NCLAT Dismisses Jindal Poly Films Appeal, Class Action Suit by Minority Shareholders to Proceed
In a setback for Jindal Poly Films, the National Company Law Appellate Tribunal has dismissed the company’s appeal against an earlier order permitting a class action lawsuit to move forward. The decision, delivered on February 26, upholds the National Company Law Tribunal’s admission of the case and formal notice issued to the company.Minority Shareholders Allege ₹2,000 Crore Loss
The class action lawsuit has been initiated by minority shareholders, who allege diversion of funds to entities linked to the company’s promoters. According to the plea, these transactions resulted in an estimated loss of ₹2,000 crore to Jindal Poly Films and were detrimental to public investors.The shareholders’ application before the NCLT outlines a sequence of financial transactions between FY13 and FY17.
Timeline of Transactions Under Scrutiny
During this period, Jindal Poly Films invested ₹700 crore in two related entities, Jindal Powertech and Jindal Thermal, through Optionally Convertible Preference Shares and Redeemable Preference Shares.The plea alleges that this ₹700 crore investment was written off almost simultaneously after being made.
Subsequently, when the related entities defaulted on their obligations and entered settlement discussions with lenders, Jindal Poly Films invested an additional ₹600 crore to facilitate those settlements.
In total, the company is said to have invested around ₹1,300 crore in these entities during a downturn in the power sector. However, once sector conditions improved, the shareholders allege that Jindal Poly Films sold its stake in the related entities to a promoter group trust for ₹106 crore.
Minority shareholders contend that this pattern of investing during distress and divesting at a significantly lower value during recovery forms the core of the alleged ₹2,000 crore loss.
Share Price Reaction
Shares of Jindal Poly Films were down 4.91 percent on the day, trading at ₹609.10 apiece on the BSE as of 1:08 pm IST.The dismissal of the appeal clears the way for the class action proceedings to continue before the National Company Law Tribunal.
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