Section 64(d) MSCS Act restricts investment to institutions sharing substantial business sameness as defined in society bye-laws.

The Appellant is a Multi-State Co-operative Society (MSCS) registered under the Multi-State Co-operative Societies Act, 2002 (2002 Act)

It operates a textile unit named "Nirmal Textile"

Following a 2023 amendment to Section 64(d) of the 2002 Act, which restricted MSCS investments to subsidiary institutions or those in the "same line of business," the Appellant amended its bye-laws to mirror this statutory language

When Morarji Textiles Ltd. (Corporate Debtor/CD) entered Corporate Insolvency Resolution Process (CIRP) under the IBC, the Appellant submitted a resolution plan

The Resolution Professional (RP) and subsequently the NCLT and NCLAT declared the Appellant ineligible

They held that the Appellant’s primary business (financial services and agro-based processing) was not in the "same line of business" as the CD (industrial manufacturing of man-made/synthetic fibres)

The Appellant challenged these orders before the Supreme Court but later sought to withdraw the appeal

The Court applied Section 30(2)(e) of the Insolvency and Bankruptcy Code (IBC), 2016, which requires resolution plans to comply with all existing laws

The "law in force" here was Section 64(d) of the Multi-State Co-operative Societies Act, 2002, which restricts an MSCS from investing funds in institutions unless they are subsidiaries or in the "same line of business"

The Court also relied on the 2023 Joint Parliamentary Committee (JPC) Report, which established that these restrictions were intended to prevent the "dubious" diversion of member funds into unrelated or risky ventures

Furthermore, the Court noted that an MSCS’s "line of business" is strictly governed by the "object clause" in its bye-laws framed under Section 10(2) of the 2002 Act

The Court held that "same line of business" is a restrictive standard requiring "substantial or predominant sameness" in core activities

To determine this, courts must look at the MSCS’s charter (bye-laws) rather than financial metrics like revenue or profit/loss

Upon reviewing the Appellant’s bye-laws (Clause 5), the Court observed that its primary functions were financial services (loans/deposits) and member welfare

While Clause 5(s) permitted "agro-product" processing, this was distinct from the CD’s business of manufacturing synthetic man-made fibres/viscose

The Court reasoned that "agro-based" and "synthetic industrial" processing are different in nature, scale, and technology

It further clarified that simply amending bye-laws to include the language of Section 64(d) is insufficient; the "object clause" itself must be expanded to include the specific line of business of the target entity to satisfy the statutory threshold

The Court emphasized that Section 64(d) of the 2002 Act acts as a safeguard for members' funds by preventing unrelated investments

While the Court permitted the Appellant to withdraw its appeal, it formally clarified these legal principles to settle the position of law

The appeal was dismissed as withdrawn, and the CIRP was ordered to proceed according to the IBC