IBC overrides Multi-State Co-operative Societies Act regarding jurisdiction over corporate debtor assets and post-resolution adjustments.

In brief

The question

Whether the NCLT possesses jurisdiction under Section 60(5) of the IBC to decide the application post-approval of the Resolution Plan, given Section 121 of the Multi-State Co-operative Societies Act, 2002

The court held

The Tribunal upheld the NCLT's jurisdiction and the finding that the adjustment of dividends was unauthorized.

It also directed

It held that Multi-State Co-operative Societies fall under the ambit of the IBC by virtue of Section 238

The court confirmed the order to refund ₹56,00,000/-

However, it modified the relief regarding interest, holding that since neither the RP nor stakeholders challenged the adjustments earlier, interest at 10% per annum should only be calculated from the date the SRA filed the application (04.03.2025) rather than the original adjustment dates

The appeal was partly allowed only to this extent

01Facts

The Corporate Debtor (CD), Swastik Ceracon Ltd., entered Corporate Insolvency Resolution Process (CIRP) on 15.01.2019

pp. 1-2

The Appellant, a Multi-State Co-operative Bank, filed a claim for ₹10.43 Crores and participated in the CoC with an 8.9% voting share

p. 2, 6

A Resolution Plan was approved on 20.06.2022, under which the Appellant was proposed a payout of over ₹5 Crores

p. 2

Post-approval, the Successful Resolution Applicant (SRA) discovered that the Appellant had unilaterally adjusted dividends (totaling ₹56,00,000/-) arising from the CD’s shareholding in the Appellant bank both during the CIRP and after the plan's approval

pp. 2-3

The SRA filed I.A. 370/2025 seeking a refund.

The Adjudicating Authority (NCLT Ahmedabad) ordered the refund with 10% interest from the dates of adjustment

pp. 3-4

The Appellant challenged this, citing a lack of jurisdiction under the Multi-State Co-operative Societies Act, 2002

p. 4

02Issues

i.Whether the NCLT possesses jurisdiction under Section 60(5) of the IBC to decide the application post-approval of the Resolution Plan, given Section 121 of the Multi-State Co-operative Societies Act, 2002

¶ 20(i) / p. 3

ii.Whether the adjustment of dividends by the Appellant violated the moratorium under Section 14 and the extinguishment provisions of the IBC

¶ 20(ii) / p. 3

iii.Whether the shares/dividends qualify as "assets" of the Corporate Debtor under Section 18 of the IBC

¶ 20(iii) / p. 3-4

03Law Applied

The court primarily applied Section 238 of the IBC, which mandates that the Code overrides any inconsistent provisions in other laws

p. 8

It interpreted Section 60(5)(c) of the IBC, which grants the NCLT broad jurisdiction over any question of law or fact arising out of or in relation to insolvency proceedings

p. 10

The court also referred to the definition of a "person" under Section 3(23)(g) of the IBC to include entities established under a statute, such as Co-operative Societies

p. 9

It contrasted these with Section 121 of the Multi-State Co-operative Societies Act, 2002, which excludes the Companies Act but does not exclude the IBC

pp. 7-8

04Reasoning

The Tribunal rejected the Appellant’s argument that Section 121 of the Multi-State Co-operative Societies Act ousted NCLT's jurisdiction.

It reasoned that while the Companies Act might not apply to the internal management of the Co-operative Society, the IBC is a distinct, overriding statute for debt resolution

pp. 8-9

Since the Appellant voluntarily submitted to the NCLT's jurisdiction by filing a claim and receiving payments under the resolution plan, it was estopped from challenging the forum's authority

pp. 9-10

The Tribunal noted that the shares were recorded as assets in the Information Memorandum; therefore, the dividends generated from those shares belonged to the CD

p. 10

Any unilateral "set-off" or adjustment during the moratorium period (Section 14) or after the plan's approval (which extinguishes past claims) is illegal as it disrupts the collective resolution process

p. 10

The court distinguished *Embassy Property Development* by clarifying that the present dispute arose directly from the insolvency process and the protection of the CD's assets, rather than a matter of public law

pp. 15-16