Lawyers keep close eye on first class action lawsuit

Law firms are closely watching the case of minority shareholders of Jindal Poly Films against promoters Shyam Sunder Jindal and Subhadra Jindal over an alleged “siphoning of assets” of more than ₹2,500 crore—the first corporate class action suit in India under a provision of the Companies Act that has never been used before.

- Krishna Yadav

US, Canada and UK widely see class action lawsuits.

(ISTOCKPHOTO)

Shyam and Subhadra Jindal are trustees of Shyam Sunder Jindal (SSJ) Trust, a promoter group trust linked to BC Jindal Group, a films-to-power group. Besides Jindal Polyfilms, the group has several companies such Jindal Poly Investment, Jindal Powertech, Jindal Thermal, Concatenate Advest Advisory, among others.

The case is the first time that Section 245 of the Companies Act, 2013, which allows shareholders or depositors holding at least 2% of a company's shares to collectively take action against fraud, mismanagement, or unfair practices by promoters, is being used in a legal challenge.

Minority shareholders previously filed complaints under Section 241. The key difference between the two Sections is the threshold of shareholding of shareholders: Section 241 is usually for holdings of 10% or more. In other words, Section 245 protects shareholders with a smaller holding.