Multi-State Co-Operative Societies Barred From Investing Outside Their 'Same Line Of Business' : Supreme Court

The Supreme Court has observed that a Multi-State Co-operative Society (MSCS) cannot invest in a business other than its line of business. A bench comprising Justices JB Pardiwala and KV Viswanathan considered a matter where the Appellant, a multi-state credit co-operative society registered under the MSCS Act, 2002, sought approval of its resolution plan for a textile company. The National Company Law Appellate Tribunal had rejected the plan on the ground that Section 64(d) of the MSCS Act, 2002, bars such a society from investing its funds in another institution unless the institution is either its subsidiary or operates in the "same line of business." Affirming the NCLAT's decision, the judgment authored by Justice Pardiwala observed that the Appellant's resolution plan for a textile company fell afoul of Section 64(d) of the 2002 Act, as the textile business was not the same line of business. Consequently, the NCLAT had rightly refused to approve the plan. “…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.”, the court observed, pointing out that the Appellant is entitled to 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 Supreme Court clarified that the expression "same line of business" requires a substantive sameness or a close nexus between the core business activities of two entities, rather than a merely remote or incidental connection. Applying this standard, the Court held that the Appellant, primarily a credit co-operative society, could not categorize its investment in the Respondent textile company as being in the "same line of business." Consequently, the resolution plan was deemed a violation of the restrictive investment protocols mandated under the MSCS Act. Since the Appellant sought to withdraw the appeal, the Court, in terms of the aforesaid, dismissed the appeal as withdrawn. Cause Title: M/S NIRMAL UJJWAL CREDIT CO-OPERATIVE SOCIETY LTD. VERSUS RAVI SETHIA & ORS.Citation : 2026 LiveLaw (SC) 357Click here to download judgmentAppearance: For Appellant(s) : Mr. Mukul Rohatgi, Sr. Adv. Mr. Rajiv Shakdher, Sr. Adv. Mr. Amit Pai, AOR Ms. Honey Satpal, Adv. Mr. R. Prashant Reddy, Adv. Ms. Pankhuri Bhardwaj, Adv. Mr. Aniruth G. Purusothaman, Adv. Mr. Abhiyduaya Vats, Adv. Mr. Keshav Sehgal, Adv. For Respondent(s) :Mr. Gopal Jain, Sr. Adv. Mr. Rajesh Kumar Gautam, AOR Mr. Anant Gautam, Adv. Mr. Deepanjal Chaudhary, Adv. Mr. Rishi Chauhan, Adv. Ms. Likivi K Jhakalu, Adv. Ms. Azal Aekram, Adv. Mr. Neeraj Kishan Kaul, Sr. Adv. Mr. Himanshu Satija, Adv. Mr. Jatin Kumar, Adv. Ms. Neha Mehta Satija, AOR Mr. Raghav, Adv. Mr. Harsh Saxena, Adv. Mr. Shevaaz Khan, Adv. Mr. Anshul Rao, Adv. Mr. Navin Pahwa, Sr. Adv. Mr. Rajesh J., Adv. Mr. Dhrupad Vaghani, Adv. Mr. Yashwardhan Agarwal, Adv. Mr. Guruprasad Naik, Adv. Mr. Md Arsalan Ahmed, Adv. Mr. Gajendra Singh Negi, Adv. Mr. Dcosta Ivo Manuel Simon, AOR Mr. Siddharth Dharmadhikari, Adv. Aastha Singh, Adv. Mr. Mayank Pandey, Adv. Mr. Rajat Nair, Adv. Mr. Santosh Ramdurg, Adv. Mr. Shreekant Neelappa Terdal, AOR Ms. Aishwarya Bhati, A.S.G.

Multi-State Co-Operative Societies Barred From Investing Outside Their 'Same Line Of Business' : Supreme Court

Yash Mittal

The Court upheld the rejection of resolution plan submitted by a mult-state cooperative society.

Tags