Mint Explaner: Why are class actions on the rise in India?

Earlier this year, minority shareholders of Jindal Poly Films filed India’s first class action lawsuit against the company’s promoters, alleging fraud. Ola Electric is now facing the possibility of a class action lawsuit after the Central Consumer Protection Authority (CCPA) issued a show-cause notice, alleging violation of consumer rights and misleading advertising.

Mint Explains what a class action lawsuit is and why it is increasing in India.

What is a class action lawsuit?

A class action lawsuit is a legal mechanism that allows a group of people with a common grievance to bring a single case against one party, rather than filing separate lawsuits. It can be used to reverse illegal activity, stop harmful decisions, or claim damages, among other things.

In India, class actions in corporate governance were formally introduced in 2013 through Section 245 of the Companies Act. These cases are decided by the National Company Law Tribunal (NCLT).

Why is Ola Electric facing the possibility of a class action lawsuit?

Last week, the Central Consumer Protection Authority (CCPA) issued show-cause notices to Ola Electric after receiving nearly 10,000 consumer complaints through the national consumer helpline between September 2023 and August 2024. The complaints cover a range of issues, including late deliveries, product defects and more. vehicles, misleading advertising and inadequate customer service.

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The CCPA accused Ola of violating the Consumer Protection Act, 2019. If the company fails to adequately address these issues, it may face further consequences, including class action lawsuits. Ola Electric has 15 days to respond to the CCPA notice.

What is the Jindal Pauly case?

In March 2024, minority shareholders of Jindal Poly Films filed a class-action lawsuit against the company, accusing it of “oppression and mismanagement.” The case revolves around the sale of Optional Convertible Preference Shares (OCPS) and Redeemable Preference Shares (RPS) to the promoter entity, SSJ Trust, at an undervalued price, which allegedly resulted in $The company suffered a loss of Rs 2,268 crore. Shareholders have asked NCLT to quash the deal and order the company to compensate them. The case is currently pending.

Where else can a class action lawsuit be filed?

Class action clauses were first introduced in India under the Code of Civil Procedure, 1908. The Consumer Protection Act 2019 also allows consumers to lodge complaints collectively, and the Competition Act 2002 and the Insolvency Act 2016 provide additional avenues for class actions. justice.

Why are such lawsuits increasing in India?

The rise in class actions in India can largely be attributed to technological advancements and increased access to information, as well as growing consumer and shareholder awareness. As individuals become more aware of their rights, they are increasingly using such tools to hold companies accountable for their actions.

Senior Supreme Court lawyer and former Solicitor General Sanjay Jain explained: “With the rise of the internet and social media, Indians are more aware of global trends and their rights as consumers. This increased awareness It also prompts the government to actively protect citizens’ rights, especially in the areas of corporate mismanagement and consumer protection.”

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Despite the success of class actions in countries such as the United States, their use was largely absent in India until recently. “While the Consumer Protection Act allows such cases, they have remained underutilized for decades,” Jain said. “It was not until 2015 that the Indian government filed its first class action lawsuit, marking a turning point in corporate responsibility.”

Additionally, companies’ collection and use of vast amounts of personal data has expanded the scope of class action lawsuits in the digital age. Akshat Pande, managing partner at Alpha Partners, said: “The collection and use of large amounts of personal data by companies creates the risk of privacy breaches or misuse, potentially affecting many individuals simultaneously.”

Will the Ola Electric and Jindal Poly Films case set a precedent?

Yes, they can. “The outcome of the Ola Electric case, for example, could impact how courts approach class actions in the tech industry, particularly those involving marketing claims and consumer protection,” Akshat Pande said.

“This trend shows that government agencies and consumers themselves are becoming more proactive in holding companies accountable. Consumers, in particular, are no longer willing to accept management decisions that harm their economic interests,” Jain said.

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Experts say class action litigation in India, while still evolving, is a powerful tool to protect the rights of shareholders, consumers and savers. As the number of class action lawsuits continues to increase, they are expected to play an increasingly important role in ensuring corporate liability and strengthening antitrust laws in India.