In a significant hearing that may shape the interface between cooperative law and the insolvency framework, the Supreme Court of India on Tuesday, November 4, 2025, considered a case regarding the eligibility of Multi-State Cooperative Societies to act as resolution applicants under the Insolvency and Bankruptcy Code.
The said issue originated from a dispute involving M/s. Nirmal Ujjwal Credit Co-operative Society Ltd., where the latter was seeking to participate in the Corporate Insolvency Resolution Process (CIRP). The issue before the Court is whether, under the IBC, even a Multi-State Cooperative Society can bid for a corporate debtor considering the limitations provided under the Multi-State Cooperative Societies Act, 2002 (MSCS Act).
A bench comprising Justice J. B. Pardiwala and Justice K. V. Viswanathan heard elaborate submissions by senior advocates Mukul Rohatgi and Rajiv Shakdher, appearing for the appellant-society; Gopal Jain for the CoC; and Navin Pahwa for the Resolution Professional. Additional Solicitor General Aishwarya Bhati appeared for the Central Registrar of Multi-State Cooperative Societies and filed a short note in response to the earlier directions issued by the Court.
According to the note submitted by the Central Registrar, the MSCS Act does not expressly bar a cooperative society from participating in a resolution process under the IBC or from acquiring assets of a corporate debtor, so long as it meets the dual requirements:
(i) the investment must fall within the society's objectives as stated in its memorandum of incorporation, and
(ii) the investment must be made in another institution engaged in the same line of business.
However, the Registrar clarified that the authority has powers under Section 78 of the MSCS Act to examine whether such an investment conforms to the above conditions.
Senior counsel appearing for the appellant cooperative society, however, strongly contended that such an inquiry under Section 78 is not contemplated when the process is governed by the IBC, which already contains strict eligibility norms under Section 29A. They argued that because cooperative entities are financial institutions under specific legislation, they should be allowed to participate in the resolution process like any other eligible bidder.
After hearing the parties, the Court directed both the Resolution Professional and the Committee of Creditors to file their detailed affidavits clarifying their respective stands, with advance copies to be shared with the appellant. The matter has been posted for final disposal on November 18, 2025, and all counsel have been asked to file written submissions ahead of the next hearing.
The Bench has meanwhile exempted the personal appearance of the Central Registrar and directed that the note filed by the Registrar be taken on record. This case is expected to have widespread ramifications for the involvement of cooperative societies in insolvency resolution proceedings because it lies at the junction of two huge areas, namely financial cooperatives and corporate insolvency regulation. The impending decision of the Court may clarify whether a cooperative entity can expand its activities through acquisition under the IBC within the scope of its objects under the relevant statute.
INSOLVENCY AND BANKRUPTCY CODE, 2016
