Jindal Poly Films shareholders move SC to revive class-action suit

A group of 29 minority public shareholders of Jindal Poly Films (JPFL) has approached the Supreme Court, seeking to revive a shareholder class action involving alleged diversion of corporate value and its impact on public investors.

Earlier, minority shareholders of the company raised concern over the Supreme Court judgment setting aside the NCLT and NCLAT orders, disposing of the corporate class action suit with consent and appointing Justice Manindra Mohan Shrivastava (Retd Chief Justice) as sole arbitrator.

The affected shareholders have now written to the Chief Justice of India and plead to implead in the case and recall the applications. They also raised concerns on how a representative proceeding affecting public investors was concluded without hearing the very class it was meant to protect.

In a detailed representation addressed to the Chief Justice of India, the minority shareholders have placed on record the full factual background leading up to the order dated passed by the Supreme Court.

The representation highlights that the underlying proceedings arose from an admitted shareholder class action concerning alleged large-scale diversion of corporate value and its impact on public shareholders of a listed company.

The shareholders have stated that the matter involved not just a bilateral dispute, but a representative proceeding affecting a wide body of public investors, with multiple intervention petitions pending and regulatory findings already part of the proceedings.

Shareholders pointed out that during court vacation, the appeal was mentioned and disposed of on the same day by the consent of only two parties, resulting in the dispute being referred to arbitration, without notice to or participation of the broader shareholder class or other stakeholders.

The statutory remedy designed to protect minority investors should not be effectively extinguished without the Court being apprised of the full factual context, including the representative character of the proceedings and the existence of multiple affected parties, said the affected investors.

The minority shareholders formally approached the Supreme Court seeking to implead as parties to the proceedings, so that the class of minority shareholders, for the first time, has a direct voice before the Court in a matter affecting their rights.

They also sought to recall the July 8 order of SC on the ground that the proceeding was disposed of without hearing the necessary and affected parties and without placing before the Court the complete factual matrix, including the nature of the class action and the absence of any authorised representative of the class to bind it.

Sohil Shah, Partner, Pioneer Legal, said: “Given that class action proceedings under Section 245 of the Companies Act are representative in nature and possess in rem characteristics, they affect the rights of the entire class of shareholders collectively.”

Consequently, the Supreme Court is obligated to entertain objections from any affected shareholder, he said.

“The Court cannot mandate recourse to an arbitral tribunal, as arbitration is a private, in personam forum, lacking the requisite jurisdiction to adjudicate matters that are in rem in nature and impact the wider shareholder class,” he added.