NCLAT Upholds India's First Corporate Class Action Against Jindal Poly Films

In a landmark decision shaping corporate governance in India, the National Company Law Appellate Tribunal (NCLAT) on Thursday, February 26, 2026, dismissed an appeal filed by Jindal Poly Films Ltd, thereby refusing to stay the proceedings in what is widely regarded as India's first corporate class action lawsuit. This appellate tribunal's ruling upholds an earlier order by the National Company Law Tribunal (NCLT), Delhi bench, dated February 5, 2026, which had admitted the class action petition filed by minority shareholders. The NCLAT's decision allows the NCLT proceedings to continue, marking a crucial test for India's nascent class action framework under Section 245 of the Companies Act, 2013. The class action lawsuit was initiated by a group of minority shareholders, including Ankit Jain, Rina Jain, and Ruchi Jain Hanasoge, who collectively hold approximately a 4.99% stake in Jindal Poly Films. They allege fraudulent conduct and the siphoning of more than ₹2,500 crore by the company's promoters and management through a series of undervalued asset sales and related-party transactions. Specifically, the petition details how Jindal Poly Films allegedly invested over ₹703 crore between 2013 and 2017 in promoter-linked power companies—Jindal Powertech and Jindal India Thermal Power—through 0% preference shares. These power companies later secured significant debt waivers, improving their valuations. Subsequently, Jindal Poly Films' stake in Jindal Powertech was allegedly sold at deeply undervalued prices to promoter-linked entities, resulting in substantial losses for public shareholders. Jindal Poly Films had challenged the maintainability of the class action petition at the NCLT stage, arguing that such proceedings should be confined to preventive or ongoing acts and not be invoked to examine completed transactions. The company also contended that the suit was essentially a 'derivative action' attempting to bypass stricter requirements for 'oppression and mismanagement' cases under Section 241 of the Companies Act. However, the NCLT rejected these preliminary objections, asserting that there is no statutory restriction preventing shareholders from seeking relief for past transactions and that claims for compensation and damages imply jurisdiction to examine such conduct. Following the NCLT's admission order on February 5, 2026, Jindal Poly Films promptly appealed to the NCLAT, seeking an urgent stay on the NCLT's directive. The company argued that without interim relief, it would be compelled to send formal communications to its nearly 40,000 shareholders, stock exchanges, and the market regulator, which could cause irreparable reputational and market harm, especially given a reported 31% loss in its stock value since the proceedings began. Senior advocate Abhishek Manu Singhvi, representing Jindal Poly Films, emphasized the wide-ranging implications for a listed company with a large shareholder base. However, the NCLAT bench, comprising Judicial Member Justice (retd) Yogesh Khanna and Technical Member Ajai Das Mehrotra, declined to grant the interim relief, thereby allowing the NCLT to proceed with hearing the matter on its merits. This decision is critical as it validates the class action mechanism under Section 245 of the Companies Act, 2013, almost a decade after its introduction, finally allowing it to move beyond the admission threshold. Legal experts view this as a significant shift in judicial willingness to allow minority shareholders to pursue allegations of oppressive conduct and related-party abuse. Adding to the company's challenges, the Securities and Exchange Board of India (SEBI) is also reportedly investigating Jindal Poly Films for alleged breaches of securities laws, focusing on undisclosed investment write-offs amounting to ₹760 crore related to a group entity, Jindal India Powertech. SEBI's involvement provides regulatory backing to the minority shareholders' claims, intensifying the scrutiny on Jindal Poly Films. The company has consistently denied all allegations, asserting that its business decisions were commercially prudent and legally compliant. The stock price of Jindal Poly Films has reportedly halved since early 2025, reflecting the financial strain and market uncertainty surrounding these legal and regulatory challenges. This case is expected to set a significant precedent for shareholder activism, corporate accountability, and the enforcement of minority shareholder rights in India, redefining the corporate governance landscape.

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