The amendment to the Multi-State Cooperative Societies Act, 2002 restricts investments to businesses in the same line as defined by society bye-laws, preventing misuse of funds and ensuring alignment with core business objectives.

JUDGMENT :

J.B. PARDIWALA, J.

For the convenience of exposition, this judgment is divided into the following parts:-

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, 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.

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 —

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(d) in the shares, securities or assets of a subsidiary institution