NCLAT reserves order on Jindal Poly’s plea against admission of class action suit
The National Company Law Appellate Tribunal (NCLAT) on Friday reserved its verdict on Jindal Poly Films Ltd’s appeal challenging the admission of India’s first collective class action suit filed by minority shareholders alleging fraud by the company’s founders and management.
The appellate court heard arguments from both Jindal Poly and minority shareholders. It will decide whether to grant an adjournment based on the National Company Law Tribunal’s (NCLT) order dated February 5, which accepted the class action and issued a formal notification.
Jindal Poly has sought an urgent stay, stating that it will have to send communications to stock exchanges and the market regulator, as well as to around 40,000 shareholders, unless the NCLT order is put on hold. This could cause irreparable reputational and market damage, the company said.
The Delhi bench of the NCLT accepted the petition filed by the minority shareholders, marking the first time that an Indian company court had formally given notice of a corporate class action under Article 245 of the Charter. Companies Law2013, almost two years after the case was filed.
The case was initiated in March 2024 by minority shareholders Ankit Jain, Rina Jain and Ruchi Jain Hanasoge, who hold 4.99% stake in the company.
They claim it’s over ₹2,500 crore was funneled through undervalued asset sales and related party transactions involving entities linked to the promoter.
Challenging the NCLT order, Jindal Poly said that the class action was not maintainable and that Article 245 violated Articles 241-242 of the Agreement. He argued that it could not be used instead of the oppression and mismanagement petition within the scope of the articles. Companies Lawthis requires a higher shareholding threshold. According to the company, the issues raised relate to governance concerns that need to be pursued through other legal avenues.
The company also noted that minority shareholders had previously initiated litigation against a group entity before another panel of the court and subsequently filed the current class action petition.
Section 245 was implemented in 2013 based on the recommendations of the JJ Irani Committee to strengthen protection of minority shareholders in the wake of the Satyam scandal. allows shareholders Holding at least a 2% stake in a publicly traded company for the purpose of seeking collective resolution of allegations of fraud, mismanagement or unfair practices.
According to the petition, Jindal Poly invested approx. ₹703.79 crore with 0% preference shares in group power companies (Jindal Powertech and Jindal India Thermal Power) between 2013 and 2017.
In FY21, these companies in total ₹7,000 crore, thus increasing their valuation. Shareholders allege that Jindal Poly then sold its shares to investor-linked entities at grossly undervalued prices, resulting in losses exceeding Rs 100,000. ₹2,500 crore to public investors.
The court’s decision will determine whether the NCLT’s acceptance order will stand. Unless a stay is granted, the class action will continue on its merits and this is being closely watched as an important development for minority shareholder rights in India.
