Supreme Court Directs Status Quo On SAIL Employees Cooperative Credit Society Winding-Up Order

The Supreme Court on Tuesday directed status quo on a Delhi High Court order concerning the winding up of Steel Authority of India (SAIL) Employees Cooperative Credit Society Ltd.

The High Court in May 2026 had directed the Central Registrar to pass an order for winding up the Society and appoint a Liquidator to take charge of its assets and facilitate repayment of claims.

A bench of Justices Pamidighantam Sri Narasimha and Alok Aradhe directed the parties to file their responses. It listed the matter after three weeks and, pending further consideration, directed the status quo concerning the winding-up direction.

The top court was hearing a petition filed by members, including retired and serving SAIL employees, seeking repayment of their fixed deposits. They also sought enforcement of Cooperative Ombudsman orders directing the Society to pay their dues.

The dispute involves around 12,520 members and approximately ₹430 crore payable to depositors and members. The High Court noted that the majority of petitioners were senior citizens and retired SAIL employees who had invested their hard-earned money with the Society, but their deposits remained unpaid.

The High Court noted that the Society's financial position had deteriorated. It also referred to the Central Registrar's findings of financial mismanagement and observed that Cooperative Ombudsman orders had become “mere 'paper orders'”.

The High Court directed the Central Registrar to pass an order for winding up the Society and appoint a Liquidator. The Liquidator was directed to take charge of the Society's assets and facilitate time-bound repayment of claims.

Senior Advocate Gaurav Agarwal, appearing for the erstwhile Board of Directors of the Society, argued that the Society had not been given an adequate opportunity before the winding-up direction was passed. He submitted that the Society had approached the authorities and disclosed its assets, including immovable properties and bank accounts.

He questioned the High Court order, saying, “And the High Court without telling me that I want to wind you up, please tell me why I shouldn't wind you up.”

Agarwal submitted that the Society was already a party to the proceedings and had placed its assets on record. “We are represented. We filed all assets declarations saying these are the assets; there are 5 immovable properties. These are the accounts.”

He further argued that the statutory authority, rather than the High Court itself, should exercise the power of winding up after following the prescribed procedure.

Counsel appearing for the Union of India submitted that the Society had been heard. A show-cause notice concerning winding up had preceded the High Court's direction, the counsel submitted.

The counsel pointed out that the show-cause notice had given the Society an opportunity to respond before winding-up proceedings were initiated.

The bench indicated that it was concerned not necessarily with the need for statutory action but with the manner in which the winding-up power had been exercised.

It remarked, “We are with you to the extent of the prejudice. Perhaps we also share the same kind of approval, but then the method and manner by which the statutory provision has to be respected is different.”

The bench also questioned the High Court's directions concerning the Liquidator and the transfer of control over the Society's assets. The Court indicated that the portion directing winding up could be set aside or suitably modified while preserving other directions, subject to hearing the parties.

The Court also noted the existence of a prior show-cause notice. It sought clarification on whether the statutory authority had yet passed a final winding-up order.

The Union Government's counsel also submitted that the power of dissolution or winding up rests with the competent statutory authority. The authority would pass an order after hearing the Society and other concerned parties, counsel submitted.

After hearing the case, the court directed the parties to file their responses and listed the matter after three weeks.

Background

The case arose from petitions by retired and serving SAIL employees who had deposited money with the Steel Authority of India Employees Co-operative Credit Society Ltd Kolkata. Several members sought premature closure of their fixed deposits but were not paid despite favourable orders from the Cooperative Ombudsman under Section 85A of the Multi-State Cooperative Societies Act, 2002.

The Delhi High Court noted that the Society had around 12,520 members and liabilities of approximately ₹430 crore while an inquiry and forensic audit revealed severe financial deterioration and a substantial deficit. The Court observed that Ombudsman orders had effectively become paper orders because the Act lacked an effective mechanism for their enforcement.

The Court held that depositors could not be made to suffer for the statutory lacuna and directed the Central Registrar to wind up the Society under Section 86 and appoint a Liquidator under Section 89. The Liquidator was directed to take charge of all Society assets, including bank accounts, properties, investments, FDs and mutual funds, and realise them in accordance with law.

The Court further directed that claims of petitioners and other depositors awaiting payment under Ombudsman orders be honoured in a time-bound manner, with an endeavour to make payments by October 15, 2026.