NCLT's Jindal Poly ruling marks rare activation of class-action law

NCLT's admission of a minority shareholders' class action against Jindal Poly Films revives Section 245, signalling a shift in judicial approach to corporate accountability

The National Company Law Tribunal’s (NCLT’s) decision to admit a minority shareholders’ class action against Jindal Poly Films has brought renewed judicial focus to Section 245 of the Companies Act, 2013, a provision that has rarely been tested in substance despite being on the statute book for over a decade.

 

Section 245 introduces the concept of statutory class action suits, allowing a specified number of shareholders or depositors to approach the NCLT on behalf of a wider class to challenge mismanagement or conduct prejudicial to their interests.

 

The provision empowers the tribunal to restrain unlawful acts, declare misleading resolutions void, and award damages or compensation against companies, directors, auditors, or other advisers. Legal experts say the importance of the ruling lies less in the quantum of the claim and more in the fact that Section 245 has finally crossed the admission threshold.

 

“The Jindal Poly Films matter is significant because it marks one of the first times Section 245 of the Companies Act, 2013, has actually been allowed to cross the threshold of maintainability,” said Raheel Patel, partner at Gandhi Law Associates.

 

“The NCLT’s decision signals a clear judicial willingness to let minority shareholders test allegations of oppressive conduct and related-party abuse on merits, rather than shutting such cases out at the preliminary stage,” he added.

 

Patel noted that procedurally, the present petition is only the starting point. Once public notices are issued, other similarly placed shareholders can join the proceedings, which is central to how a statutory class action is designed to operate.

 

“Indian law has always had a class action framework on paper through Section 245, but for nearly a decade it remained largely dormant. Jindal Poly is important not because it is the largest in monetary terms, but because it finally activates the provision in a meaningful way,” he added.

 

According to Hardeep Sachdeva, senior partner at AZB & Partners, the case marks a shift from legislative intent to judicial scrutiny.

 

“For years, class actions under Section 245 remained largely theoretical, confined more to academic discussion than practical enforcement,” he said.

 

“The class action in Ankit Jain vs Jindal Poly Films Limited is a welcome and much-needed development. It marks the first meaningful attempt to operationalise Section 245 and assumes particular significance in today’s corporate environment, where complex structures and technical compliance can often undermine minority interests,” Sachdeva added.

 

If such cases evolve into consistent precedent, he said, they could play a vital role in strengthening corporate accountability and stakeholder protection.

 

B Shravanth Shanker, managing partner at B Shanker Advocates LLP, said the tribunal’s February 5 order amounts to the formal admission of a corporate class action.

 

“The tribunal recorded satisfaction with the statutory threshold under Section 245(3) and formed a prima facie opinion as to actionable prejudice. It then directed issuance of notice under Section 245(5), which triggers the representative character of the proceedings,” he said.

 

Other practitioners say the case highlights how underused India’s class action regime has been.

 

Yash B Joglekar, counsel at the Bombay High Court, described corporate class action jurisprudence in India as “nascent”, noting that past large-scale collective litigation, including the Satyam fallout, the Sahara investor recovery exercise, governance disputes at Fortis Healthcare, and the IL&FS crisis, were driven by regulators or courts rather than shareholders invoking Section 245.

 

Earlier this month, the NCLT’s Delhi Bench allowed the class action petition against Jindal Poly Films to proceed after rejecting the company’s preliminary objection on maintainability. The order is yet to be uploaded on the tribunal’s website.

 

The NCLT clarified that it was not expressing any view on the merits of the allegations, but held that the petition met the statutory thresholds prescribed under Section 245. The matter will now proceed to adjudication on merits.

 

The petition was filed in March 2024 by a group of minority shareholders led by Ankit Jain, together holding close to 5 per cent of the company’s equity. The shareholders have alleged that a series of related-party transactions, asset transfers, and write-downs involving promoter-linked entities resulted in losses exceeding ₹2,500 crore to the company and its public shareholders.

 

Jindal Poly Films has disputed the allegations and said it has filed an appeal against the order.

 

“The hearing was limited to the issue of maintainability and does not deal with the merits of the allegations, which are yet to be examined by the NCLT. Jindal Poly maintains that all business decisions were taken in accordance with commercial prudence and applicable law. The company has reviewed the order and has filed an appeal before the NCLAT,” a company spokesperson said. 

Paper to practice

• This case brings renewed judicial focus to Section 245 of the Companies Act, 2013
• Class action suits allow a specified number of shareholders to approach the NCLT against a defendant
• Indian law always had a class action framework on paper, but for nearly a decade it remained dormant
• NCLT’s decision signals a clear judicial willingness to let minority shareholders test allegations of oppressive conduct, say lawyers