NCLAT refuses to stay India’s first corporate class action against Jindal Poly Films
NEW DELHI: In a setback for Jindal Poly Films Ltd, the National Company Law Appellate Tribunal (NCLAT) on Thursday refused to stay proceedings in India’s first corporate class action case filed by minority shareholders, alleging fraudulent conduct and siphoning off of over 100 people. ₹2,500 crore by the promoters and management of the company.
The appellate court dismissed the company’s plea challenging the February 5 order of the National Company Law Tribunal (NCLT), Delhi bench, which accepted the class action petition under the Companies Act and issued notice in the matter. Detailed written instructions are awaited from NCLAT.
Jindal Poly, in its plea, has sought an immediate stay of the NCLT order, arguing that formal communications will have to be sent to around 40,000 shareholders, stock exchanges and market regulators unless interim relief is taken. The company argued that such disclosures could cause irreparable damage to its reputation and market.
Jindal Poly also argued that the class action petition was unsustainable and that this provision could not be used as a substitute for other remedies requiring higher shareholding thresholds. The company said the issues raised were related to governance concerns that needed to be pursued through alternative legal routes, adding that shareholders had previously filed a separate lawsuit against a group company before another tribunal.
However, NCLAT refused to grant interim relief.
With Jindal Poly’s stay plea rejected, the NCLT can now proceed to hear the matter on merits and decide whether the minority shareholders’ claims are maintainable.
Earlier this month, the Delhi bench of the NCLT accepted the petition; This marks the first time that an Indian company court has formally given notice of a collective class action under Section 245 of the Companies Act, 2013, nearly a decade after the provision came into force.
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 more ₹2,500 crore was funneled through undervalued asset sales and related party transactions involving entities linked to the promoter.
Allegedly 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, valuations are improving.
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.
Section 245 of the Companies Act allows a group of shareholders to file a single suit before the NCLT if they believe that a company has acted unfairly or caused harm to investors. Shareholders who own at least a 2% stake in a publicly traded company can file a lawsuit jointly for fraud, mismanagement or wrongdoing.
This provision was introduced in 2013 in the wake of the Satyam scandal, based on the recommendations of the JJ Irani Committee, with the aim of strengthening the protection of minority shareholders.
As the NCLT goes to deliberate on the merits of the case, the proceedings are being closely watched by corporate boards as well as minority investors. If the court ultimately rules in favor of shareholders, this could be an important moment for shareholder activism in India. Although class action solutions are common in jurisdictions such as the US, they were rarely tested in India until the Jindal Poly matter brought the provision into active use.
