Crepe cotton bandages or the surgical cotton fabrics output has risen dramatically in recent years as a result of rising demand from medical experts, particularly in nations like India, which is one of the top five cotton exporters in the world. For the manufacturing of crepe cotton bandages high quality of cotton fibres are used. The effluent released from crepe cotton textile units are distinguished from the other textile effluents by the absence of colouring agents. Suspended particles, COD, dissolved ions, organic carbon, and an alkaline pH characterise this effluent. Several degradation studies of colouring chemicals, organic and inorganic contaminants released from textile effluents have been conducted, but treatment studies on Crepe Cotton Textile Wastewater (CCTW) have been rare, despite their potential environmental threat. Biological treatment of wastewater is an indelible part of any industrial or domestic wastewater treatment plant. Although ASP (activated sludge process) is the most common, and primordial process used to treat wastewater, nevertheless generates ESP (Excess Sludge Produced) is the major disadvantage of this process. Conversely the burgeoning demand for energy has spurred scientists to test the potential of algae for treating wastewater, and energy production as well. Therefore, there is a paucity of knowledge of understanding, and selecting the right ecological, and economical system for effective treatment of cotton processing wastewater till date. In this research article a comparative batch study between activated sludge and microalgae Scenedesmus dimorphus with respect to different dilutions (100%, 50%, 25%, 10%) of CCTW was studied. From the results, it was observed that the strain Scenedesmus dimorphus could deplete > 83%, and > 97% of COD from 25%, and 10% of wastewater batches respectively during the microalgal batch study. On the contrary activated sludge microbes could remove maximum 76.40% of carbon from the initial concentration of 3560 mg/l of COD while cultured in 25% of wastewater. Likewise, the reduction efficiency of nitrate nitrogen (NO− 3-N), ammonia nitrogen (NH+ 4-N), phosphate (PO3 − 4-P) was compared. Simultaneously the growth of S. dimorphus by measuring total chlorophyll showed a 1.28-fold increase in biomass in wastewater as comparison with pure culture medium within 15 days of batch experiment conducted in triplicates. After the batch experiment the total lipid content was estimated from the wet algal biomass with extraction efficiency of 90 ± 1.2%. From this study a significant decrease in organic and inorganic pollutants by Scenedesmus dimorphus was noticed as compare to activated sludge microbes.