The Nationwide Firm Legislation Appellate Tribunal (NCLAT) on Thursday refused to remain proceedings in India’s first company class motion lawsuit filed by minority shareholders in opposition to Jindal Poly Movies Ltd, which alleges fraudulent conduct and siphoning of greater than ₹2,500 crore by the corporate’s promoters and administration.
The appellate tribunal dismissed the corporate’s attraction difficult a 5 February order of the Nationwide Firm Legislation Tribunal (NCLT), Delhi bench, which had admitted the category motion petition underneath the Corporations Act and issued discover within the matter. The detailed written order from NCLAT is awaited.
In its plea, Jindal Poly sought an pressing keep on the NCLT order, arguing that with out interim aid it will be required to ship formal communications to just about 40,000 shareholders, inventory exchanges and the market regulator. The corporate contended that such disclosures may trigger irreparable reputational and market hurt.
Jindal Poly had additionally argued that the category motion petition was not maintainable and that the availability couldn’t be used as an alternative to different authorized cures requiring increased shareholding thresholds. The corporate stated the problems raised relate to governance considerations that ought to have been pursued by means of different authorized routes, including that the shareholders had earlier filed a separate case in opposition to a bunch firm earlier than one other tribunal bench.
The NCLAT, nonetheless, declined to grant interim aid.
With Jindal Poly’s keep plea rejected, the NCLT can now proceed to listen to the matter on deserves and decide whether or not the minority shareholders’ allegations are sustainable.
Earlier this month, the NCLT’s Delhi bench admitted the petition, marking the primary time an Indian firm tribunal has formally issued discover in a company class motion underneath Part 245 of the Corporations Act, 2013, practically a decade after the availability got here into power.
The case was initiated in March 2024 by minority shareholders Ankit Jain, Rina Jain and Ruchi Jain Hanasoge, who collectively maintain a 4.99% stake within the firm. They allege that greater than ₹2,500 crore was siphoned off by means of undervalued asset gross sales and related-party transactions involving promoter-linked entities.
In keeping with the plea, Jindal Poly invested about ₹703.79 crore between 2013 and 2017 in group energy corporations–Jindal Powertech and Jindal India Thermal Energy–by means of 0% desire shares. In FY21, these corporations secured debt waivers totalling over ₹7,000 crore, bettering their valuations.
The shareholders allege that Jindal Poly later offered its stake at deeply undervalued costs to promoter-linked entities, leading to losses exceeding ₹2,500 crore to public traders.
Part 245 of the Corporations Act permits a bunch of shareholders to file a single case earlier than the NCLT in the event that they consider an organization is performing unfairly or inflicting loss to traders. In a listed firm, shareholders holding at the least a 2% stake can collectively search motion for fraud, mismanagement or wrongful conduct.
The supply was launched in 2013 following the Satyam scandal, based mostly on suggestions of the J.J. Irani Committee, to strengthen minority shareholder safety.
Because the NCLT strikes to listen to the case on deserves, the proceedings are being carefully watched by minority traders in addition to company boardrooms. If the tribunal finally guidelines in favour of the shareholders, it may mark a major second for shareholder activism in India. Whereas class motion cures are frequent in jurisdictions such because the US, they’ve not often been examined in India till the Jindal Poly matter introduced the availability into lively use.