India’s Opening Bell: Why the Jindal Polyfilms Case Should Redefine Our Class-Action Future

[Tanya is a student at Dr Ram Manohar Lohiya National Law University.]

When National Company Law Tribunal (NCLT) admitted Jindal Polyfilms petition under Section 245 of the Companies Act 2013, it did more than revive a dormant clause; it sounded India’s opening bell for shareholder class actions. In the said case, minority shareholders alleged that the company’s promoters conducted its affairs prejudicially, undervaluing share transactions and writing off related-party loans. For nearly a decade, Section 245 has been an ornamental provision, quoted in commentary, ignored in courtrooms. Now, for the first time, India is witnessing its statutory class-action design being tested in practice. The case reveals both the promise and the pitfalls of India’s framework and raises a crucial question: can India build a hybrid model that empowers investors while filtering abuse?

Class Actions as Engines of Accountability

Class actions are not merely procedural innovations: they are enforcement engines. By aggregating scattered harms, they convert passive shareholders into a collective force capable of challenging corporate misconduct that would otherwise go unpunished. In systems where thousands of small investors each suffer a minor loss, traditional remedies fail because the cost of suing outweighs the damage. Class actions bridge that gap. Yet India’s experience has been one of dormancy. Since Section 245 was enacted in 2013, the provision has remained largely unused. Commentators repeatedly called it “symbolically powerful but practically unusable,” citing high thresholds, unclear procedures, absence of precedent, and no framework for funding or certification. Investors instead gravitated toward the more predictable oppression and mismanagement remedies under Section 241. Jindal breaks this long silence, forcing India to confront whether its class-action regime can ever be functional.

It becomes noteworthy that investors preferred Section 241 as it provided a simpler, time-tested route with clearer remedies against oppression and mismanagement. Section 245, by contrast, involved higher procedural thresholds and collective-action complexities that deterred individual shareholders.

Asia’s Two Models, and India’s In-Between Design

Across Asia, two dominant models define the collective enforcement landscape. China and South Korea follow the institutional or opt-out model, where state-backed or quasi-public entities act as lead plaintiffs on behalf of investors. China’s “special representative” securities actions and Korea’s Securities-Related Class Action Act both rely on these institutional mechanisms to ensure scale, credibility, and meaningful recoveries. In contrast, Singapore and Hong Kong adopt a representative or leave-based model, i.e., opt-in, derivative, and deliberately narrow. Their courts exercise rigorous gatekeeping, allowing collective proceedings only in tightly defined circumstances to prevent excessive litigation.

India’s Section 245 sits uneasily between these poles: opt-out post-admission but tribunal-centric. On paper, it offers collective enforcement; in practice, it lacks the infrastructure: no institutional plaintiff, no funding, and uncertain gatekeeping norms. Jindal thus becomes India’s chance to redesign this middle ground into a robust hybrid.

 

Gatekeeping: The First Line of Defense

The Jindal petition illustrates that the first battle in India’s class-action experiment is procedural, not substantive. Under Rule 85 of the National Company Law Tribunal Rules 2016, the tribunal must decide whether a class action is admissible, testing whether the claim is made in good faith, whether grievances are common, whether evidence supports the allegations, and whether an individual suit would be more appropriate. This gatekeeping function is essential. It protects companies from frivolous, malicious, or politically motivated litigation while ensuring genuine claims are not stifled. However, numeric thresholds and unstructured discretion can both under- and over-filter legitimate cases. India’s tribunals need clearer criteria, akin to certification standards elsewhere, so that Rule 85 becomes a predictable filter, not a black box.

 

The Missing Pieces: Representation and Resources

For Section 245 to work, gatekeeping alone is not enough. India must address two structural gaps: representation and resources.

 

Institutional lead plaintiffs: Currently absent in India

India’s class actions presently rely on dispersed minority shareholders, which are often unorganized, hesitant to litigate, and lacking both credibility and coordination. In absence of a recognized representative body, most cases fail to gain momentum. Per the author, way forward lies in establishing neutral and independent lead plaintiffs who can represent investor interests effectively. These could include investor associations modelled on the US lead-plaintiff framework, SEBI-registered shareholder trusts empowered to file collective claims, a Shareholder Protection Fund similar to China’s Securities Investor Service Centre but independent of the state, or accredited NGOs and professional class-action trustees capable of managing proceedings transparently. Such institutional intermediaries would infuse legitimacy, ensure better coordination, and correct imbalance of power between retail investors and corporations.

Regulated litigation funding: Missing, but necessary

Even the most credible representative cannot succeed without adequate financial backing. Class actions are inherently costly, and individual shareholders seldom possess resources to sustain them. Currently, India lacks any framework for collective or third-party funding, leaving plaintiffs vulnerable to prohibitive litigation expenses and adverse cost risks. To address this, India must introduce a regulated third-party funding regime that mandates full disclosure of funders’ identities and financial interests, imposes caps on funder returns to prevent profiteering, ensures court oversight to deter abuse or coercive settlements, and includes cost-shifting provisions to make enforcement economically viable. Experiences from other jurisdictions show that transparent funding mechanisms can widen access to justice without encouraging frivolous or vexatious claims.

 

Ratification and Accountability

Another unresolved frontier is ratification: can shareholders collectively approve a wrongful act and thereby insulate management from liability? In Singapore and Hong Kong, courts only recognize ratification if it is informed, disinterested, and consistent with fiduciary standards. In China and Korea, institutional investors or state-backed agencies may still challenge even ratified acts when public interest or fraud is implicated.

India has yet to define its stance. If tribunals permit ratification to sanitize deliberate fraud or undisclosed related-party transactions, Section 245’s promise will crumble. While Section 245 provides shareholders right to bring a class action against the company for acts that are “prejudicial to the interests of the company, its members or depositors,” it is silent on whether prior shareholder ratification of such acts can bar such an action. Similarly, Section 179(3) (powers of the Board) and Section 188 (related-party transactions) allow for shareholder approval in certain matters, but they do not expressly state that such approval extinguishes liability if the act was fraudulent, misleading, or lacked full disclosure.

Indian jurisprudence has also not settled this question. The Supreme Court in cases such as Needle Industries (India) Limited v. Needle Industries Newey (India) Holding Limited acknowledged the concept of ratification of certain management acts but emphasized that fraud or oppression cannot be cured by shareholder approval. Likewise, in Bajrang Prasad Jalan v. Mahabir Prasad Jalan, the Calcutta High Court held that ratification must be informed and bona fide, i.e., mere majority consent cannot validate misconduct. However, these principles have evolved under Section 241-242, and not under Section 245, which is newer and untested. Thus, no Indian tribunal or court has yet clarified whether shareholder ratification can bar a class action, especially where allegations of fraud, prejudice, or non-disclosure exist. The Jindal case, thus, presents the perfect opportunity to clarify that principle: ratification cannot legitimize deceit.

 

The Case for a Hybrid Model

India’s next step should be to adopt a hybrid class-action framework, i.e., one that aligns with its legal culture and market realities while drawing from both Asian and Western systems. First, tribunal gatekeeping under Rule 85 should be retained to filter out frivolous or politically motivated suits, with the NCLT developing transparent criteria for certification based on good faith, commonality, feasibility, and proportionality. Second, India must introduce institutional lead plaintiffs by empowering accredited investor associations, SEBI-registered trusts, or neutral NGOs to represent shareholders, alongside the creation of a Shareholder Protection Fund to serve as a credible, permanent litigant. Third, a regulated litigation funding system should be established, allowing third-party funding under strict oversight, with mandatory disclosures and caps on funder profits to ensure fairness and accountability. Together, this triad of tribunal gatekeeping, institutional representation, and regulated funding can transform Section 245 from a symbolic provision into a functional engine of corporate accountability.

 

The Broader Market Impact

Opponents warn that class actions could create a “litigation culture,” burdening companies with defensive compliance costs. Yet the opposite is more likely. A calibrated regime enhances investor confidence and market trust. When misconduct faces credible consequences, markets price risk more accurately and corporate governance improves. The danger lies not in over-litigation, but in the vacuum of accountability.

 

The Way Forward

The Jindal Polyfilms case marks a turning point. For years, Section 245 sat dormant, an ambitious provision without infrastructure. Now, India has a live opportunity to reimagine it. Policymakers, tribunals, and investors must act jointly to build the hybrid model India needs: tribunal-gatekept, institutionally led, and transparently funded. If we seize this moment, class actions can evolve into a cornerstone of market integrity and shareholder democracy. If we fail, Jindal will become just another footnote in India’s long record of reform without realization.

Either way, the bell has rung, and India must decide whether it will lead or lag in the next chapter of shareholder justice.