NCLAT refuses to stay India’s first corporate class action against Jindal Poly Films

The National Company Law Appellate Tribunal (NCLAT) has declined to stay proceedings in a corporate class action lawsuit against Jindal Poly Films Ltd, brought by minority shareholders alleging fraudulent conduct and the siphoning of over ₹2,500 crore by the company’s promoters and management. The NCLAT dismissed Jindal Poly’s appeal against a National Company Law Tribunal (NCLT) order admitting the petition, finding that the NCLT had properly satisfied all preconditions under the Companies Act.

Jindal Poly argued that staying the proceedings would require extensive disclosures causing reputational and market harm, and that the petition was not maintainable. However, the NCLAT disagreed, noting the petitioners met the minimum shareholding requirement and presented sufficient initial evidence of wrongdoing. The case was initiated by shareholders holding a 4.99% stake, alleging losses due to undervalued asset sales and related-party transactions.

This decision marks the first time a corporate class action has progressed past an initial stay challenge in India, potentially strengthening shareholder leverage and activism. While the NCLAT’s decision does not address the merits of the case, the NCLT will now proceed to hear the matter and determine the validity of the shareholders’ allegations. Jindal Poly Films maintains that all business decisions were made with commercial wisdom and in compliance with applicable laws.

(Source：Livemint)