NCLT's Jindal Poly ruling marks rare activation of class-action law

The National Company Law Tribunal’s (NCLT’s) decision to admit a minority shareholders’ class action against Jindal Poly Films has brought renewed judicial focus to Section 245 of the Companies Act, 2013, a provision that has rarely been tested in substance despite being on the statute book for over a decade.

- BHAVINI MISHRA

Section 245 introduces the concept of statutory class action suits, allowing a specified number of shareholders or depositors to approach the NCLT on behalf of a wider class to challenge mismanagement or conduct prejudicial to their interests. The provision empowers the tribunal to restrain unlawful acts, declare misleading resolutions void, and award damages or compensation against companies, directors, auditors, or other advisers. Legal experts say the importance of the ruling lies less in the quantum of the claim and more in the fact that Section 245 has finally crossed the admission threshold.

“The Jindal Poly Films matter is significant because it marks one of the first times Section 245 of the Companies Act, 2013, has actually been allowed to cross the threshold of maintainability,” said Raheel Patel, partner at Gandhi Law Associates. “The NCLT’s decision signals a clear judicial willingness to let minority shareholders test allegations of oppressive conduct and related-party abuse on merits, rather than shutting such cases out at the preliminary stage,” he added.