In a latest setback to Jindal Poly Films, the National Company Law Appellate Tribunal (NCLAT) on Thursday dismissed the company’s plea against class action lawsuit by its minority shareholders.
The bench, led by Justice Yogesh Khanna and Technical Member Ajai Das Mehrotra, also upheld the National Company Law Tribunal’s (NCLT) admission of the case. “We are not inclined to interfere in the impugned order and hence the appeal is dismissed,” said the NCLAT order. This now paves the way for the NCLT to hear the matter on merits basis.
Rs 2,518-Crore Dispute
The issuance of notice has a serious repercussion upon the reputation of the company since the proceedings have wider consequences, the appellate tribunal said. The matter has also created a situation of panic amongst the company’s public shareholders, potentially triggering a fall in its share price by 31% to ₹404, the order noted. On Thursday, the stock closed almost 7% lower at ₹595 on the National Stock Exchange.
A spokesperson of Jindal Poly said, “This decision rendered today does not have any implications or bearing on the merits of the case as the Hon’ble NCLT is yet to start hearing the matter.” The company said that all business decisions were taken under “commercial wisdom with necessary approvals as required under applicable laws” and that it is reviewing the order. The NCLAT’s decision does not impose any findings on the allegations made in the petition, it added.
The case was filed under Section 245 of the Companies Act, 2013, which allows a group of shareholders to file a single case against the entity for causing losses to them.
On February 6, Jindal Poly had approached the NCLAT to challenge the admission of the case by the NCLT. The NCLT admission was also widely cheered by legal experts for allowing the petition to pass the “maintainability” threshold and proceed to a hearing on its merits.
The case was brought by three shareholders, Ankit Jain, Rina Jain and Ruchi Jain Hanasoge, who together held a 4.99% stake in the company in March 2024. They alleged that certain promoter-linked transactions caused a financial loss of ₹2,518.45 crore to the company and its public shareholders.
This includes a loss of over ₹2,200 crore in the sale of optionally convertible preference shares, ₹135-crore loss from undervalued sale of shares of Jindal Thermal, and ₹128-crore loss from advancement of loan to Jindal Thermal.
For the quarter ended December, the company had reported a consolidated net loss of more than ₹96 crore on a revenue of almost ₹372 crore.
Regulatory Heat
In October, the Securities and Exchange Board of India (Sebi) had alleged the company to have violated the rights of minority shareholders and the securities market at large under various provisions. These include the Sebi Act, Prohibition of Fraudulent and Unfair Trade Practices (PFUTP) Regulations, and Listing Obligations and Disclosure Requirements (LODR) Regulations. The regulator then approached the NCLT against the company in November with an intervention application.