Mint Explainer: Why are class actions on the rise in India?

Earlier this year, minority shareholders of Jindal Poly Films filed a class action lawsuit – the first in India – against the company’s promoters, claiming fraudulent conduct. And Ola Electric now faces the possibility of a class action after the Central Consumer Protection Authority (CCPA) issued a show-cause notice, alleging violations of consumer rights and misleading advertising.

Mint explains what a class action is and why it is on the rise in India.

What is a class action?

A class action is a legal mechanism that allows a group of people with a common grievance to file a single case against a party rather than separate lawsuits. It can be used for such things as reversing illegal activities, stopping harmful decisions or demanding compensation for damages.

In India, class actions in corporate governance were formally introduced through Section 245 of the Companies Act in 2013. These cases are adjudicated by the National Company Law Tribunal (NCLT). 

Why does Ola Electric face the possibility of a class action?

Last week the Central Consumer Protection Authority (CCPA) issued a show-cause notice to Ola Electric after nearly 10,000 consumer complaints were lodged on the National Consumer Helpline from September 2023 to August 2024. These complaints involve a range of issues including delayed deliveries, faulty vehicles, misleading advertisements and inadequate customer service. 

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The CCPA has accused Ola of violating the Consumer Protection Act, 2019. Should the company fail to adequately address these concerns, it could face further consequences, including a class action. Ola Electric was given 15 days to respond to the CCPA’s notice.

What is the Jindal Poly case?

In March 2024 minority shareholders of Jindal Poly Films filed a class action lawsuit against the company, alleging “oppression and mismanagement". The case revolves around the sale of optionally convertible preference shares (OCPS) and redeemable preference shares (RPS) to a promoter entity, SSJ Trust, at undervalued prices, which allegedly caused a ₹2,268-crore loss to the company. The shareholders have asked the NCLT to reverse the transaction and order the company to compensate them. The case is currently pending.

Where else can class action suits be filed?

Class action provisions were first introduced in India under the Code of Civil Procedure, 1908. The Consumer Protection Act, 2019 also allows consumers to file complaints collectively, and the Competition Act, 2002 and the Insolvency and Bankruptcy Code, 2016 provide additional avenues for collective justice.

Why are such lawsuits on the rise in India?

The increase in class actions in India could be largely attributed to growing awareness among consumers and shareholders thanks to technological advancements and increased access to information. As individuals become more conscious of their rights, they are increasingly using such tools to hold companies accountable for their actions.

Sanjay Jain, senior advocate at the Supreme Court and former additional solicitor general explained, “With the rise of the internet and social media, Indians are more aware of global trends and their rights as consumers. This heightened awareness has also pushed the government to actively protect citizens’ rights, especially with regard to corporate mismanagement and consumer protection."

Also read: Heat is rising for Ola Electric as ministry, consumer authority step in

Despite the success of class actions in countries such as the US, they have been largely unused in India until recently. “While the Consumer Protection Act allowed for such cases, they remained underutilised for decades," Jain said. “It wasn’t until 2015 that the Indian government filed its first class action, marking a turning point in corporate accountability."

Also, the collection and use of vast amounts of personal data by companies increases the scope for class action in the digital age. Akshat Pande, managing partner at Alpha Partners said, “Companies collecting and using vast amounts of personal data creates risks of privacy breaches or misuse that could affect numerous individuals at once."

Could the Ola Electric and Jindal Poly Films cases set a precedent? 

Yes, they could. Akshat Pande said, “The outcome of the Ola Electric case, for example, could influence how courts handle class actions in the tech sector, especially those concerning marketing claims and consumer protection."

Jain said, “This trend signals that government agencies and consumers themselves are becoming more proactive in holding companies accountable. Consumers in particular are no longer willing to accept management decisions that jeopardise their financial interests."

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Experts said that while class action is still evolving in India, it is a powerful tool to protect the rights of shareholders, consumers and depositors. As the number of class actions continues to rise, they are expected to play an increasingly important role in ensuring corporate accountability and strengthening India’s antitrust laws.