NCLT defers Jindal Poly Films case over fraud allegations in class action suit

The National Company Law Tribunal (NCLT) deferred the case on Tuesday regarding the class action suit initiated by minority shareholders of Jindal Poly Films Ltd. alleging fraudulent conduct by the company’s promoters and management.

Last month, minority shareholders of Jindal Poly Films, led by Ankit Jain, filed India’s first class action lawsuit since the regulations were established in 2016. They claimed wrongful losses of approximately ₹2,500 crore, allegedly due to actions of its promoters and directors. 

The lawsuit targets members of the Jindal Polyfilms promoter family — Shyam Sunder Jindal, Subhadra Jindal, and Bhavesh Jindal —as well as certain company directors and officials. Directors named in the lawsuit include Sonal Agarwal, Sanjeev Aggarwal, Rathi Binod Pal, Sanjeev Saxena, Devinder Kumar Rithaliya, and Vijender Kumar Singhal. Additionally, the company’s current chief executive officer Vinod Kumar Gupta and past non-executive director Punit Gupta are also named in the suit.

The tribunal adjourned the case after hearing arguments from both minority shareholders and the company. The company court will take up this case on 9 May.

Under the Companies Act, 2013 of India, section 245 allows a group of individuals to collectively file a lawsuit against a company. This can be initiated by either 100 members or 1/10th of the total members of the company, whichever is less. The lawsuit must be filed in the NCLT specifying grounds for the action and relief sought.

During Tuesday's hearing, minority shareholders argued against the unjustifiable exploitation of shareholder funds through optionally convertible preference shares (OCPS) and redeemable preference shares (RPS) investments. They alleged that Jindal Poly Films Ltd. (JPFL) made substantial investments totalling ₹703.79 crore in Jindal India Powertech Ltd. (Jindal Powertech) between FY 2013-2014 and FY 2016-17, despite Jindal Powertech suffering continuous cash losses and significant erosion in net worth.

The petitioners further claimed that in FY 2018-19, instead of recovering the investments from Jindal Powertech, JPFL chose to write them off. Subsequently, in FY 2021-22, JPFL sold the investments to its promoters and group entities, causing a loss of ₹600 crore on the said investments itself.

The minority shareholders also accused JPFL of manipulative sale transactions, alleging that the sale of investments to the promoters occurred when the valuation of Jindal Powertech had significantly increased, but the investments were sold at a fraction of their true value.

They informed the court that all information they collected is from the company documents available in public, as they don’t have access to the company's confidential documents.

In response to these allegations, Jindal Poly Films argued that the legal suit is not maintainable. They challenged the definition of 'Class' in the class-action suit, raising concerns about homogeneity within the defined class. JPFL asserted that the class defined by the petitioners does not meet the criteria of homogeneity, as it includes individual shareholders with varied circumstances.

The company argued that shareholders, through their approvals of the company’s actions in the previous years, have implicitly consented to and accepted the decisions, potentially affecting the homogeneity and qualifying number of the class.