Case Law Details
Jindal Poly Films Limited Vs Monet Securities Private Limited & Ors. (Supreme Court of India)
The Supreme Court disposed of a civil appeal arising from proceedings under Section 245 of the Companies Act, 2013 after the parties jointly consented to refer their disputes to arbitration. The appeal had challenged an NCLAT judgment dated 26 February 2026, which had upheld the NCLT’s order dated 5 February 2026 rejecting objections to the maintainability of a class action petition and directing issuance of public notice to shareholders.
Read NCLAT Judgment in this case: NCLAT Allows Class Action Claims for Past Acts Under Companies Act
Before the Supreme Court, both parties submitted draft minutes of a consent order seeking referral of the disputes to arbitration. It was represented that, upon reviewing the nature of the disputes and the efficacy of available remedies, arbitration would be a more suitable mechanism for adjudication. The appellant stated that it had no objection to the disposal of the pending company petition under Section 245 and to the appointment of an arbitrator by the Court.
Accepting the consensus between the parties, the Supreme Court referred the disputes to arbitration and appointed Justice Manindra Mohan Shrivastava, former Chief Justice, as the Sole Arbitrator. The Court directed that the arbitration proceedings be conducted with Delhi as the seat of arbitration and permitted the Arbitrator to determine his fees in consultation with the parties. The Supreme Court expressly set aside both the NCLT order dated 5 February 2026 and the NCLAT judgment that had upheld it. The Court clarified that the orders related only to the issue of maintainability before the NCLT and that all contentions of the parties were left open for consideration in arbitration.
The NCLAT judgment, which stood set aside pursuant to the consent order, had examined the maintainability of a class action petition filed under Section 245 of the Companies Act by shareholders holding 4.99% of the company’s share capital. The petition challenged three categories of transactions involving group entities. These included the sale of Redeemable Preference Shares (RPS) and Optionally Convertible Preference Shares (OCPS) to promoter-related entities, the write-off of loans extended to a group company followed by fresh lending, and the sale of an investment held by a wholly owned subsidiary to another promoter-linked entity. The petitioners alleged that these transactions were undervalued, concealed from shareholders, and had caused substantial losses to the company and minority shareholders.
The appellant had argued before the NCLAT that Section 245 could not be invoked in relation to past and concluded transactions because the provision referred to affairs “being conducted” in a prejudicial manner. It was also contended that the NCLT had considered only the shareholding threshold and prima facie opinion of the petitioners without adequately examining the factors specified under Section 245(4), including good faith and the availability of alternative remedies.
The NCLAT rejected these objections. It held that Section 245 contemplated class actions not only for the protection of shareholders but also for safeguarding the interests of the company itself. According to the appellate tribunal, the language of Section 245(1)(g) and Section 245(1)(h) conferred broad powers upon the NCLT to grant damages, compensation, suitable action, and other remedies. The NCLAT further observed that claims for damages and compensation necessarily encompassed past and concluded transactions and were not confined to ongoing acts alone.
The appellate tribunal also found that the statutory requirements under Section 245 had been satisfied. It noted that the petitioners exceeded the minimum threshold prescribed for listed companies, had demonstrated a prima facie opinion regarding prejudice to the company and its members, and had acted in good faith by seeking information from the company and obtaining an independent evaluation of the disputed transactions before initiating proceedings. The NCLAT concluded that the NCLT had properly considered the relevant factors under Section 245 and the applicable Rules before directing issuance of notice.
However, following the parties’ agreement before the Supreme Court, the NCLT and NCLAT orders on maintainability were set aside, and the disputes were directed to be resolved through arbitration, with all substantive issues expressly left open.
FULL TEXT OF THE SUPREME COURT JUDGMENT/ORDER
1. Upon being jointly mentioned, the matter is taken on board.
2. Delay condoned.
3. Both the parties have consented for an order referring the matter to Arbitration and have presented draft minutes of the consent order, duly signed by learned counsel for the parties. The said “draft minutes of consent order is taken on record”.
4. Mr. Shardul Singh, learned counsel appearing for the petitioner and Mr. Santosh Paul, learned senior counsel appearing for respondent No. 1 through video conferencing, assisted in Court by Ms. Neeha Nagpal would submit draft consent order.
5. The present appeal filed under Section 423 of the Companies Act, 2013 (“Act”) challenges the judgment & order dated 26.02.2026, passed by the National Company Law Appellate Tribunal, New Delhi in Company Appeal (AT) No. 47/2026 (“Impugned Order”). The Appellant contends that the Impugned Order erroneously dismissed the Company Appeal and upheld order dated 05.02.2026, passed by National Company Law Tribunal, Principal Bench in I.A. No. 132/2024 in Company Petition No. 58/2024. The Petitioner in Company Petition No. 58/2024 filed under Section 245 of the Act, who is the sole Respondent in the matter appears on caveat. At the outset it is submitted that the Respondent, who was not the original petitioner before the NCLT, has recently been substituted in place of the original petitioner. It is further submitted that on a review of the nature of the disputes and considering efficacy of the remedy, the matter would be better suited to adjudication through arbitration.
6. The counsel for the Appellant states that it has no objection if the Company Petition No. 58/2024 initiated by the Respondent, is disposed of and the disputes are referred to an Arbitrator appointed by this Hon’ble Court. In view of the aforesaid the Company Petition No. 58/2024 is disposed of with consent of the parties and the disputes between the parties herein are referred to arbitration.
7. The parties have left the choice of Arbitrator upon the Court. We appoint Justice Manindra Mohan Shrivastava, Chief Justice as the Sole Arbitrator, who shall decide upon the disputes expeditiously. The seat of arbitration shall be Delhi and the Learned Arbitrator may decide upon his own fee in consultation with the parties.
Needless to add, the order dated 05.02.2026, passed by NCLT and the Impugned Order passed by the NCLAT, which pertained to maintainability before NCLT, are set aside. All contentions of the parties are kept open.
8. The Civil Appeal is disposed of in the above terms.
9. Pending application(s), if any, shall stand disposed of.
1. Delay condoned.
2. The Civil Appeal is disposed of in terms of the signed order placed on the file.
3. Pending application(s), if any, shall stand disposed of.
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