NCLAT Dismisses Jindal Poly Films Appeal, Class Action Suit to Proceed

Tribunal Upholds NCLT Order in Minority Shareholders' Plea​

In a setback for Jindal Poly Films Ltd, 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 ruling, delivered on February 26, upholds the decision of the National Company Law Tribunal to admit the plea filed by minority shareholders and also includes a formal notice issued to the company.

The development marks a significant legal escalation in a dispute involving alleged financial transactions linked to promoter-connected entities.

Allegations of ₹2,000 Crore Loss​

The class action lawsuit, initiated by minority shareholders, alleges that funds were siphoned off to entities associated with the company’s promoters. According to the shareholders, these transactions resulted in an estimated loss of ₹2,000 crore to Jindal Poly Films and were detrimental to public investors.

The allegations center on a series of investments and write-offs carried out between FY13 and FY17.

Timeline of Key Transactions​

As outlined in the plea submitted to the NCLT, Jindal Poly Films invested ₹700 crore in two related entities, Jindal Powertech and Jindal Thermal. The investments were structured through Optionally Convertible Preference Shares and Redeemable Preference Shares.

The ₹700 crore investment was allegedly written off almost immediately after it was made.

Subsequently, when the related entities defaulted on their debt obligations and entered into settlement discussions with lenders, Jindal Poly Films infused an additional ₹600 crore to facilitate those settlements.

In total, the company invested around ₹1,300 crore into these entities during a downturn in the power sector.

However, once conditions in the sector improved, the company allegedly sold its stake in the related entities to a promoter group trust for ₹106 crore.

Minority shareholders argue that this sequence of investing during financial stress and exiting at a significantly lower valuation during recovery forms the basis of the claimed ₹2,000 crore loss.

Jindal Poly Films Share Price Reaction​

Shares of Jindal Poly Films declined 4.91 percent on February 26 and were trading at ₹609.10 apiece on the BSE at 1:08 pm IST, reflecting investor reaction to the tribunal’s decision.

The dismissal of the appeal ensures that the class action proceedings will continue before the NCLT, keeping the spotlight on the company’s past financial transactions.