New Delhi, February 28 The appellate tribunal, the NCLAT, has declined to stay an order of the National Company Law Tribunal, which has admitted a class action petition against Jindal Poly Films, filed by its shareholders.
A two-member NCLAT bench held that the petition filed by the minority shareholders, alleging misappropriation of more than Rs 2,500 crore, meets the required criteria mentioned in Section 245 of the Companies Act.
On February 5, the Principal bench of the National Company Law Tribunal (NCLT) in Delhi admitted the class action petition filed against the company and issued a notice, directing it to file a response.
The company subsequently challenged this before the National Company Law Appellate Tribunal (NCLAT). However, the NCLAT bench comprising Justice Yogesh Khanna (Member Judicial) and Ajai Das Mehrotra (Member Technical) rejected the petition.
"The NCLT, in its order, has satisfied itself regarding the fulfillment of all requisite pre-conditions under Section 245 read with relevant Rules. Therefore, we are not inclined to interfere with the impugned order, and hence the appeal is dismissed," the NCLAT said in its 26-page order passed on February 26.
Section 245 of the Companies Act, 2013, enables shareholders and depositors to file a class action petition before the NCLT against a company, directors, auditors, or advisors for prejudicial management or fraudulent conduct. It empowers stakeholders to seek damages, compensation, or injunctions to protect their interests.
During the proceedings of the appellate tribunal, senior advocate Abhishek Manu Singhvi, representing Jindal Poly Films Ltd (JPFL), submitted that it is a publicly listed company with approximately 40,000 public shareholders.
While three petitioners, who collectively filed the section 245 petition, hold only 4.99 per cent of the share capital. The issuance of notice has serious repercussions on the reputation of the appellant company.
He submitted that the proceedings under Section 245 have wide in rem consequences, and the issuance of a public notice has created a situation of panic among the public shareholders, potentially triggering a fall in the share price of the company, adversely affecting it.
The share price of Jindal Poly Films fell from "Rs 587 on February 23, 2024, to Rs 404 as of February 5, 2026, i.e., a drop of 31 per cent in value, and the notice has caused irreparable loss to reputation and market harm which cannot be undone".
Singhvi also argued that Section 245 of the Companies Act, 2013, cannot be activated for past and concluded transactions as it uses the word "are being conducted", which means the act that warrants interference has to be in praesent.
However, the appellate tribunal rejected Jindal Poly Films' submission and said that the NCLT, in its order, had noted that intervention applications have been filed by other petitioners holding 5.03 per cent of the shares, wherein they have asserted that "the interveners have chosen not to pursue a separate legal action to avoid multiplicity of lawsuits".
"Prima facie, the allegations are of illegal and systematic fraudulent acts perpetrated by JPFL, its promoters and directors and in undertaking the impugned transactions have caused significant loss to the entire class of minority public shareholders of JPFL, including Respondent No. 1 - 3."
The NCLT order came in response to a petition filed by three petitioners - Ankit Jain, Rina Jain and Ruchi Jain Hanasoge, who had alleged that over Rs 2,500 crore was siphoned off through undervalued asset sales and related-party transactions involving promoter-linked entities.
The petitioners had alleged that JPFL invested Rs 703.79 crore between 2013 and 2017 in group power companies -- Jindal Powertech and Jindal India Thermal Power.
In FY21, these companies secured debt waivers totalling over Rs 7,000 crore, improving their valuations. The shareholders alleged that Jindal Poly later sold its stake at deeply undervalued prices to promoter-linked entities, resulting in a loss of Rs 2,518.45 crore to public investors.
