In what can be seen as India’s first-ever class action suit, the National Company Law Appellate Tribunal (NCLAT) on Thursday dismissed an appeal by Jindal Poly (JPFL) and upheld the admission of the shareholder class action before the National Company Law Tribunal (NCLT).
“NCLT in the impugned order has satisfied itself regarding fulfilment of all requisite pre-conditions under Section 245 read with relevant Rules. Thus, we are not inclined to interfere in the impugned order and hence the appeal is dismissed,” a Coram of Justice Yogesh Khanna (Member-Judicial) and Ajai Das Mehrotra (Member-Technical) said.
Acknowledging the dismissal, a spokesperson of JPFL said: “This decision does not impose any findings on the allegations made in the petition. The company is reviewing the order and shall decide on the next steps accordingly.”
Under Section 245 of the Companies Act 2013, a “Class Action” suit may be initiated by a collective of shareholders or depositors. This recourse is available when there is a reasonable belief that the company’s management is acting in a manner prejudicial to the interests of the company, its members or its depositors. However, such suits must meet specific statutory criteria to be admitted.
NCLT findings
The Appellate Tribunal upheld the NCLT’s findings regarding the six mandatory pre-conditions for a class action suit. Specifically, the applicants far exceeded the 2 per cent shareholding threshold by cumulatively holding 4.99 per cent of the share capital. Furthermore, the NCLT was satisfied that the applicants had established a valid “opinion” that the company’s affairs were being managed in a manner prejudicial to the interests of its members, depositors, or the company itself.
Regarding the “good faith” requirement, the NCLT noted the petitioners’ attempts to engage with the company through multiple emails, all of which went unaddressed. This lack of transparency culminated in the company’s outright refusal to provide any documents or information. Consequently, the petitioners engaged FTI Consulting, a globally-recognised audit firm, whose forensic evaluation revealed a gross undervaluation of transactions, resulting in losses exceeding ₹2,500 crore.
The NCLAT found that, prima facie, the allegations suggest illegal and systematically fraudulent acts perpetrated by JPFL, its promoters and its directors. It noted that these impugned transactions have resulted in substantial financial losses for the entire class of minority public shareholders. “The investigation conducted by SEBI and by the Directorate of Enforcement (ED) prima facie establish the ‘management and conduct of the affairs of the company (Appellant / JPFL herein) are being conducted in a manner prejudicial to the interest of the company itself as well as its members’,” it said.
Published on February 26, 2026