The National Company Law Appellate Tribunal (NCLAT) dismissed Jindal Poly Films Limited’s appeal challenging the National Company Law Tribunal (NCLT) order admitting a shareholder class action petition and directing issuance of public notice under the Companies Act, 2013, affirming continuation of class action proceedings.
The National Company Law Appellate Tribunal (NCLAT) dismissed Jindal Poly Films Limited’s appeal against the National Company Law Tribunal’s (NCLT) order admitting a shareholder class action petition.
A bench comprising Judicial Member Justice (retd) Yogesh Khanna and Technical Member Ajai Das Mehrotra issued the decision in the appeal filed by Jindal Poly Films, which had challenged the NCLT’s recent ruling to admit a shareholder class action and to direct the issuance of a public notice under the class action provisions of the Companies Act, 2013.
Background and NCLT ruling
The NCLT, New Delhi, had recently held that shareholder class actions can be maintained even for past and completed transactions. It dismissed Jindal Poly Films’ contention that such proceedings are limited to preventive or ongoing acts and cannot be used to scrutinize concluded transactions.
The Tribunal observed there is no statutory bar on shareholders seeking relief for past transactions, and that claims for compensation and damages necessarily involve jurisdiction to examine such conduct.
After forming a prima facie view at the threshold stage, the NCLT ordered that a public notice be issued on behalf of the Tribunal, including publication on Jindal Poly Films Limited’s website.
Allegations and relief sought:
The petition arose from accusations of “gross undervaluation” and “siphoning of funds” to entities linked with the promoters.
Petitioners alleged that the company’s management sold high-value instruments (optionally convertible preference shares and redeemable preference shares) to promoter-associated entities at a fraction of their true value.
Supported by an independent audit from FTI Consulting, the petition contends these transactions caused a loss exceeding Rs 2,500 crore to the company and its public shareholders.
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The petition seeks annulment of the undervalued transfers, restitution of the alleged losses to the company, and action against the independent valuer for producing valuation reports that the petitioners say facilitated the transactions.
Legal issue:
Whether petitioners Ankit Jain, Rina Virendra Jain and Ruchi Jain Hanasoge (together holding 4.99% of JPFL) could invoke Section 245 to challenge corporate actions?
Jindal Poly Films argued the suit was effectively a “derivative action” designed to avoid the more stringent requirements of Section 241 (oppression and mismanagement). The NCLT rejected this objection at the threshold, noting that what matters is whether shareholders form an opinion that the company’s affairs are being conducted in a manner prejudicial to the company or its members.
Jindal Poly Films appealed the NCLT order to the NCLAT, which has now dismissed the appeal.
The shareholders were represented by Senior Advocates Abhinav Vashisht and Arun Kathpalia, along with Advocates Vaibhav Kakkar (Senior Partner), Abhishek Swaroop (Partner), Anupam Prakash, Anuj Garg and Manav Sharma of Saraf & Partners.
The written judgment has not yet been released.
Case Title: Jindal Poly Films v. Ankit Jain
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