In a significant hearing before the Supreme Court of India, the bench clarified how co-operative societies can invest under law, while allowing the appellant to withdraw its appeal. The Court chose to lay down legal principles without deciding the dispute on merits.
Background of the Case
The case arose from a dispute involving M/s Nirmal Ujjwal Credit Co-operative Society Ltd., which had submitted a resolution plan during insolvency proceedings of Morarji Textiles Ltd. under the Insolvency and Bankruptcy Code (IBC).
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The Resolution Professional later declared the society ineligible. The decision was upheld by the National Company Law Tribunal (NCLT) and later by the National Company Law Appellate Tribunal (NCLAT). Both forums held that the society’s bye-laws did not permit such an investment and that it was not operating in the “same line of business” as the corporate debtor.
Aggrieved, the society approached the Supreme Court.
When the matter came up, the appellant sought permission to withdraw the appeal due to subsequent developments. The Court agreed to the withdrawal request.
However, considering the importance of the legal issue involved, the bench decided to examine the matter briefly to clarify the law.
“The Court made it clear that it would explain the legal position… without returning any findings on the merits of the appeal,” the judgment noted.
Court’s Observations
The Court focused on the interpretation of Section 64(d) of the Multi-State Co-operative Societies Act, 2002. This provision allows societies to invest in:
- Subsidiary institutions, or
- Institutions in the “same line of business”
The bench observed that this phrase is not defined in the statute. Therefore, its meaning must be understood from legislative intent and the society’s own bye-laws.
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Referring to parliamentary discussions, the Court highlighted that the phrase was introduced to prevent misuse of funds.
“The earlier provision was open-ended and had been misused for making dubious investments,” the bench explained.
The amendment aimed to:
- Restrict investments to related business areas
- Ensure financial discipline
- Protect members’ funds
The Court emphasized that a society’s line of business is determined by its bye-laws.
“The societies can frame their bye-laws democratically… to decide their line of business,” the Court noted while referring to legislative material.
Thus, whether an investment is valid depends on alignment with the society’s stated objectives.
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The Court clarified that before making any investment, a co-operative society must demonstrate:
- The entity is its subsidiary, or
- The entity operates in the same line of business as defined by its bye-laws
Further, compliance with existing laws, including the IBC, is mandatory.
The Supreme Court permitted the appellant to withdraw the appeal. At the same time, it clarified the legal position regarding the interpretation of “same line of business” under the Multi-State Co-operative Societies Act, without deciding the case on merits.
Case details
Case Title: M/s Nirmal Ujjwal Credit Co-operative Society Ltd. vs Ravi Sethia & Ors.
Case Number: Civil Appeal No. 11193 of 2025
Court: Supreme Court of India
Judge: Justice J.B. Pardiwala & K.V. Viswanathan
Decision Date: 9th April, 2026
