Last updated: 24 July 2026 · By CS Sapna Malpani, Practising Company Secretary, Bangalore
On 5 February 2026 the National Company Law Tribunal in New Delhi did something no Indian tribunal had done in the ten years since the provision was switched on: it admitted a full Section 245 class action suit. Minority shareholders holding just 4.99% of Jindal Poly Films Limited alleged that more than ₹2,500 crore had been moved out of the company through undervalued deals with promoter-linked entities. Four months later, on 8 June 2026, the Supreme Court closed the same case by sending it to a private arbitrator, leaving roughly 40,000 public shareholders with no class action and no ruling on the merits. If your board approves related-party transactions, appoints auditors, or signs off on group investments, this one case rewrites your risk map.
TL;DR – Section 245 Class Action
- What it is: A statutory suit letting a class of members or depositors sue the company, its directors, and its auditors together before the NCLT for conduct prejudicial to their interests.
- Who can file: 100 members or 5% of members (whichever is less), or holders of 2% of issued capital in a listed company (5% if unlisted). Jindal’s petitioners cleared it with 4.99%.
- The exposure: Directors, the auditor, and the audit firm face damages claims; an audit firm is liable jointly with the partners involved.
- Key action: Tighten related-party pricing, board minutes, and valuation records now – a class action is built on the paper trail your board already created.
- Time to act: Continuous. There is no filing deadline for you, but there is no limitation shield either.
The problem: one weapon minority shareholders almost never got to fire
Section 245 of the Companies Act, 2013 was notified on 1 June 2016. For nearly a decade it sat mostly unused. Indian minority investors who felt wronged reached for oppression-and-mismanagement petitions under Sections 241 and 242 instead, because the class action route looked untested and procedurally heavy. The Jindal Poly Films order changed that perception in a single afternoon.
Here is why it matters to your company even if you are nowhere near a courtroom. A class action is not an individual grievance. It is a representative action: one small group files, and the outcome binds the whole class of members and depositors, plus the company, its directors, and its auditors. The threshold is deliberately low. Section 245(3) sets it at 100 members or a prescribed percentage, whichever is less, and Rule 84 of the Companies (Management and Administration) Rules brings the shareholding bar down to 2% of issued capital for a listed company. In a company with a dispersed public float, a handful of aggrieved investors can clear that bar in an afternoon.
The Jindal petitioners, led by shareholder Ankit Jain, held 4.99% between them. They alleged that the company invested in group entities Jindal Powertech and Jindal Thermal at prices that favoured the promoter side and drained value from public shareholders. The NCLT recorded that the statutory threshold under Section 245(3) was met, formed a prima facie view of actionable prejudice, and issued notice under Section 245(5) – the step that converts a private complaint into a class proceeding. When Jindal Poly Films challenged that admission, the NCLAT dismissed the appeal and upheld maintainability.
Diagram 1 – How the Jindal Poly Films case moved (and stalled)
What happened at the Supreme Court, and why it unsettled the doctrine
On 8 June 2026 a Bench of Justices Prashant Kumar Mishra and Atul S Chandurkar disposed of Jindal Poly Films Ltd v. Monet Securities Pvt Ltd in a short consent order. The Court referred the underlying dispute to arbitration, appointed former Chief Justice Manindra Mohan Shrivastava as the sole arbitrator with Delhi as the seat, and set aside the NCLT and NCLAT orders – both of which had been confined to the question of maintainability. All contentions were kept open.
Read the sequence carefully, because the tension is the story. A class action under Section 245 is a statutory right that belongs to a class. Arbitration is a private contract between two parties. When a dispute that a tribunal had already accepted as a class proceeding is pushed into a two-party arbitration, the roughly 40,000 shareholders who were never parties to any arbitration agreement lose the forum that had opened for them. The Court did not examine the merits of the diversion allegations or the material placed by SEBI; it resolved the matter between the named parties and left the class outside.
Commentators have called it a “privatised class action”. A recall application is now listed before the Supreme Court, so the last word has not been written. For a company secretary, the practical takeaway does not depend on how that plea ends. The tribunals have already shown they will admit a Section 245 petition, test the threshold, and put directors and auditors in the frame. Whether the final forum is the NCLT or an arbitrator, the evidence that decides the case is the governance record your board produced.
Jindal Poly Films by the numbers
Who can actually file a Section 245 class action
The reason this provision frightens boards is the low entry bar. Under Section 245(3) read with Rule 84, the requisite number turns on whether the company has share capital and whether it is listed. A single investor with a modest stake can qualify on the share-capital limb.
Diagram 2 – Class action eligibility at a glance
| Applicant type | Requisite number to file |
|---|---|
| Members – company with share capital | 100 members, or 5% of total members (whichever is less); or members holding at least 2% of issued capital (listed) or 5% (unlisted). Calls on shares must be paid. |
| Members – company without share capital | At least one-fifth of the total number of members. |
| Depositors | 100 depositors, or 5% of total depositors (whichever is less); or depositors owed at least 5% of total deposits. |
| Excluded entity | Section 245(9): the section does not apply to a banking company. |
Section 245(1) then lists what the class can ask the NCLT for: to restrain the company from acts that are ultra vires the memorandum or articles, to declare a resolution void where it was passed by suppressing material facts, to restrain action contrary to a members’ resolution, and – the clause that keeps directors awake – to claim damages or compensation. Under Section 245(1)(g), that claim runs against the company and its directors, against the auditor including the audit firm for a misleading audit report or wrongful conduct, and against any expert, advisor, or consultant who made an incorrect or misleading statement to the company.
What you must do now: nine steps to stay out of the frame
A class action is reconstructed from documents that already exist on the day it is filed. The work that protects a board happens years earlier, in the quality of its records. These are the steps CS Sapna Malpani recommends every listed and large private company put in place this quarter.
- Price every related-party transaction at arm’s length, and keep the working. The Jindal allegation is undervaluation in favour of promoter entities. Retain the valuation basis, comparable data, and the registered valuer’s report for each material RPT under Section 188.
- Route material RPTs through the audit committee with a real record. Minute the rationale, the pricing method, and any dissent. A committee approval that reads as a rubber stamp helps a petitioner more than it helps you. See the audit committee composition rules.
- Write board minutes that show application of mind. Section 245(4) asks the tribunal to weigh whether an act could have been ratified or authorised by the company. Minutes that record the commercial reasoning are your first defence.
- Get investments in group entities independently valued. Where funds move to a subsidiary or associate, a contemporaneous valuation converts a “diversion” narrative into a documented commercial decision.
- Give the auditor room to qualify. Section 245(1)(g)(ii) puts the auditor and the audit firm directly in the claim. A clean report over questionable numbers is a liability for both sides; support honest disclosure rather than pressing for a smooth sign-off.
- Tighten disclosure of promoter interest. Every director’s interest under Section 184 and every RPT disclosure should be current. Suppressed material facts are a specific ground under Section 245(1)(c).
- Run a governance gap review before an investor does. A Section 204 secretarial audit that genuinely tests RPTs, board process, and disclosures surfaces the weak points while you can still fix them.
- Check your board composition and independence. Independent directors on the audit committee are the people a tribunal looks to for objectivity. Confirm your board composition meets the law in substance, not just on the register.
- Preserve records for the long run. There is no comfortable limitation wall around a class action built on continuing conduct. Archive valuations, minutes, and approvals so that a decision taken today can be explained years later.
The deeper implication
According to CS Sapna Malpani, the Jindal Poly Films episode should be read less as a win or a loss and more as proof of concept. “The tribunals demonstrated that a Section 245 petition can be admitted, that the 2% threshold is easy to cross in a listed company, and that directors and auditors sit inside the claim, not beside it,” she notes. “The Supreme Court’s arbitration reference paused this one case, but it did nothing to un-teach that lesson to the next set of aggrieved shareholders.”
The forward prediction is that the recall plea, however it is decided, keeps the spotlight on class actions through 2026 and 2027. Institutional and retail investors have now seen the mechanism work up to admission. Proxy advisory firms will start scoring RPT hygiene and board minutes as class-action risk. The companies that treat this as a documentation discipline – not a litigation problem – will be the ones that never receive a Section 245 notice in the first place.
Section 245 compared with the routes founders confuse it with
| Feature | Section 245 – Class action | Sections 241-242 – Oppression & mismanagement |
|---|---|---|
| Who benefits | The whole class of members/depositors; order binds all of them. | The petitioning members who bring the case. |
| Who can be sued | Company, directors, auditor and audit firm, experts and advisors. | Mainly the company and those running its affairs. |
| Core relief | Damages, restraint of ultra vires acts, voiding of tainted resolutions. | Wide equitable relief to end the oppressive state of affairs. |
| Auditor exposure | Express, including the firm and involved partners under 245(2). | Not the primary target. |
Diagram 3 – The liability chain and the cost of ignoring a Section 245 order
245(1)(g)(i)
245(1)(g)(i)
245(1)(g)(ii), 245(2)
245(1)(g)(iii)
| Failure to comply with an NCLT order under Section 245(7) | Consequence |
|---|---|
| Company | Fine of not less than ₹5 lakh, up to ₹25 lakh. |
| Every officer in default | Imprisonment up to 3 years and fine of ₹25,000 to ₹1 lakh. |
| Frivolous or vexatious application (245(8)) | Applicant pays costs to the opposite party, up to ₹1 lakh. |
Key takeaways
- ✓ Section 245 produced its first admitted class action on 5 February 2026 – Jindal Poly Films – over an alleged ₹2,500 crore diversion.
- ✓ The Supreme Court referred the dispute to arbitration on 8 June 2026, setting aside the NCLT and NCLAT orders and leaving ~40,000 shareholders without a class forum.
- ✓ A recall plea is pending, so the reach of Section 245 versus arbitration is still unsettled.
- ✓ The filing threshold is low: 100 members, 5% of members, or just 2% of issued capital in a listed company. The petitioners qualified with 4.99%.
- ✓ Directors, the auditor, and the audit firm are all named defendants; an audit firm is liable jointly with the partners involved.
- ✓ Ignoring an NCLT order under Section 245(7) costs the company ₹5–25 lakh and every officer in default up to 3 years’ imprisonment plus ₹25,000–₹1 lakh.
- ✓ Your best defence is built years before any petition: arm’s-length RPT pricing, honest board minutes, and independent valuations.
Sources and references
- Section 245, Companies Act, 2013 – bare text: ca2013.com/245-class-action
- Section 245, Companies Act, 2013 – IBC Laws: ibclaw.in
- “Unlocking Section 245: A New Chapter in Shareholder Class Actions” – IndiaCorpLaw: indiacorplaw.in
- “NCLT admits India’s first major section 245 shareholder class action” – Law.asia: law.asia
- Jindal Poly Films Ltd v. Monet Securities Pvt Ltd, Supreme Court order (08-06-2026) – Live Law: livelawbiz.com
- “Reassessing Jindal Poly Films: privatised class action and the Section 245 dilemma” – Bar & Bench: barandbench.com
Worried your RPTs or board minutes could invite a class action?
CS Sapna Malpani helps listed and growth-stage companies in Bangalore run governance gap reviews, tighten related-party documentation, and build a board record that stands up to scrutiny.
Read next: Oppression & Mismanagement (Sections 241-242) · Related Party Transactions (Section 188) · Secretarial Audit (Section 204)
Talk to CS Sapna Malpani on WhatsApp: +91 96208 03375
Frequently asked questions
What is a Section 245 class action suit under the Companies Act, 2013?
A Section 245 class action suit lets a specified class of members or depositors approach the NCLT together when they believe the company’s affairs are being conducted in a manner prejudicial to the company, its members, or its depositors. They can seek orders to restrain ultra vires acts, void resolutions passed by suppressing material facts, and claim damages from the company, its directors, its auditor and audit firm, and its advisors. The order binds the whole class, which is what distinguishes it from an individual complaint.
Who can file a class action suit under Section 245?
In a company with share capital, the requisite number is 100 members or 5% of the total members, whichever is less, or members holding at least 2% of issued capital in a listed company (5% if unlisted), provided calls on their shares are paid. In a company without share capital, at least one-fifth of the members must join. Depositors qualify with 100 depositors, 5% of depositors, or those owed 5% of total deposits. In Jindal Poly Films the petitioners qualified holding 4.99%.
What was the Jindal Poly Films class action about?
Minority shareholders of Jindal Poly Films Limited alleged that more than ₹2,500 crore was moved out of the company through undervalued investments in promoter-linked group entities. The NCLT admitted the petition on 5 February 2026 – the first Section 245 class action ever admitted in India – and the NCLAT upheld it. On 8 June 2026 the Supreme Court referred the dispute to arbitration and set aside the tribunal orders, leaving roughly 40,000 public shareholders without the class forum. A recall plea against that reference is pending.
Can a company’s auditor be sued in a Section 245 class action?
Yes. Section 245(1)(g)(ii) expressly allows the class to claim damages from the auditor, including the audit firm, for any improper or misleading statement in the audit report or for fraudulent, unlawful, or wrongful conduct. Section 245(2) makes the audit firm liable together with each partner who was involved in the misleading statement or wrongful act. This direct exposure is a key reason auditors of listed and large companies watch class-action developments closely.
What is the penalty for not complying with a Section 245 order?
Under Section 245(7), a company that fails to comply with an NCLT order attracts a fine of not less than ₹5 lakh, which may extend to ₹25 lakh. Every officer in default is punishable with imprisonment of up to three years and a fine of ₹25,000 to ₹1 lakh. Separately, under Section 245(8), if the tribunal finds an application frivolous or vexatious, it can order the applicant to pay costs of up to ₹1 lakh to the opposite party.
How can directors reduce the risk of a Section 245 class action?
The exposure is documentary, so the defence is documentary. Price every related-party transaction at arm’s length and keep the valuation working, route material RPTs through the audit committee with reasoned minutes, obtain independent valuations for investments in group entities, keep director-interest and RPT disclosures current, and run a genuine Section 204 secretarial audit that tests these areas. A class action is reconstructed from records that already exist, so the quality of those records years before any petition decides the outcome.
Does Section 245 apply to private and unlisted companies?
Yes, with one carve-out. Section 245(9) states that the section does not apply to a banking company. Every other company with share capital is within its scope, listed or unlisted. The practical difference is the threshold: an unlisted company’s shareholders need 5% of issued capital on the shareholding limb, against 2% for a listed company, but the alternative “100 members or 5% of members” route applies to both. Large private companies with several investors should treat the risk as real, not theoretical.