Jindal Films' class action suit: NCLAT declines to stay NCLT order

The National Company Law Appellate Tribunal (NCLAT) has declined to stay an order by the National Company Law Tribunal (NCLT) that admitted a class action petition against Jindal Poly Films, filed by its shareholders. The petition alleges the siphoning of more than Rs 2,500 crore through undervalued asset sales and related-party transactions. Jindal Poly Films argued that the proceedings would harm its reputation and share price, noting that its share price had already fallen by 31% following the notice of the suit. They also contended that Section 245 of the Companies Act, 2013, shouldn't apply to past transactions.

However, the NCLAT bench found that the NCLT had properly assessed the fulfillment of preconditions under Section 245 of the Companies Act, which allows shareholders to seek redress for prejudicial or fraudulent conduct. The NCLAT also noted that other shareholders had intervened to avoid multiple lawsuits, and that the allegations pointed to “illegal and systematic fraudulent acts” causing significant loss to minority shareholders.

The original petition, filed by Ankit Jain, Rina Jain, and Ruchi Jain Hanasoge, detailed investments in group power companies that later received debt waivers, followed by undervalued sales of Jindal Poly’s stake to promoter-linked entities, resulting in substantial losses for public investors.

(Source：The Economic Times)