From a Landmark to a Locked Room: India’s First Section 245 Class Action and the Supreme Court’s Referral to Arbitration
In four months, the Jindal Poly Films litigation ran the full corporate adjudicatory ladder and, by consent, stepped off. On 5 February 2026, the National Company Law Tribunal (“NCLT”) admitted the country’s first class action under Section 245 of the Companies Act, 2013 (“Act”) against Jindal Poly Films Limited.[1] Section 245 of the Act permits a prescribed class of members or depositors to bring a representative action seeking collective relief, including damages, where a company’s affairs are conducted in a manner prejudicial to the company or its stakeholders. It provides minority investors with an effective remedy against governance abuse. Subsequently, the National Company Law Appellate Tribunal (“NCLAT”) dismissed the company’s appeal against this order.[2] On 8 June 2026, the Supreme Court, on the parties’ joint mention and a consent order, set aside both orders and referred the disputes to a sole arbitrator.[3]
Disposing of it on the two litigants’ consent raises unresolved questions of arbitrability and the consent of an absent class, given that Section 245 action is a public, representative and largely in rem proceeding before a statutory tribunal, whereas arbitration is a private, consensual process that binds only those who agree to it.
The dispute and its journey
The petition was filed by a group of minority shareholders holding 4.99% of the issued and paid-up share capital of Jindal Poly Films. They alleged that, over several years, a series of transactions involving promoter-linked entities (including the issue and transfer of optionally convertible and redeemable preference shares, transfers of securities at values said to be well below their worth, and related loan write-offs) had eroded corporate value to the detriment of both the company and its members. The respondents called it a derivative claim dressed as a class action, deployed to evade the higher threshold governing oppression and mismanagement proceedings under Sections 241–242 of the Act.
What the tribunals decided
The NCLT rejected the challenge to maintainability and admitted the petition, directing the issuance of public notice to shareholders. It held that the petitioners satisfied the 2% threshold and that, at the time of admission, its task was confined to determining whether a prima facie case existed. It also observed that the Indian class action framework is broader than its US analogue, permitting shareholders to seek relief that may ultimately enure to the company. On appeal, the NCLAT declined to interfere and held that Section 245 of the Act is wide enough to reach concluded transactions and is not confined to continuing acts, and that the provision enables shareholders to initiate proceedings for the benefit of the company. The NCLAT also noted that investigations by SEBI and the Enforcement Directorate prima facie supported the allegations of prejudicial conduct.
The Supreme Court’s order
The company’s appeal to the Supreme Court was brought under Section 423 of the Act where the appellant was Jindal Poly Films. The contesting respondent was Monet Securities Private Limited (which the order records was not the original petitioner but a recent substitute, having been brought on record in place of the original petitioners, Ankit Jain and others, as the class representative after acquiring shares in the company). On a joint mention with signed minutes (the mention was made jointly by the company and Monet Securities, and the minutes were the agreed consent terms recording their agreement to refer the disputes to arbitration), the Court referred the disputes to arbitration, appointed a former Chief Justice of Madras High Court as sole arbitrator at Delhi, set aside the NCLT and NCLAT orders and kept all contentions open.[4] Since the reference, the minority shareholders have moved to the Supreme Court seeking recall of the order relegating the disputes to arbitration[5]; if entertained, that application may squarely raise the questions of arbitrability and class consent examined below.
A critique of the referral
Arbitration is suited to disputes about rights in personam between consenting parties; it is not the natural home of rights in rem or of remedies whose effect reaches beyond the contracting parties. In Booz Allen & Hamilton Inc. v. SBI Home Finance Ltd., the Supreme Court drew this distinction precisely,[6] and in Vidya Drolia v. Durga Trading Corporation, it refined a fourfold test that treats as non-arbitrable those disputes that affect third-party rights, have erga omnes effect, or implicate sovereign and public-interest functions.[7] Applying related reasoning, the Bombay High Court in Rakesh Malhotra v. Rajinder Kumar Malhotra[8] held that petitions alleging oppression and mismanagement are not arbitrable, because the Tribunal’s powers operate in rem and bind persons who are strangers to any arbitration agreement.
The case against arbitration is even stronger in the context of a Section 245 class action than in a petition alleging oppression and mismanagement. The difference is one of degree. An oppression and mismanagement petition is ordinarily prosecuted by identified members for relief between the parties before the tribunal. A Section 245 action, by contrast, is inherently collective. Once admitted it must be notified to, and its outcome binds, an entire class of shareholders, and under Section 245(6) of the Act any order binds the company and even non-party directors, auditors, experts and advisers. Its reach beyond the two litigants is therefore wider, which makes a reference to a private, consensual forum correspondingly harder to justify.
To treat such a proceeding as freely referable to arbitration on the consent of the parties before the Court is to assume away the very feature that distinguishes it from a bilateral commercial claim. The NCLT had issued notice to Jindal Poly Films’ roughly 40,000 public shareholders, and the reliefs sought (reversal of the impugned promoter-linked transactions and compensation payable to the company) were to enure to that entire class. By diverting the admitted action into a confidential arbitration agreed between the company and a single substituted respondent, the order leaves those absent shareholders bound by a forum they never chose and deprived of the class-wide remedy the admission had opened; and because Section 245(5)(c) bars a second class action on the same cause, they may have no evident route to reagitate it.
Conclusion
The Jindal Poly Films reference is troubling as a matter of design. The defect is not that the Supreme Court honoured an agreement; it is that the architecture of Section 245 offers no settled mechanism as to whether a representative statutory action, once admitted and notified, can be disposed of, and its forum altered, on the consent of two litigants without regard to the class it was meant to protect.
[1] Ankit Jain v. Jindal Poly Films Ltd., I.A. No. 132/2024 in Co. Pet. No. 58/2024 (Nat’l Co. L. Trib., Principal Bench, Feb. 5, 2026) (India).
[2] Jindal Poly Films Ltd. v. Ankit Jain, Co. App. (AT) No. 47/2026 (Nat’l Co. L. App. Trib. Feb. 26, 2026) (India).
[3] Jindal Poly Films Ltd. v. Monet Sec. Pvt. Ltd., Diary No. 25829/2026 (India Sup. Ct. June 8, 2026).
[4] Jindal Poly Films (SC), supra note 3.
[5] Yadav, K. (June 2026) Minority shareholders ask Supreme Court to revive Jindal Poly class action lawsuit, Livemint. Available at: https://www.livemint.com/companies/news/minority-shareholders-ask-supreme-court-to-revive-jindal-poly-class-action-11782118047264.html.
[6] Booz Allen & Hamilton Inc. v. SBI Home Finance Ltd., AIR 2011 SC 2507.
[7] Vidya Drolia v. Durga Trading Corporation, (2021) 2 SCC 1.
[8] Rakesh Malhotra v Rajinder Kumar Malhotra, (2015)2C ompLJ288(Bom)