The National Company Law Tribunal (NCLT) on Thursday admitted a class action suit by Jindal Poly Films’ minority shareholders against the company, alleging diversion of funds to promoters as well value erosion for shareholders, according to an order seen by FE. The New Delhi bench of the tribunal also rejected the company’s objections about the case’s maintainability and moved the matter for a formal hearing on its merit to April 2.
Legal experts said class action lawsuits against listed companies are rare in India. Jindal Poly’s minority group, holding almost 5% stake, claimed that the company and its promoters transferred funds and assets at significant undervaluation, unfairly wrote off loans, and made consultancy payments to unqualified entities, all aggregating to more than ₹2,700 crore.
Breaking the “Promoter Moat”
This include 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, as per the order. As per the company’s financial statement for the September quarter, it had reported a consolidated net loss of almost ₹10 crore on a revenue from operations of over ₹410 crore.
The minority shareholders have made a series of demands, including restraining the company from transferring of assets of its related entities, apply a 12% annual compounding interest on all determined losses from the date of the loss occurred, disciplinary action against independent valuer for allegedly providing misleading valuations, and bar the management from taking any action that can harm public shareholders or diminish the company’s value.
Regulatory Scrutiny
A few months ago, the Securities and Exchange Board of India had collected evidence about the investment write-offs made by Jindal Poly and general financial mismanagement, which violated the rights of minority shareholders and the securities market at large under various provisions, including the Sebi Act, Prohibition of Fraudulent and Unfair Trade Practices (PFUTP) Regulations, and Listing Obligations and Disclosure Requirements (LODR) Regulations.
Since the beginning of 2025, Jindal Poly’s share price lost more than half of its value to over ₹400 on the BSE. Jindal Poly is a part of the BC Jindal group and is engaged in the business of various packaging films and non-woven fabrics.