NCLT Admits India's First Major Shareholder Class Action Under Section 245: Jindal Poly Films Case Explained

On 5 February 2026, the National Company Law Tribunal (NCLT) in Delhi admitted India's first major shareholder class action under Section 245 of the Companies Act, 2013, reviving a remedy that had remained virtually unused for nearly a decade since its introduction. The petition by minority shareholders of Jindal Poly Films Limited (JPFL) alleges value diversion of approximately Rs 2,500 crore (about USD 300 million) through related party transactions that moved company assets at deep discounts to promoter-linked entities. The NCLAT subsequently dismissed the appeal against this order, confirming that Section 245 is now a credible enforcement tool.

Section 245: The Dormant Remedy That Came to Life

Section 245 of the Companies Act, 2013 provides a mechanism for class action suits by members (shareholders) or depositors against a company, its directors, auditors, or advisors for any fraudulent, unlawful, or wrongful act. Despite being in the statute books since 2013, the provision had never been successfully invoked in a major case. The NCLT's decision to admit the Jindal Poly Films petition marks the first time the provision has been activated to address allegations of large-scale promoter misconduct.

The reason Section 245 remained dormant is partly procedural and partly structural. The threshold requirements for filing a class action, the complexity of proving systemic wrongdoing, and the absence of a procedural framework made it difficult for minority shareholders to use the provision effectively. The Jindal Poly Films petition succeeded because the petitioners were able to demonstrate a clear pattern of value diversion through specific transactions, supported by documentary evidence.

The Allegations: Related Party Deals and Value Diversion

The petition was filed by Ankit Jain and other minority shareholders who together hold approximately 4.99% of JPFL's equity. The core allegation is that the promoter group diverted company value worth approximately Rs 2,500 crore through related party transactions that transferred assets at deep discounts to entities controlled by or linked to the promoters. These transactions allegedly included asset sales at below-market valuations, preferential supply arrangements, and other dealings that enriched the promoter group at the expense of minority shareholders.

The NCLT's Legal Reasoning: A Positive Enactment

A key aspect of the NCLT's reasoning was its refusal to import foreign legal distinctions into the interpretation of Section 245. The tribunal treated the provision as a "positive enactment" under Indian law, holding that it must be interpreted on its own terms rather than through the lens of foreign jurisprudence. This is significant because courts and tribunals had previously been hesitant to admit class actions, partly because of uncertainty about how the provision should be applied in the absence of Indian precedent.

By treating Section 245 as a self-contained provision with its own procedural requirements, the NCLT removed a significant barrier to its use. This approach was subsequently affirmed when the NCLAT dismissed the appeal against the NCLT order, confirming the admissibility of the class action.

Implications for Minority Shareholder Rights in India

The Jindal Poly Films ruling has implications far beyond the specific case. It establishes that Section 245 is a viable, enforceable remedy for minority shareholders who believe they have been harmed by promoter misconduct. For listed companies with concentrated promoter holdings, this ruling serves as a warning that related party transactions will face greater scrutiny. Independent directors and audit committees should take note that their oversight responsibilities extend to preventing the kind of value diversion alleged in this case.

Key Takeaways

The NCLT's admission of the Jindal Poly Films class action marks a turning point for corporate governance in India. Section 245, which had been a paper remedy for nearly a decade, is now a live enforcement tool. Minority shareholders in listed companies should understand that collective action is now procedurally viable. Promoter groups should re-examine their related party transaction governance to ensure compliance not just with SEBI regulations but also with the Companies Act's class action provisions. Auditors and independent directors should strengthen their oversight of related party dealings, as the class action remedy creates an additional accountability mechanism beyond regulatory enforcement by SEBI or the Ministry of Corporate Affairs.