NEW DELHI: In a setback for Jindal Poly Films Ltd, the National Company Law Appellate Tribunal (NCLAT) on Thursday declined to stay proceedings in India’s first corporate class action lawsuit filed by minority shareholders, alleging fraudulent conduct and siphoning of more than ₹2,500 crore by the company’s promoters and management.
The appellate tribunal dismissed the company’s appeal challenging a 5 February order of the National Company Law Tribunal (NCLT), Delhi bench, which had admitted the class action petition under the Companies Act and issued notice in the matter. The detailed written order from NCLAT is awaited.
In its plea, Jindal Poly sought an urgent stay on the NCLT order, arguing that without interim relief it would be required to send formal communications to nearly 40,000 shareholders, stock exchanges and the market regulator. The company contended that such disclosures could cause irreparable reputational and market harm.
Jindal Poly had also argued that the class action petition was not maintainable and that the provision could not be used as a substitute for other legal remedies requiring higher shareholding thresholds. The company said the issues raised relate to governance concerns that should have been pursued through alternative legal routes, adding that the shareholders had earlier filed a separate case against a group company before another tribunal bench.
The NCLAT, however, declined to grant interim relief.
With Jindal Poly’s stay plea rejected, the NCLT can now proceed to hear the matter on merits and determine whether the minority shareholders’ allegations are sustainable.
Earlier this month, the NCLT’s Delhi bench admitted the petition, marking the first time an Indian company tribunal has formally issued notice in a corporate 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 together hold a 4.99% stake in the company. They allege that more than ₹2,500 crore was siphoned off through undervalued asset sales and related-party transactions involving promoter-linked entities.
According to the plea, Jindal Poly invested about ₹703.79 crore between 2013 and 2017 in group power companies—Jindal Powertech and Jindal India Thermal Power—through 0% preference shares. In FY21, these companies secured debt waivers totalling over ₹7,000 crore, improving their valuations.
The shareholders allege that Jindal Poly later sold its stake at deeply undervalued prices to promoter-linked entities, resulting in losses exceeding ₹2,500 crore to public investors.
Section 245 of the Companies Act allows a group of shareholders to file a single case before the NCLT if they believe a company is acting unfairly or causing loss to investors. In a listed company, shareholders holding at least a 2% stake can jointly seek action for fraud, mismanagement or wrongful conduct.
The provision was introduced in 2013 following the Satyam scandal, based on recommendations of the J.J. Irani Committee, to strengthen minority shareholder protection.
As the NCLT moves to hear the case on merits, the proceedings are being closely watched by minority investors as well as corporate boardrooms. If the tribunal ultimately rules in favour of the shareholders, it could mark a significant moment for shareholder activism in India. While class action remedies are common in jurisdictions such as the US, they have rarely been tested in India until the Jindal Poly matter brought the provision into active use.