TaxTMI 
TaxTMI 
2026 (3) TMI 111
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....sha, Advocates for R1 to R3. JUDGEMENT JUSTICE YOGESH KHANNA, MEMBER (JUDICIAL) This appeal challenges the impugned order dated 05.02.2026 passed by the Ld.NCLT whereby an IA No.132/2024 filed by appellant challenging the maintainability of Company Petition No.58/2024, filed by Respondent No.1 to 3 before the Ld. NCLT, under Section 245 of the Companies Act, 2013 was dismissed and consequently the directions were given to issue public notice of the Company Petition to all public shareholders of the appellant company in terms of Rule 87 of the NCLT Rules, 2016. 2. It is the submission of the learned senior counsel for the appellant the appellant is a public listed company having approximately 40000 public shareholders and the Respondents No.1 to 3 who had filed the Company Petition collectively hold only 4.99% of the share capital and that the issuance of notice has serious repercussion upon the reputation of the appellant company since the proceedings under Section 245 of the Companies Act, 2013 has wide in-rem consequences and issuance of public notice has created a situation of panic amongst its public shareholders, potentially triggering of fall in the share price of....
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.... the loan in FY 2019. Contesting Respondents allege that this caused loss of INR 127.96 crores to Appellant and consequent proportionate loss to public shareholders. However, despite writing off the earlier loan, Appellant provided fresh loans of INR 150 crores and INR 260 crores to R-17/ Jindal Thermal in FY 2021 and FY 2022respectively. 4.1.3. IMPUGNED TRANSACTION 3: SALE OF INVESTMENT BY APPELLANT'S SUBSIDIARY: By FY 2017, Jindal Films - a wholly owned subsidiary of the Appellant - had acquired 11.41% equity stake in R-17/ Jindal Thermal for INR 31.18 crores. In FY 2021, this investment was sold to Champak Niketan - a company majorly owned by Gunjan Trust (a promoter group trust) for merely INR 6.93 crores. Contesting Respondents allege that this caused loss of INR 135.34 crores to Appellant and consequent proportionate loss to public shareholders. 3. The learned senior counsel for the appellant argued that Section 245 of the Companies Act, 2013 cannot be activated for past and concluded transactions as it uses the word "are being conducted" which means the act which warrant interference has to be in praesenti and is contrary to the language of Section 241 wherei....
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....ny other remedy as the Tribunal may deem fit. (2) Where the members or depositors seek any damages or compensation or demand any other suitable action from or against an audit firm, the liability shall be of the firm as well as of each partner who was involved in making any improper or misleading statement of particulars in the audit report or who acted in a fraudulent, unlawful or wrongful manner. (3) (i) The requisite number of members provided in sub-section 1) shall be as under:- (a) in the case of a company having a share capital, not less than one hundred members of the company or not less than such percentage of the total number of its members as may be prescribed, whichever is less, or any member or members holding not less than such percentage of the issued share capital of the company as may be prescribed, subject to the condition that the applicant or applicants has or have paid all calls and other sums due on his or their shares; (b) in the case of a company not having a share capital, not less than one-fifth of the total number of its members. (ii) The requisite number of depositors provided in sub-section (1) shall not be l....
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....ication for class action shall be defrayed by the company or any other person responsible for any oppressive act. (6) Any order passed by the Tribunal shall be binding on the company and all its members, depositors and auditor including audit firm or expert or consultant or advisor or any other person associated with the company. (7) Any company which fails to comply with an order passed by the Tribunal under this section shall be punishable with fine which shall not be less than five lakh rupees but which may extend to twenty-five lakh rupees and every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to three years and with fine which shall not be less than twenty-five thousand rupees but which may extend to one lakh rupees. (8) Where any application filed before the Tribunal is found to be frivolous or vexatious, it shall, for reasons to be recorded in writing, reject the application and make an order that the applicant shall pay to the opposite party such cost, not exceeding one lakh rupees, as may be specified in the order. (9) Nothing contained in this section shall apply to a banking....
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....xx...All that is required is shareholding of 2% of total share capital as per Rule 84(3)(ii)(b) of the NCLT Rules 2016 and a justifiable prima facie opinion which we observe there is. The Respondent are at liberty to refute each and every allegation on merits. 42. We refrain from giving an opinion on this issue at present, as we do not want to pre-judge the legal argument on the factual aspects. The Respondents may have a valid defence. For the purpose of prima-facie case to issue notice, we are of the opinion that the ingredients of Section 245 of the Companies Act, 2013 having been satisfied in this case, there is no necessity to go into various factual aspects of the case, as pleaded by the Respondents to come to a conclusion that there is no case under Section 245 of the Companies Act, 2013. This will amount to prejudging the issues. Thus it is argued the impugned order is passed only upon the threshold and upon opinion of 4.99% shareholders and nothing else. 8. The learned senior counsel for the appellant referred to the 57th Report of the Standing Committee of Finance to show that Ministry of Corporate Affairs had specifically rejected the proposal to include d....
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....the appellant and one M/s Jindal Power Limited, has stepped in to meet such short fall(s). 12. It was argued the appellant then wrote off all the RPS and OCPS in its books in the year 2018-19 for reasons of negative networth; of continuing cash loss of Jindal Power Tech Ltd i.e. Respondent No.16. It was alleged despite the negative networth and continued cash loss and contrary to the commercial prudence/wisdom the appellant continued infusing more money in Respondents No.16 and 17, during the financial years 2020-21 and 2021-22 and allegedly a loan of Rs. 106.50 crores was converted to RPS worth Rs.108.77 crores to be redeemed in the financial year 2021-22 and further a loan of Rs. 150 crores and Rs.260 crores was given by the appellant to Respondent No.17 for payment of debt to secured financial creditors of Respondent No.17 in the financial year 2021-22. 13. Thereafter on 29.05.2021 Jindal Power-Tech/Respondent No.16 had entered into OTS with IFCI for Rs.103 crores against the debt of Rs.428.32 crores and whereas M/s Jindal Thermal/Respondent No.17 signed Master Resolution Agreement for Rs.2541 crores against the debt of Rs.9431 crores, which resulted in benefit of the said....
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....orrectly the materiality threshold would have required a mandatory approval of majority of the minority shareholders before the General Body and thus thereby deliberately undervaluing it the directors of the appellant company in collusion with independent valuers had caused the minority public shareholders a grave loss and also purposefully violated law viz Rule 23 of SEBI (LODR) Regulations, 2015. The relevant portion of which is as under: - 23. Related party transactions. (1) to (3) ........... (4) All material related party transactions and subsequent material modifications as defined by the audit committee under sub-regulation (2)] shall require [prior] approval of the shareholders through resolution and [no related party shall vote to approve] such resolutions whether the entity is a related party to the particular transaction or not: [Provided that prior approval of the shareholders of a listed entity shall not be required for a related party transaction to which the listed subsidiary is a party but the listed entity is not a party, if regulation 23 and sub-regulation (2) of regulation 15 of these regulations are applicable to such....
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....show 4.99% of the shareholders were of the opinion that the affairs of the company are being conducted in the manner prejudicial to its interest and of its members. 20. Now in this appeal the distinction between derivative and class suit is sought to be argued in the context of maintainability of the Company Petition under Section 245 of the 2013 Act. Section 245 allows a class of members (which also includes the class of minority public shareholders, as in the present case to pursue such actions in relation to the management or the conduct of the affairs of the company which are prejudicial to the interests of the company or its members or depositors. A bare perusal of the aforesaid provision clearly demonstrates the Parliament did not intend to limit class action only to actions that affect the shareholders but to extend them to even actions affecting the company. Now Section 245 explicitly contemplates class action being filed for actions which are prejudicial to the interests of not only the members but also the company. Although the wording of Section 245(1) is very clear as to the Parliament's intent, the Appellant has sought to rely on response of the Ministry of Corp....
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....Section 245(1)(g)(iii) affords claims for damages or compensation or any suitable action 'from or against' any expert or advisor or consultant or any other person for any incorrect or misleading statement to the company or for any fraudulent, unlawful or wrongful act or conduct. Thus, under Section 245(1) of the 2013 Act, the Ld. NCLT has very wide powers and reliefs thereunder can be sought against third parties, including directors and promoters of the company. In any event, Section 245(1)(h), "to seek any other remedy as the Tribunal may deem fit", is a residuary provision taking within its ambit the matters which are not subsumed within other sub-clauses. The Hon'ble Supreme Court in CED vs. Kantilal Trikamlal, reported in (1976) 4 SCC 643, has held that when an expression is a residuary one, ejusdem generis would not apply. The reliefs sought in the Company Petition are also maintainable under Section 245 as it would not be proper for a shareholder to seek compensation from' the company when the company itself has been a victim of alleged fraud at the hands of the promoters and the directors - a situation clearly identified in the J.J. Irani Committee Report, culminati....
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....bove the materiality threshold warrants affirmative prior approval of the shareholders. Undisputedly, the sale of OCPS and RPS investments to SSJ Trust (Respondent No. 4& 5/Trustees of SSJ Trust) and Jindal Poly Investment (Respondent No.18) respectively was a related party transaction. Had the said transactions been undertaken at its actual value (which as per SEBI investigation was~ INR 800 crores and as per fair market value ~ INR 2500 crores), it would have required the prior approval of the shareholders. Allegedly the Appellant and other Respondents i.e., the promoters and directors have, so to say, made the impugned transactions stale' by their own conduct. Having allegedly concealed the transactions at the time of commission, the appellant and other Respondents i.e., the promoters and directors now cannot take benefit of their own wrongdoings. 24. In any event, at the time of institution of the Company Petition, the instruments i.e., OCPS and RPS sold to SSJ Trust and Jindal Poly Investment were yet to be converted and / or redeemed by the said entities. Hence, in terms of prayer 'a' of the petition, the Ld. NCLT could have passed such orders or directions dec....
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....appellant - which they could not have pursued in their own right. The impugned transactions have caused loss not only to the Respondent No. 1 - 3, but to the entire class of minority public shareholders. Further Rule 85 of the NCLT Rules states the NCLT 'may' look into additional grounds, the Ld. NCLT has in fact considered the said factors individually and rather set them out explicitly in. Para 44 of the impugned order is relevant in this context. 26. Prima facie the allegations are of illegal and systematic fraudulent acts perpetrated by JPFL, its promoters and directors and in undertaking the impugned transactions have caused significant loss to the entire class of minority public shareholders of JPFL, including Respondent No. 1 - 3. The investigation conducted by the market regulator SEBI and by the Directorate of Enforcement (ED) prima facie establish the 'management and conduct of the affairs of the company (Appellant / JPFL herein) are being conducted in a manner prejudicial to the interest of the company itself as well as its members'. 27. Nevertheless the impugned order also considered the factors mentioned in sub-section (1) and (4) of Section 245 in its paras ....
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....n his own right rather than through an order under Section 245. [Section 245 (4)(c)]: In para 41 of the impugned order, the Ld. NCLT noted that "Section 245 is a benevolent legislation to shareholders, depositors against the company and to the company for various reliefs stated therein and for other relief(s) past, present and future". It further held in the same para 41 that "the provisions of Section 245 enable Petitioners, stock holders to initiate proceedings for the benefit of the company also. Merely because there is another option available under Section 241- 242 that cannot dis-credit a case under 245 is met by the Petitioners". v. Consideration whether the act or omission is yet to occur or has already occurred where its likely to be ratified. [Section 245(e) and (f)]: In para 35, the Tribunal examines the issue whether Section 245 can be used for past, present and continuing actions and notes that these provisions can be used to remedy past, present and continuing actions and also notes that "the provisions of Section 245(h) provide for seeking any other remedy as the Tribunal may deem fit make its amplitude wide". vi. Whether the class....