The National Company Law Appellate Tribunal (NCLAT) on February 26 dismissed Jindal Poly Films' plea, allowing India's first corporate class action suit to proceed against the company. According to CNBC TV18, the ruling upholds the National Company Law Tribunal's (NCLT) decision to admit the lawsuit and issued a formal notice to the company. Shares of Jindal Poly Films were down 4.91% on the day and traded at ₹609.10 apiece at the BSE as of 1:08 pm IST following the court decision. The detailed written order from NCLAT is awaited, but with Jindal Poly's stay plea rejected, the NCLT can now proceed to hear the matter on merits.
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. As reported by Mint, the company contended that such disclosures could cause irreparable reputational and market harm. Jindal Poly 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.
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. According to the plea reported by Mint, they allege that more than ₹2,500 crore was siphoned off through undervalued asset sales and related-party transactions involving promoter-linked entities. The shareholders allege that 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, after which the company later sold its stake at deeply undervalued prices to promoter-linked entities.
As reported by CNBC TV18, the shareholders' plea details a series of financial moves occurring between FY13 and FY17. Jindal Poly Films invested ₹700 crore into two related entities–Jindal Powertech and Jindal Thermal–using Optionally Convertible Preference Shares (OCPS) and Redeemable Preference Shares (RPS). These investments of ₹700 crore were allegedly written off almost simultaneously after being made. When the related entities defaulted on their debts and entered settlement talks with lenders, the company invested an additional ₹600 crore to facilitate those settlements. Jindal Poly Films invested approximately ₹1,300 crore into these entities during a downturn. However, once the health of the power sector improved, the company allegedly sold its shares in these related entities to a promoter group trust for only ₹106 crore.
As reported by Mint, the NCLT's Delhi bench admitted the petition earlier this month, 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. Section 245 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.
