolution
Professional (RP) submitted that the under the Order of this Court
dated 13-10-2025, the Committee of Creditors (CoC) was directed
to deposit an amount of Rs.2,00,00,000/- (Rupees Two Crore)
towards the Corporate Insolvency Resolution Process (CRIP) costs.
53. He brought to our notice that CoC has deposited
Rs.1,63,42,661.15/- The CoC has to still deposit the balance
amount of Rs.36,57,338.85/-.
54. Since we have now clarified that the CRIP shall continue in
accordance with the provisions of the Insolvency and Bankruptcy
Code, 2016 (IBC), the RP can take up the aforesaid issue with the
Adjudicating Authority.
Civil Appeal No. 11193 of 2025 Page 28 of 29
55. The pending applications, if any, shall stand disposed of.
....................................... J.
(J.B. Pardiwala)
....................................... J.
(K.V. Viswanathan)
New Delhi;
th
9 April, 2026.
Civil Appeal No. 11193 of 2025 Page 29 of 29