Can Multi-State Cooperative Societies Submit Resolution Plans Under IBC? Supreme Court To Consider

The Supreme Court recently directed that the Central Registrar of Multi-State Cooperative Societies be made a party to the appeal filed by a multi-state co-operative society against a National Company Law Appellate Tribunal (NCLAT) judgment that had held the society ineligible to submit a resolution plan for a company under the Insolvency and Bankruptcy Code, 2016.

A bench of Justice JB Pardiwala and Justice KV Viswanathan sought a response from the Central Registrar on whether multi-state cooperative societies are barred from submitting a resolution plan for a corporate entity under the Insolvency and Bankruptcy Code.

“We want to know from the Central Registrar whether the societies like the appellant before us are, in any manner, barred from submitting a resolution plan under the provisions of the Insolvency and Bankruptcy Code, 2016 for a corporate entity”, the Court stated.

The Court observed that the presence of the Central Registrar was necessary for an effective and complete adjudication of the issues raised in the case. The Court therefore directed the appellant to amend the cause title of the appeal to implead the Central Registrar as respondent no. 4.

The Court permitted the NCLAT to continue proceedings relating to the approval of the resolution plan but directed that no final order be passed until further orders. The matter will next be heard on October 28, 2025.

The appeal before the Supreme Court arises out of the NCLAT's judgment rejecting the society's challenge against its disqualification from the corporate insolvency resolution process of Morarjee Textiles Ltd., holding that the society's bye-laws and the provisions of the Multi-State Cooperative Societies Act restricted it from investing in a company engaged in the textile industry.

Before the NCLAT, Nirmal Ujjwal Credit Co-operative Society, a Nagpur-based multi-state cooperative registered under the 2002 Act, had argued that it was eligible to participate in the corporate insolvency resolution process and that its textile business arm, Nirmal Textiles, operated in the same line as the corporate debtor. The society claimed to have submitted the highest resolution plan of ₹170 crore compared to the next best offer of ₹156 crore.

However, the Resolution Professional rejected its eligibility, citing restrictions under Section 64 of the 2002 Act and the society's own bye-laws, which limited its business to agro-based activities. The NCLAT agreed with this view, holding that Section 64(d) of the 2002 Act allowed investment only in subsidiary institutions or other institutions in the same line of business as the cooperative society. The tribunal found that Morarjee Textiles Ltd., which manufactures cotton and man-made fabrics, was not in the same line of business as the appellant, which primarily engages in credit and agro-based textile activities.

The appellate tribunal also noted that any amendment to the society's bye-laws to permit such investment had not been approved by the Central Registrar as required under Section 11 of the Act. It held that eligibility must exist at the time of submission of the resolution plan and cannot be rectified by subsequent amendment.

The Supreme Court has now sought the Central Registrar's view on whether cooperative societies registered under the 2002 Act are legally barred from submitting resolution plans for corporate entities.

Senior Advocate Rajiv Sakhdhar represented the appellant society, Senior Advocate Krishna Venugopal represented the successful resolution applicant Shriniwas Spintex Industries Pvt. Ltd., and Senior Advocate Navin Pahwa represented the Resolution Professional.

Case no. – Civil Appeal No. 11193/2025

Case Title – Nirmal Ujjwal Credit Co-operative Society Ltd. v. Ravi Sethia & Ors.