INTRODUCTION

In March 2024, a group of minority shareholders led by Ankit Jain, holding only 4.99% of the minority stake in Jindal Poly Films Limited (“JPFL”), filed India’s first major class action suit under Section 245 of the Companies Act, 2013 (“the Act”). The petition alleged that over ₹2,500 crore had been siphoned off by the company’s promoters through a series of undervalued asset sales to the promoters’ other entities, including the Shyam Sunder Jindal Trust. Over a year after filing, the Securities and Exchange Bureau of India (“SEBI”) joined the proceedings by filing an intervention application, documenting its preliminary findings of the governance failures and securities law violations before the National Company Law Tribunal (“NCLT”). SEBI’s intervention is a pivotal point in the history of corporate governance enforcement in India, as it is the first instance where both private shareholders’ claims and proactive regulatory steps have been combined.

This piece considers whether SEBI’s unconventional view of class action enforcement is a significant improvement to the regulation of corporate governance in India. It examines the legal context of oppression and mismanagement and assesses the wider consequences of such regulatory action to the protection of minority shareholders and corporate responsibility. Additionally, it compares the challenge of maintainability of this application, with the exception of the waiver provided in the case of Tata Consultancy Services Limited v. Cyrus Investments Pvt. Ltd. (“Tata”). Moreover, the case has now been referred to arbitration by consent of the parties, which may affect the larger question of governance and reduce it to a mere private settlement.

STATUTORY FRAMEWORK UNDER THE COMPANIES ACT, 2013

In today’s age, where management is separated from ownership, governance mechanisms serve as a protective measure against the abuse of power by promoters and directors. However, earlier, the Code of Civil Procedure, 1908, through Order I, Rule 8, first introduced “representative suits,” permitting all the individuals with common needs to be represented collectively in court. A more formalised concept of class action suit was proposed by the JJ Irani Committee in its report of 2005 to protect the growing investor minority shareholders from corporate misconduct. However, despite the suggestions, any provision for the same was not integrated into the Companies’ Law until June 1, 2016. With this amendment, Indian corporate legislation has undergone significant changes, as it has reinforced disclosure obligations, codified directors’ duties, and provided remedies for oppression and mismanagement. Section 245 of the Act offers class action suits, which, as defined in the section, can be filed when the company’s management or operations are being carried out in a way that is detrimental to the company’s, its members’, or depositors’ interests. Thus, members and depositors can seek redress before the NCLT where the conduct of the company is deemed to be contrary to their interests. This clause stands as a stark contrast to the principle of the common law in Foss v. Harbottle.i This introduced the “proper plaintiff principle” that restricted involvement by minority shareholders, stating that the company is only entitled to be the plaintiff in suits and not the shareholders, premised on the concept of a separate legal entity.

The company, together with the Act and SEBI are the key player in implementing governance standards in listed companies using the SEBI Act, 1992, and the Listing Obligations and Disclosure Requirements Regulations, 2015 (“LODR”). Recently, SEBI’s intervention in issues, which led to the so-called governance failures at JPFL, has brought forth the growing trend of applying enforcement techniques to hold promoters and directors accountable. The focus, now, is no longer on profit-making but on ethical management, protection of investors and long-term sustainability.

SEBI’S INTERVENTION AND MAINTAINABILITY ISSUES

In March 2026, while this case was still pending, SEBI filed an intervention application in NCLT with a 46-page affidavit containing the findings of its preliminary investigation in FY14-18 and FY20-24. Notably, this was not a regulatory adjudication or penalty order under the SEBI Act; SEBI has not yet formally taken any action against JPFL or its promoters. However, the affidavit made SEBI’s factual findings accessible to the civil court to help the court in its evaluation and to enhance the evidential record for the class action petitioners. These included governance lapses and securities law violations as evidenced by the staggered investment write-offs, undisclosed related-party consultancy payments, and the unaccountable intra-group fund flows. This is a significant change from SEBI’s traditional enforcement mechanisms of ‘show cause’ notices and penalty orders, and reflects a new strategy of utilising regulatory discovery to assist private actions taken by the NCLT. The pressure this creates on independent directors and auditors, particularly regarding Regulation 23 compliance on related-party transactions (“RPT”), is significant in the era of the post-Kotak Committee (2017).

Predictably, JPFL argued both in NCLT and at the stage of appeal that this class action is unmaintainable, both on the technical aspects, i.e. the statutory thresholds, as well as the substantive merits. This is not the first time maintainability has been leveraged as a defence in a class action suit. In Tata, when petitioners failed to satisfy the statutory mandates, they successfully pleaded for a waiver under the proviso of Section 244 of the Act, which was provided considering various circumstances through a non-exhaustive list of factors. Similarly, the National Company Law Appellate Tribunal (“NCLAT”) refused to interfere with NCLT’s order and rejected the plea of non-maintainability, allowing the minority shareholders to proceed.

PRECEDENTS AND COMPARISONS

An example of such failures is observed in the case of the Satyam scandal. Ramalinga Raju, the founder-chairman of Satyam Computer Services, confessed to placing the accounting falsification amounting to approximately ₹7,800 crore ($1.47 billion) for years. SEBI investigated exaggerated revenues and board oversight failures, and in 2018, passed an order directing disgorgement of approximately ₹813 crore from his family and associated entities, which was subsequently set aside by the Securities Appellate Tribunal and remanded to SEBI for fresh adjudication, reducing it to ₹622 crores. SEBI’s conventional post-scandal response has typically been reactive, in the form of penalties and disgorgement orders, issued years after the harm.

In JPFL, SEBI’s proactive involvement in the NCLT proceedings was intended to assist the court before any final determination of liability. The advantage is that it speeds up the remedies under Section 242 of the Act instead of the slower enforcement pipeline of SEBI. This approach can be risky because it may come years after the financial damage is already done. Further, the deterrent effect remains uncertain as there is no formal process compelling NCLT to take any action on the findings of SEBI.

RECENT DEVELOPMENTS

It is notable that, recently, the original petitioner before the NCLT, namely Ankit Jain, sold his shares in the JPFL, subsequently substituting the petitioner and respondent in the Supreme Court proceedings with Monet Securities Private Limited. It took over the 4.99% shares of the original petitioner, following which, they submitted a substitution application seeking to be replaced as the petitioner.

Moreover, the proceedings had a pivotal development on 8 June 2026, after which the Supreme Court gave permission for this case to be referred to arbitration through a consent order. The petition arose from the appeal filed under Section 423 of the Act, challenging the order of NCLAT. The appellant contended that NCLAT erroneously rejected the company’s appeal of maintainability. They also observed that, given the nature of the disputes and the efficacy of the remedy, the matter would be better suited to arbitration. Through this, the entire matter is now referred to arbitration by Justice Prashant Kumar Mishra and Justice Atul S. Chandurkar, setting aside the NCLT and NCLAT rulings allowing the class action by the minority shareholders. The Supreme Court appointed Retd. Chief Justice Manindra Mohan Shrivastava as Sole Arbitrator, with Delhi designated as the seat of arbitration. Consequently, the petition before the NCLT has been disposed of. All contentions of the parties remain open before the arbitrator.

The outcome of this action may be the prompt redressal of the case, so that there is no need to repeat the litigation process in order to compensate the loss of the minority shareholders. This can, however, lead to the suit being directed at a private settlement instead of a representative remedy, thus excluding any other systemic failures of governance, providing a deterrent precedent towards prejudicial actions of the management and excluding class members who were not a part of the suit from receiving any remedy.

CONCLUSION

JPFL signifies a pivotal moment in corporate governance in India, merging proactive regulatory efforts by SEBI and private actions by minority shareholders into a unified approach. The move of SEBI to intervene in NCLT is an indication of a change in approach from a punitive stance to a mindset of accountability. Despite uncertainties about the advantages for minority shareholders, the integration of SEBI’s findings into the evidentiary corpus could facilitate quicker resolutions for petitioners. The case questions the depth of maturity of the corporate governance system in India, which may be a shift from compliance to accountability. But the new development could mean a potentially groundbreaking collective remedy being made into a private settlement, not a judicial precedent against corporate mismanagement. Section 245 is a possible protection from promoters. On the other hand, if it remains inconclusive, it can potentially reinforce suspicions of weaknesses in the enforcement of class action suits. Whatever the outcome is, JPFL will be a significant benchmark for the effectiveness of India’s emerging minority shareholder protection framework.