The recent arbitration referral by the Supreme Court in the Jindal Poly Films case has sparked significant debate within legal circles. This decision has raised questions about the future of shareholder class actions under the Companies Act, 2013, particularly concerning Section 245. On June 8, 2026, Justices Prashant Kumar Mishra and Atul S Chandurkar issued a consent order in the case of Jindal Poly Films Ltd v. Monet Securities Pvt Ltd, appointing former Chief Justice Manindra Mohan Shrivastava as the arbitrator with Delhi as the arbitration seat. This order effectively bypassed the National Company Law Tribunal (NCLT) and National Company Law Appellate Tribunal (NCLAT) decisions, which had focused on maintainability.
The initial petition, filed in March 2024 by shareholders holding 4.99% of Jindal Poly Films, alleged mismanagement involving promoter-linked transactions. These transactions included the sale of OCPS and RPS in Jindal Powertech to the SSJ Trust and Jindal Poly Investment at a value significantly lower than the estimated fair value. This reportedly resulted in losses exceeding ₹2,500 crore, as estimated by FTI Consulting. The NCLT provided a comprehensive 61-page order, establishing jurisprudence under Section 245, highlighting its role in protecting both the company and its members. The tribunal directed that public notice be given to the entire class under Rule 87, and the NCLAT reaffirmed this directive, yet both were set aside without further examination.
Arbitrability Concerns
A key contention is the lack of an arbitration agreement, which raises questions about the arbitrability of the dispute. The Arbitration and Conciliation Act, 1996, allows for arbitration agreements in writing for disputes that have already arisen. However, the issue of subject-matter arbitrability remains unresolved, as actions in rem and disputes designated for public forums are typically non-arbitrable, as established by the Supreme Court in Booz Allen & Hamilton Inc. v. SBI Home Finance Ltd. and refined in Vidya Drolia v. Durga Trading Corporation.
Section 245 proceedings are collective by nature, requiring public notification to class members and statutory opt-out provisions. An arbitral award generally binds only the signatories, lacking the capacity to affect the shareholder class as a whole. This raises concerns about the ability to reverse transactions against entities not party to the arbitration and to engage the full shareholder base.
The Insolvency Code Comparison
The Supreme Court’s decision appears inconsistent with the Insolvency and Bankruptcy Code (IBC), where proceedings are deemed in rem upon admission, precluding arbitration even in the presence of an arbitration clause, as seen in Swiss Ribbons Pvt Ltd v. Union of India and Indus Biotech Pvt Ltd v. Kotak India Venture (Offshore) Fund. Although Section 245 lacks the IBC’s collective architecture, both regimes share the transformation from individual to collective proceedings once admitted.
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Global Class Action Standards
In contrast to international class action standards, which require court supervision over settlements, India’s Section 245 lacks a settlement-approval mechanism. This oversight was highlighted by the Supreme Court’s decision, which proceeded without notifying the class or conducting a fairness inquiry, potentially undermining the collective interests the class action was intended to protect.
Potential Alternatives and Legal Implications
The Companies Act provides for mediation as an alternative, allowing the tribunal to maintain supervisory jurisdiction over settlements. This structural feature could have safeguarded class interests while facilitating resolution. The Supreme Court’s exercise of Article 142 powers must complement statutory provisions without overriding them, yet the order failed to address the broader implications for absent class members.
This consent order, while not setting a formal precedent, leaves unresolved questions about the arbitrability of Section 245 proceedings and the statutory rights within a class. The future credibility of Section 245 now hinges on whether subsequent benches treat this case as an isolated incident or a precedent for future actions.
Prasanth Raju is a counsel and advocate practising in the Bombay High Court.
