2026 INSC 338

REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 11193 OF 2025

M/S NIRMAL UJJWAL CREDIT

CO-OPERATIVE SOCIETY LTD.

…APPELLANT

VERSUS

RAVI SETHIA & ORS.

…RESPONDENTS

J U D G M E N T

Civil Appeal No. 11193 of 2025 Page 1 of 29

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 2 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 3 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 4 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 5 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 6 of 29

Upon receiving the resolution plan, the respondent no. 1 – RP

invited the appellant to the next meeting of the COC. The appellant

attended the 10

th 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)

12. In the 10

th and 17

th 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 7 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 8 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 9 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 “agro-products” for the processing of the

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 10 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 11 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 12 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 13 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 14 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 15 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 16 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 “any other institution” was open-

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 17 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

business” in Section 64(d), formed part of a larger legislative

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 18 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 19 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 20 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

business” refers to a substantive sameness or close nexus in core

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 21 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 22 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 23 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, whet her 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 24 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 25 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 26 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 27 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 28 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 29 of 29

55. The pending applications, if any, shall stand disposed of.

....................................... J.

(J.B. Pardiwala)

....................................... J.

(K.V. Viswanathan)

New Delhi;

9

th April, 2026.