Introduction

The Jindal Polyfilms Case is the first instance of a class action lawsuit brought before the National Company Law Tribunal (NCLT) under Section 245 of the Companies Act of 2013 (‘Companies Act/ Act’).  Minority shareholders holding a 4.99% stake filed a class action lawsuit before the National Company Law Tribunal (‘NCLT’) against Jindal Poly Films Ltd. (JPFL) (‘Company’) and its promoters, alleging oppression and mismanagement. Minority shareholders contended that the promoter, Shyam Sunder Jindal’s, subsidiary companies participated in the purchase of Optionally Convertible Preference Shares issued by JFPL at a depressed value, thereby undermining the interests of minority shareholders and resulting in losses of over Rs 2,781 crore to the Company[i].

This case calls into question the reality of India’s promoter-dominated businesses and the extent of shareholder protection available. It serves as an indicator of whether the current framework is equipped to handle cases in which promoters’ interests dominate those of general shareholders. The decision will affect future perceptions of corporate governance in India and the interpretation of Section 245 of the Act.

Legal Framework: Section 245 of The Act and Class Action Suits

Section 245 introduced class action suits as a mechanism for shareholder protection, allowing the shareholders of a listed company who hold at least 2 per cent of the company’s share capital, and those of an unlisted company holding at least 5 per cent of the company’s share capital, to initiate a class action suit against the company[ii]. Some of the remedies available to shareholders u/s 245 of the Act are – restraining ultra vires acts, declaring resolutions passed as void and seeking damages or compensation for losses caused[iii]. The remedies under Section 245 of the Act are more extensive than those under Section 241 of the Act. Section 241 remedies oppression and mismanagement against an individual member, allowing the member to apply to the NCLT for relief. Section 245 concerns the acts that are detrimental to the very interests of the company, allowing members to file a class action suit against the company.

Distinguishing Corporate Injury from Shareholder Injury

A crucial legal question concerns the nature of injury contemplated by Section 245 of the Act. The petitioners state that it permits taking action when the actions are contrary to the Company’s interests, not just those of individual shareholders. It is the contention of the petitioners that the Tribunal impose damages, compensation, and “any other suitable action” against the corporation, its directors, or both as per Section 245 of the Act. According to the Respondents, the petition cannot be maintained. The NCLT has not yet heard the case or issued a final ruling. The next hearing is set for October 30, 25.

Factual Allegations and Corporate Governance Implications

The Pattern of Questionable Transactions

The petitioners have raised allegations regarding the sale of optionally convertible preference shares (OCPS) to a promoter-controlled entity, SSJ Trust (‘Shyam Sunder Jindal Trust’) and other firms at allegedly depressed valuations, causing losses of over Rs 2,000 crore to the Company. If confirmed, these claims would constitute grave violations of fiduciary responsibility. This action violates the arms-length principle, which requires that all transactions involving firms and promoter-affiliated entities be closely examined to ensure they are carried out in a fair and just manner[iv]. Minority shareholders who owned 4.99% of the Company suffered significant losses as a result of transactions that benefited these promoter-affiliated firms.

Related Party Transactions and Governance Failures

This case illustrates the ongoing challenge posed by related party transactions (‘RPTs’) in India. The discourse on corporate governance of RPTs in India has evolved primarily around the history of family-run businesses, with promoter groups exercising control over decision-making, leading to corporate scandals due to inadequate regulatory oversight of RPTs undertaken solely for the benefit of related parties[v].

Studies have shown that the concentrated ownership structure in India, though it guarantees continuity and long-term strategy, is risky and can lead to minority shareholder oppression[vi]. These concentrated ownership structures create immense potential for abusive related-party transactions that are detrimental to the interests of minority shareholders.

Significance of The Case for Indian Company Law

Establishing Section 245 as an Effective Remedy

A Petitioner victory would suggest that minority shareholders may be effectively protected by Section 245, thereby encouraging other shareholders to bring class action lawsuits against such allegedly unfair acts. It would establish significant precedent on the scope of Section 245, which kinds of transactions can be contested, and which remedies are available. On the other hand, a respondent victory can indicate that Section 245 needs legislative modification due to technical, practical or legal obstacles.

Redefining Promoter Accountability

While concentrated ownership can help organisations by ensuring a dedication to performance and growth, it can also lead to power abuse.  This case will establish whether courts are ready to impose significant liability for wealth extraction through related-party transactions, signalling to promoters that self-dealing operations will be closely scrutinised.  The result has the potential to alter the power dynamics in the promoter-dominated corporate structures widely seen in India.

Enhancing Corporate Governance Standards

The case emphasises the necessity for independent directors, audit committees, and regulatory bodies to keep an increased focus on related party transactions. It highlights the importance of robust oversight mechanisms in safeguarding the interests of minority shareholders.

Conclusion

The Jindal Polyfilms case represents far more than a dispute between shareholders and a company; it is a test case for India’s corporate governance framework and the effectiveness of Section 245 as a mechanism for protecting minority shareholders. It is a test of India’s corporate governance framework.  Section 245 was created to give minority shareholders a collective remedy since individual owners lacked effective ways to challenge promoter behaviour[vii]. No matter the outcome, the case will have implications on our understanding of Section 245 and the extent of protection given to minority shareholders in India.

References:

[i] Yadav K, “A  ₹2,500 Crore Lawsuit Is India’s First Corporate Class Action. Here’s Why Legal Firms, Boardrooms Are Watching.” (Mint, October 3, 2025) accessed October 22, 2025
[ii] Srimali VG, “Maintainability Conundrum of Class Action Suits Under Indian Corporate Law” (CBFL, November 15, 2022) accessed October 22, 2025
[iii] Ultra Vires acts are those acts that are “beyond the powers” of an individual or an organization. In company law, these acts are those that are against the Companies Act, the Memorandum of Association of the Company, or any other governing document of the Company.
[iv] The arms-length principle states that any transaction between relation parties must be fair, just and reasonably priced as if the transaction were taking place between two unrelated parties in a competitive market.
[v] Chaturved L, “Related Party Transactions and Corporate Governance in India” (SCC Times, November 2, 2021) accessed October 22, 2025
[vi] Kumar N and Singh JP, “Effect of Board Size and Promoter Ownership on Firm Value: Some Empirical Findings from India” (2013) 13 Corporate Governance: The international journal of business in society 88
[vii] Prasad P, “Analysis of the Rights of Minority Shareholders in India” (IPLF, June 6, 2024) accessed October 22, 2025