Home / Business and Economy / Minority Shareholders Fight Back in Landmark Class Action
Minority Shareholders Fight Back in Landmark Class Action
20 Feb
Summary
- Jindal Poly appeals first corporate class action suit admission.
- Shareholders allege ₹2,500 crore siphoned through undervaluation.
- Tribunal decision pivotal for minority shareholder rights.
The National Company Law Appellate Tribunal (NCLAT) recently reserved its order on Jindal Poly Films Ltd's appeal against the admission of India's inaugural corporate class action lawsuit. This suit, filed by minority shareholders, alleges fraudulent actions by the company's promoters and management, seeking to overturn a February 5th order by the National Company Law Tribunal (NCLT).
Jindal Poly has requested an urgent stay, citing the logistical burden of notifying approximately 40,000 shareholders, stock exchanges, and the market regulator. The company argues this process could inflict irreparable reputational damage and market harm, while also questioning the suit's maintainability under Section 245 of the Companies Act, 2013.
The minority shareholders, who collectively own a 4.99% stake, initiated the case in March 2024. They contend that over ₹2,500 crore was misappropriated through undervalued asset sales and related-party transactions involving promoter-linked entities between 2013 and 2017.
Section 245, introduced to bolster minority shareholder protections following the Satyam scandal, permits shareholders with at least a 2% stake to collectively seek remedies for alleged fraud or mismanagement. The tribunal's forthcoming decision is crucial, as it will determine whether the NCLT's admission stands, thereby advancing this significant development for shareholder advocacy in India.
