Under the Companies Act, 2013 , Section 245 explains concept of class action suits, it’s a major step toward protecting the rights of minority shareholders and depositors. It is brought by one or several people on behalf of a larger group (the “class”) who’ve suffered the same or similar harm from the same party.
Minority Shareholders – Under Companies Act, 2013 , there is no specific definition of Minority shareholders however in general terms, Minority shareholders are those who hold less than 50% of a company’s share capital and therefore lack controlling power over corporate decisions.
Depositors – Under the Companies Act, 2013 , a “depositor” refers to any person who places money with a company as a deposit, subject to certain rules and exclusions of the Law.
This provision was introduced in the wake of the Satyam scandal, where Indian shareholders had no legal recourse while U.S. investors successfully filed a class action abroad. Section 245 was India’s answer to that gap in investor protection.
Who Can File Class Action Suit?
Class action suits can be filed by:
- Members (shareholders):
- At least 100 members, or
- 10% of the total number of members (whichever is less), or
- Members holding at least 10% of the issued share capital (provided all dues are paid)
- Depositors:
- At least 100 depositors, or
- 10% of the total number of depositors, or
- Depositors holding at least 10% of the total value of outstanding deposits.
Where to File and How it Proceeds –
Class Action Lawsuits must be filed before the National Company Law Tribunal (NCLT) and there is a proper procedure for the same.
The Procedure is as follows –
1. Filing: A plaintiff files the lawsuit and asks the court to certify it as a class action.
2. Class Certification: The court reviews if the group’s claims are similar enough to proceed as one case.
3.Notice: Potential class members are notified and given the chance to opt out.
4. Settlement or Trial: The case may end in a settlement or go to trial. If the class wins, members receive compensation.
Grounds for Filing Class Action Suits –
Members or depositors can file a class action suit against the Company, if they believe that the company’s affairs are being conducted in a manner:
- Prejudicial to the interests of the company or its members/depositors
- In violation of the company’s memorandum or articles of association
- Involving fraud, mismanagement, or misconduct by directors, auditors, or advisors.
Reliefs That Can Be Sought –
Under Class Action Suits, following relief can be calmed –
- Restraining the company from committing ultra vires acts
- Declaring certain resolutions void
- Seeking damages or compensation from directors, auditors, or consultants for misleading statements or fraudulent conduct.
Common Types of Class Actions
- Consumer protection (e.g. faulty products, misleading advertising)
- Securities fraud (e.g. investors misled by a company’s financial statements)
- Employment issues (e.g. wage theft, discrimination)
- Environmental harm (e.g. pollution affecting a community)
- Data breaches (e.g. personal info stolen due to lax security)
Conclusion-
In conclusion, I would like to say that Class action suit represents a unified stand against wrongdoing. It underscores the collective resolve of the affected individuals to seek justice. Through this legal action, we aim not only to secure compensation for the harm suffered but also set an examples for others to avoid future misconduct and upholds the principles of fairness and corporate responsibility.
Author Bio
