Case Note & Summary
The Supreme Court addressed a statutory appeal arising from the National Company Law Appellate Tribunal's judgment dated 21.08.2025, which affirmed the National Company Law Tribunal's decision dated 09.04.2025. The NCLT had declared the appellant, ineligible to submit its resolution plan in the Corporate Insolvency Resolution Process of Morarji Textiles Ltd., on the ground that the appellant's bye-laws did not permit it to invest in the corporate debtor. The appellant, a cooperative society registered under the Multi-State Cooperative Societies Act, 2002, operates a textile unit named 'Nirmal Textile' in Nagpur. Following an amendment to Section 64 of the 2002 Act on 03.08.2023, which inserted Clause (d) allowing investment in 'any other institution in the same line of business,' the appellant amended its bye-laws in an Annual General Meeting on 24.09.2023 to incorporate this provision. The amendment was approved by the Central Registrar on 24.01.2024. In the CIRP proceedings, the Resolution Professional sought expressions of interest, and the appellant submitted its EOI and later a resolution plan for Rs. 120 Crores. However, the RP questioned whether the appellant's constitutional documents permitted acquisition of the corporate debtor under the IBC. The appellant clarified that its charter document allowed collaboration and activities in the processing sector, aligning with the corporate debtor's textile business. Before the Supreme Court could deliver judgment, the appellant requested withdrawal of the appeal due to developments. The court permitted withdrawal but, given the importance of the issue, proceeded to examine the facts, submissions, and provisions of the IBC and 2002 Act to explain the legal position on the meaning and applicability of 'same line of business' without returning findings on the merits. The court's analysis focused on interpreting Section 64(d) of the 2002 Act and its relevance to resolution applicant eligibility under the IBC, emphasizing the need to clarify principles governing this pivotal issue.
Headnote
A) Cooperative Societies Law - Investment of Funds - 'Same Line of Business' Interpretation - Multi-State Cooperative Societies Act, 2002, Section 64(d) - The court examined the meaning and scope of the phrase 'any other institution in the same line of business' as inserted by amendment to Section 64(d) of the 2002 Act, which permits a multi-state cooperative society to invest in shares, securities, or assets of such institutions - The court clarified the legal position without deciding the merits, as the appeal was withdrawn, focusing on the statutory language and its implications for investment eligibility (Paras 1-2, 5). B) Insolvency Law - Resolution Applicant Eligibility - Bye-Law Compliance - Insolvency and Bankruptcy Code, 2016, Sections 25(2)(h), 29A - The dispute arose from the NCLT and NCLAT declaring the appellant ineligible to submit a resolution plan in the CIRP of Morarji Textiles Ltd., on grounds that its bye-laws did not permit investment in the corporate debtor - The appellant, a multi-state cooperative society operating a textile unit, had amended its bye-laws post-amendment to Section 64(d) of the 2002 Act to include investment in institutions in the same line of business - The court analyzed the facts and submissions to explain the legal principles governing eligibility under IBC, without returning findings on merits (Paras 3-4, 6-11).
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Issue of Consideration: Meaning and scope of the expression 'any other institution in the same line of business' under Section 64(d) of the Multi-State Cooperative Societies Act, 2002, and its applicability to the facts of the case regarding the appellant's eligibility to submit a resolution plan in the CIRP of the corporate debtor
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Final Decision
Court permitted appellant to withdraw appeal due to developments; clarified legal position on 'same line of business' under Section 64(d) of Multi-State Cooperative Societies Act, 2002 without returning findings on merits
