Supreme Court Directs Listing Before Original Bench in Jindal Poly Minority Shareholder Matter

Supreme Court directs the matter to be placed before the Bench that had referred the admitted class action to arbitration, following minority shareholders’ challenge to the settlement

India’s first admitted corporate class action under Section 245 of the Companies Act, 2013, involving nearly 40,000 public shareholders of Jindal Poly Films Limited, came up before the Supreme Court today, where minority shareholders sought reconsideration of the order referring the class action to arbitration.

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The application was heard before a Bench comprising Hon’ble Mr. Justice Prashant Kumar Mishra and Hon’ble Mr. Justice Shree Chandrashekhar.

Senior Advocate Mr. Kapil Sibal, appearing on behalf of the minority shareholders, submitted that the admitted class action proceedings had come to an abrupt end through a settlement between the Company and a single substituted shareholder, following which the matter was referred to arbitration. It was further argued that the Company had misled the Court, resulting in the settlement and referral of an admitted statutory class action without the participation of the larger body of affected shareholders.

Representing the respondents, including Jindal Poly Films Limited, were Senior Advocate Dr. Abhishek Manu Singhvi and Senior Advocate Mr. Atmaram Nadkarni.

During the hearing, it was submitted that the class action had already been admitted by the National Company Law Tribunal (NCLT) and affirmed by the National Company Law Appellate Tribunal (NCLAT), thereby assuming the character of an in rem proceeding affecting the rights of the entire class of shareholders. The minority shareholders have questioned whether such a statutory class action, involving nearly 40,000 public shareholders, could be concluded through a settlement with a single substituted shareholder and thereafter be referred to arbitration.

Taking note of the submissions, the Supreme Court observed that the order sought to be recalled had been passed by a differently constituted Bench. Accordingly, the Court directed that the application be placed before the same Bench that had originally passed the order referring the matter to arbitration.

The matter has now been referred to the Hon’ble Chief Justice of India for constitution of a Special Bench comprising the judges who had passed the earlier order before which the minority shareholders’ recall application will be listed in due course.

The proceedings are expected to have significant implications for the future of statutory class actions under Section 245 of the Companies Act, particularly on issues relating to minority shareholder rights, representative litigation, corporate governance, and the circumstances in which admitted class actions may be settled or referred to arbitration.

Given that this concerns India’s first admitted corporate class action under Section 245, the matter is likely to be closely watched by listed companies, institutional investors, securities law practitioners and corporate governance stakeholders across the country.