WHETHER SUPREME COURT OF INDIA IS AGAINST THE CORPORATE CLASS ACTION SUIT AS THE JINDAL POLY FILMS LTD MINORITY SHAREHOLDERS ALLEGE THAT THEY WERE SIDELINED BECAUSE SC REFERRED THE DISPUTE TO PRIVATE ARBITRATION?

WHETHER SUPREME COURT OF INDIA IS AGAINST THE CORPORATE CLASS ACTION SUIT AS THE JINDAL POLY FILMS LTD MINORITY SHAREHOLDERS ALLEGE THAT THEY WERE SIDELINED BECAUSE SC REFERRED THE DISPUTE TO PRIVATE ARBITRATION? 

REFERRING THE DISPUTE TO PRIVATE ARBITRATION

The Supreme Court has ended India’s first-ever corporate class action suit against Jindal Poly Films Ltd., referring the dispute to private arbitration after both sides consented. This move has sparked controversy, as minority shareholders allege they were sidelined, with nearly 40,000 investors losing a statutory remedy.

KEY FACTS ABOUT THE CASE

CASE ORIGIN:

Filed in March 2024 by minority shareholder Ankit Jain, alleging siphoning of ₹2,500 crore through undervalued related-party transactions.

NCLT & NCLAT ORDERS:

 Both tribunals admitted and upheld the class action under Section 245 of the Companies Act, 2013, marking India’s first admitted shareholder class action.

SUPREME COURT DECISION (JUNE 2026):

 Set aside NCLT/NCLAT orders and appointed Justice Manindra Mohan Shrivastava (Retd. Chief Justice) as sole arbitrator, with Delhi as the arbitration seat.

LEAD PETITIONER EXIT:

 Ankit Jain sold his stake in March 2026; Monet Securities substituted as petitioner in May and then consented to arbitration.

SHAREHOLDER CONCERNS

LACK OF CONSULTATION:

Minority investors claim 40,000 shareholders were not consulted before the case was diverted to arbitration.

ALLEGED STRATEGY:

 Critics argue Monet Securities’ substitution and immediate consent to arbitration may have been a pre-arranged strategy with Jindal Poly to defeat the class action.

INVESTOR PROTECTION DEBATE:

 Legal experts warn this sets a precedent where class actions can be privately settled, undermining statutory safeguards for retail investors

ROLE OF SEBI

INTERVENTION:

 SEBI filed an investigative report confirming ₹760 crore losses to public shareholders due to opaque related-party transactions and disclosure violations.

PENDING ACTION:

 Despite arbitration, SEBI continues pursuing regulatory proceedings, meaning the company may still face penalties or compliance directives.

RISKS & TRADE-OFFS

TRANSPARENCY LOSS:

Arbitration is private, reducing visibility for retail investors.

PRECEDENT RISK:

May discourage future shareholder activism under Section 245.

INVESTOR REMEDIES:

Shareholders may need to pursue individual claims or rely on SEBI’s enforcement.

CONCLUDING REMARKS

In short, while the Supreme Court’s referral to arbitration resolves the dispute procedurally, it raises serious questions about minority shareholder rights, transparency, and the future of class actions in India.

Investors should closely monitor SEBI’s ongoing proceedings, as that remains the only avenue for broader accountability.

# YOUR COMPLIANCE PARTNER R V SECKAR, FCS, LLB 79047 19295,

DESPITE SEBI’S EXPLOSIVE FRAUD ALLEGATIONS, INDEPENDENT DIRECTORS OF RAJESH EXPORTS HAVE NOT RESIGNED. ARE THEY “SUPPORT” THE PROMOTER’S STAND?

 DESPITE SEBI’S EXPLOSIVE FRAUD ALLEGATIONS, INDEPENDENT DIRECTORS OF RAJESH EXPORTS HAVE NOT RESIGNED. ARE THEY “SUPPORT” THE PROMOTER’S STAND?

IT MORE LIKELY REFLECTS THE COMPLEX DYNAMICS OF CORPORATE GOVERNANCE, REGULATORY UNCERTAINTY, AND THE DIRECTORS’ OWN LEGAL OBLIGATIONS.

RAJESH MEHTA OF RAJESH EXPORTS IS FACING ALLEGATIONS OF ₹15.15 LAKH CRORE REVENUE FRAUD, MISUSE OF FUNDS, AND MISREPRESENTATION OF ACCOUNTS.

LIC (WITH 10.8% STAKE) WILL HAVE TO PLAY A CRUCIAL ROLE IN PUSHING FOR GOVERNANCE REFORMS IN RAJESH EXPORTS?

PRESENT SCENARIO

SEBI Order (June 2026): Rajesh Exports and promoter Rajesh Mehta face allegations of ₹15.15 lakh crore revenue fraud, misuse of funds, and misrepresentation of accounts. SEBI has barred the promoter from accessing the securities market pending further investigation.

INDEPENDENT DIRECTORS:

As of now, none of the independent directors have resigned en masse. However, there have been individual cessations in past years (e.g., Vijayalakshmi in 2024).

SHAREHOLDER PUSHBACK:

 In 2025, shareholders rejected the reappointment of Asha Mehta as an independent director, showing that investors are already skeptical of governance practices.

WHY INDEPENDENT DIRECTORS OF RAJESH EXPORTS  HAVN’T RESIGNED?

LEGAL DUTY VS. OPTICS:

Independent directors are bound by fiduciary duties. Resigning immediately could be seen as shirking responsibility when regulators expect them to cooperate in investigations.

REGULATORY PRESSURE:

 SEBI often requires independent directors to remain in place to ensure continuity and accountability during probes.

REPUTATION RISK:

 Resignation could be interpreted as an admission of complicity or failure to oversee, which may expose them to liability.

PROMOTER INFLUENCE:

 In promoter-driven companies like Rajesh Exports, independent directors may have limited autonomy, making resignation politically or professionally difficult.

DOES NON-RESIGNATION MEAN TO SUPPORT TO RAJESH EXPORTS ?

Not necessarily.

·       Staying on the board does not automatically mean they endorse the promoter’s position. It may simply reflect:

·       A wait-and-watch approach until SEBI’s final order.

·       Desire to protect themselves legally by showing they are cooperating.

·       Pressure from promoters or institutional investors to maintain stability.

INVESTOR TAKEAWAY

·       Do not assume silence = support. Independent directors may be constrained by law, optics, or promoter influence.

·       Watch SEBI’s next steps. If the regulator strengthens charges, directors may be forced to resign or face liability.

·       Institutional investors (like LIC with 10.8% stake) will play a crucial role in pushing for governance reforms.

FINAL THOUGHT

The lack of resignations   by Independent Director of Rajesh Exports is less about endorsement of the promoter’s stand and more about the legal, regulatory, and reputational complexities of corporate governance in India.

# YOUR COMPLIANCE PARTNER R V SECKAR, FCS, LLB 79047 19295,

ROC BENGALURU IMPOSED PENALTY ON TACTILE EDUCATION SERVICES PRIVATE LIMITED FOR CONVERSION OF LOAN INTO EQUITY WITHOUT PASSING SPECIAL RESOLUTION AND THE ALLOTMENT WAS INCORRECTLY REPORTED AS A RIGHTS ISSUE UNDER SECTION 62(1)(A).

ROC BENGALURU IMPOSED PENALTY ON TACTILE EDUCATION SERVICES PRIVATE LIMITED FOR CONVERSION OF LOAN INTO EQUITY WITHOUT PASSING SPECIAL RESOLUTION AND THE ALLOTMENT WAS INCORRECTLY REPORTED AS A RIGHTS ISSUE UNDER SECTION 62(1)(A).

ROC , BENGALURU VS ON TACTILE EDUCATION SERVICES PRIVATE LIMITED

FACTS OF THE CASE

CONVERSION OF LOAN INTO EQUITY WITHOUT PASSING SPECIAL RESOLUTION AND THE ALLOTMENT WAS INCORRECTLY REPORTED AS A RIGHTS ISSUE UNDER SECTION 62(1)(A) WHEREAS IT SHOULD HAVE BEEN TREATED AS A PREFERENTIAL ALLOTMENT UNDER SECTION 62(1)(C) INVOLVING CONSIDERATION OTHER THAN CASH.

VIOLATION:

·       Converted loans from shareholders/directors into equity shares without prior approval via special resolution under Section 62(3).

·       Incorrectly reported the allotment as a rights issue under Section 62(1)(a) instead of a preferential allotment under Section 62(1)(c).

·       This triggered non-compliance with Section 42 (private placement provisions).

REDUCED PENALTY DUE TO START UP

•       ₹2 lakh on the company.

•       ₹1 lakh each on directors Ravi Rangan Srinivasa, Aragudige Prabhakara Raghu, and Rajani Rangan.

•       Reduced penalties applied under Section 446B (benefits for start-ups).

RISKS & COMPLIANCE LESSONS

·       Misclassification of allotment (rights issue vs. preferential allotment) can lead to serious penalties.

·       Special resolution is mandatory before converting loans into equity.

·       Private placement rules under Section 42 must be strictly followed, including filing Form PAS-3 within 15 days.

·       Start-ups may receive reduced penalties under Section 446B, but violations still attract fines and reputational risk.

KEY TAKEAWAYS

·       Always pass a special resolution before converting loans into equity.

·       Ensure allotments are correctly categorized (rights issue vs. preferential allotment).

·       File PAS-3 on time to avoid additional penalties.

·       Seek legal and compliance review before restructuring capital.

·       Start-ups should leverage Section 446B relief, but not rely on it as a safeguard against non-compliance.

# YOUR COMPLIANCE PARTNER R V SECKAR, FCS, LLB 79047 19295,

REMOVAL OF AN INDEPENDENT DIRECTOR FOR NOT ATTENDING BOARD MEETING IN THE LAST 12 MONTHS BY A LISTED COMPANY NAMELY GTT DATA SOLUTIONS LIMITED UNDER SECTION 167(1)(B) OF THE COMPANIES ACT, 2013

 REMOVAL OF AN INDEPENDENT DIRECTOR FOR NOT ATTENDING BOARD MEETING IN THE LAST 12 MONTHS BY A LISTED COMPANY NAMELY GTT DATA SOLUTIONS LIMITED UNDER SECTION 167(1)(B) OF THE COMPANIES ACT, 2013

FACTS OF THE CASE

Mr. Samarjeetsinh Vikramsinh Ghatge (Independent Director) of GTT Data Solutions Limited was removed under Section 167(1)(b) of the Companies Act, 2013 because he failed to attend any board meetings for 12 consecutive months. His office was vacated automatically on 14 August 2025, and the company later disclosed this to the stock exchange in June 2026.

LEGAL BASIS FOR REMOVAL

SECTION 167(1)(B), COMPANIES ACT, 2013:

A director automatically vacates office if they are absent from all board meetings held during a continuous period of 12 months, regardless of whether leave of absence was sought.

This provision ensures that directors remain actively engaged in governance and prevents inactive directors from continuing in office.

DISCLOSURE DELAY:

 The company identified the lapse only after receiving its Annual Secretarial Compliance Report (ASCR) on 30 May 2026.

REGULATORY COMPLIANCE:

Disclosure was filed with BSE Limited on 2 June 2026 under Regulation 30 of SEBI (LODR) Regulations, 2015

KEY CONSIDERATIONS FOR LISTED COMPANIES

AUTOMATIC VACATION VS. REMOVAL:

Vacation under Section 167(1)(b) is automatic and does not require shareholder approval.

Removal under Section 169 requires a shareholder resolution.

COMPLIANCE OBLIGATIONS:

Listed companies must promptly disclose director cessations to stock exchanges under SEBI (LODR) Regulations.

RISK OF MISUSE:

 Courts have cautioned that improper notice of board meetings can make such vacation invalid. Companies must ensure proper documentation of meeting notices and attendance

BUT ROC MAY NOT APPROVE THE FORM DIR-12 AND ASK YOU TO RESUBMIT WITH THE FOLLOWING DOCUMENTS

·      Minutes of all Board Meetings during the relevant period

·      Board Meeting Attendance Register

     AFFIDAVIT CONFIRMING:

• The director had not attended meetings for 12 months

• Meeting notices were properly issued

• No litigation existed regarding the cessation

• The company was regular in MCA filings

COMPLIANCE WITH SECTIONS 167 AND 164

·      The ROC also gave the concerned director an opportunity to submit objections.

·      If no response was received, the DIR-12 was eventually approved.

CASE LAWS ON THE SUBJECT

Union of India v. R. Gandhi (Madras High Court, 2015)	The court emphasized that vacation of office under Section 167 is automatic and does not require a board resolution.
M.K. Srinivasan v. Registrar of Companies (NCLT, 2017)	The NCLT held that once a director fails to attend all meetings for 12 months, the company must file DIR‑12 with the ROC. •      The tribunal rejected arguments that leave of absence could protect the director, affirming that leave is irrelevant under Section 167(1)(b).

 

KEY LESSON LEARNED

Even though the law provides automatic vacation of office, the ROC may require strong documentary proof before approving DIR-12.

Proper corporate records are therefore critical.

RISKS & GOVERNANCE IMPLICATIONS

Delayed disclosure can attract regulatory scrutiny and penalties.

BOARD EFFECTIVENESS:

 Prolonged absence of directors undermines governance and decision-making.

INVESTOR CONFIDENCE:

 Transparency in reporting director cessations is critical for maintaining trust in listed companies.

# YOUR COMPLIANCE PARTNER R V SECKAR, FCS, LLB 79047 19295,

LACK OF “SIGNIFICANT ACCOUNTING TRANSACTIONS” FOR 3 YEARS IN A ROW WILL BE A NEW GROUND FOR DEACTIVATION OF COMPANIES BY MCA

 LACK OF “SIGNIFICANT ACCOUNTING TRANSACTIONS” FOR 3 YEARS IN A ROW WILL BE A NEW GROUND FOR DEACTIVATION OF COMPANIES BY MCA

MCA IS SET TO WIDEN THE GROUNDS ON WHICH A COMPANY COULD BE STRICKEN OFF FROM THE OFFICIAL REGISTER THROUGH THE CORPORATE LAWS (AMENDMENT) BILL, 2026.

INACTIVE COMPANIES- NEW DEFINITION

The proposed rules would consider a company inactive if it doesn't undertake meaningful commercial or financial activity beyond just fulfilling basic compliance obligations.

SHELL COMPANIES

Indian corporates may soon find it more difficult to float shell companies or maintain existing incorporated structures that serve little purpose other than tax evasion, money laundering or hiding ownership.

NEW STRIKE-OFF GROUND:

If a company has no significant accounting transactions for 3 years in a row, it can be struck off by the Registrar of Companies (ROC).

This is aimed at curbing “shell companies” that exist only on paper without genuine business activity.

The proposal in the Bill that seeks to amend Section 248(1)(c) of the Companies Act, 2013 could bring inactive and shell entities under greater scrutiny.

It seems that the concern of the government is to make sure that such inactive companies should not be used to create proxy ownership structures, avoid taxes, or conceal beneficial ownership

THE CORPORATE LAWS (AMENDMENT) BILL, 2026

The Corporate Laws (Amendment) Bill, 2026 would inter alia seek to empower the Registrar of Companies to dissolve a company if it hasn’t conducted any “significant accounting transactions” for three years.

DEFINITION OF SIGNIFICANT ACCOUNTING TRANSACTION:

·       Includes transactions like payment of statutory dues, allotment of shares, or business-related financial activity.

·       Routine compliance filings alone may not qualify as “significant.”

MANDATORY DORMANT STATUS:

Inactive companies may be required to shift to dormant status before eventual strike-off, ensuring transparency in records.

OTHER MAJOR AMENDMENTS IN THE CORPORATE LAWS (AMENDMENT) BILL, 2026

DIRECTOR IDENTIFICATION NUMBER (DIN) DEACTIVATION:

MCA can deactivate DINs if directors fail to verify their particulars, automatically vacating their positions across all companies.

“FIT AND PROPER” CRITERIA:

 Expanded disqualification rules for directors, auditors, and insolvency professionals.

DECRIMINALIZATION OF MINOR OFFENCES:

 Over 20 offences shifted to monetary penalties instead of criminal liability.

RESTORATION POWERS:

Transferred from NCLT to Regional Directors to speed up reinstatement of struck-off companies.

IMPLICATIONS FOR COMPANIES

·       Companies must ensure at least one significant transaction annually to avoid being flagged as inactive.

·       Startups in incubation or firms waiting for funding may need to maintain minimal activity to avoid strike-off.

SUMMARY:

The MCA’s 2026 Bill is tightening rules to eliminate inactive or shell companies. Companies with no significant transactions for three years will face risk being struck off, making proactive compliance and minimal activity essential for survival.

# YOUR COMPLIANCE PARTNER R V SECKAR, FCS, LLB 79047 19295,

SEBI SUMMONED ANAND DAS, COMPANY SECRETARY OF INDUSIND BANK, IN MAY 2026 FOR SEBI PIT VIOLATION, MISSING SDD ENTRIES, UPSI RECORD TAMPERING -HEAVY PENALTY LIKELY TO BE IMPOSED

 SEBI SUMMONED ANAND DAS, COMPANY SECRETARY OF INDUSIND BANK, IN MAY 2026 FOR SEBI PIT VIOLATION, MISSING SDD ENTRIES, UPSI RECORD TAMPERING -HEAVY PENALTY LIKELY TO BE IMPOSED

BACKGROUND

ANAND DAS, COMPANY SECRETARY OF INDUSIND BANK,has recently been summoned and investigated by SEBI for alleged violations under the Prohibition of Insider Trading (PIT) Regulations, including missing entries in the Structured Digital Database (SDD), tampering of unpublished price-sensitive information (UPSI) records, and facing heavy penalties.

 This highlights SEBI’s increasing crackdown on compliance failures in corporate governance.

REASONS FOR SEBI’S ACTION

MISSING SDD ENTRIES

Under Regulation 3(5) & 3(6) of PIT Regulations, companies must maintain a Structured Digital Database (SDD) capturing all UPSI events with date, time, and audit trails.

Failure to record even a single UPSI event is treated as a serious compliance lapse.

UPSI RECORD TAMPERING

SEBI requires the database to be non-tamperable and preserved for at least 8 years.

Any manipulation or deletion of UPSI records is considered evidence of misconduct.

HEAVY PENALTIES

SEBI can impose monetary fines, market bans, and even criminal prosecution under Section 15G of the SEBI Act.

 

In past cases, senior officials have been barred from the securities market for insider trading violations.

INDUSIND BANK CASE

SEBI summoned Anand Das, Company Secretary of IndusInd Bank, in May 2026.

Allegations: A zonal head traded shares of client companies while in possession of UPSI.

SEBI investigated how the secretarial and compliance departments handled whistleblower complaints and UPSI records.

COMPLIANCE REQUIREMENTS FOR COMPANY SECRETARIES

·       Maintain SDD with strict access controls.

·       Capture all UPSI events (nature, date, time).

·       Ensure audit trails are intact and tamper-proof.

·       Certify quarterly compliance to SEBI.

RISKS & PENALTIES

VIOLATION	POSSIBLE SEBI ACTION
MISSING SDD ENTRIES	Monetary penalty, compliance warning
UPSI TAMPERING	Criminal liability, market ban
INSIDER TRADING	Prosecution, imprisonment, fines
NON-COOPERATION IN PROBE	Suspension of company secretary license

ACTIONABLE TAKEAWAYS

FOR COMPANIES:

·       Conduct regular internal audits of SDD.

·       Train compliance staff on PIT regulations.

·       Implement whistleblower mechanisms to detect violations early.

FOR COMPANY SECRETARIES:

·       Ensure personal accountability in certifying compliance.

·       Avoid shortcuts in UPSI documentation.

·       Cooperate fully with SEBI investigations to mitigate penalties.

# YOUR COMPLIANCE PARTNER R V SECKAR, FCS, LLB 79047 19295,

THE ENFORCEMENT DIRECTORATE (ED) RAIDED VEDANTA LIMITED FOR THE BRAND FEE REFUND VIOLATION UNDER FEMA AS IT AMOUNT TO PROFIT SHIFTING AS BRAND FEES AND DIVIDENDS FROM VEDANTA INDIA COULD COVER $800 MILLION–$1 BILLION OF THE PARENT’S DEBT BETWEEN FY26–FY29.

 THE ENFORCEMENT DIRECTORATE (ED) RAIDED VEDANTA LIMITED FOR THE BRAND FEE REFUND VIOLATION UNDER FEMA AS IT AMOUNT TO PROFIT SHIFTING AS BRAND FEES AND DIVIDENDS FROM VEDANTA INDIA COULD COVER $800 MILLION–$1 BILLION OF THE PARENT’S DEBT BETWEEN FY26–FY29.

FACTS OF TRE CASE

The Enforcement Directorate (ED) recently raided four offices of Vedanta Limited in Delhi, Mumbai, and Udaipur over alleged violations of the Foreign Exchange Management Act (FEMA), focusing on brand fee and royalty payments to its UK-based parent company, Vedanta Resources. The probe includes scrutiny of a 2023 brand fee refund transaction and whether such payments amount to profit shifting. Alleged FEMA violations linked to brand fee and royalty payments made by Vedanta Ltd. to Vedanta Resources (UK).

WHAT IS BRAND FEE REFUND VIOLATIONS UNDER FEMA ?

A brand fee paid by an Indian entity to an overseas holding company is typically classified as Royalty for the use of intellectual property (IP), trademarks, or brand names. Such remittances can be made through the automatic route without prior ⁠Reserve Bank of India clearance, provided the payment is at arm's length and complies with ⁠Foreign Exchange Management Act (FEMA) regulations.

WHY "PROFIT SHIFTING" IS BEING DEBATED ?

In transfer-pricing and foreign-exchange compliance discussions, regulators often examine whether:

Excessive brand fees, royalties, or management fees were paid to an overseas parent company.

Such payments reduced taxable profits in India.

Funds were effectively transferred abroad without adequate commercial justification.

If a regulator concludes that a royalty or brand fee was significantly higher than an arm's-length amount, it may view the arrangement as a form of profit shifting. However, as of now, the ED has not publicly established that Vedanta engaged in illegal profit shifting; the matter remains under investigation.

FINANCIAL CONTEXT

Vedanta Resources (UK parent) holds ₹53,400 crore debt and relies heavily on dividends and royalties from Vedanta India for servicing this debt.

Rating agencies estimate that brand fees and dividends from Vedanta India could cover $800 million–$1 billion of the parent’s debt between FY26–FY29.

Regulators suspect excessive royalty payments may amount to profit shifting and potential tax evasion.

MARKET IMPACT

Vedanta’s shares fell over 4% to ₹313.50 following news of the raids.

The company is also in the middle of a major demerger, planning to split into four listed entities:

RISKS & IMPLICATIONS

REGULATORY RISK:

If ED finds violations, Vedanta could face financial penalties or restrictions on overseas remittances.

INVESTOR SENTIMENT:

Stock volatility may continue until clarity emerges.

CORPORATE GOVERNANCE:

The case highlights scrutiny of intra-group financial arrangements and cross-border brand fee structures.

CONCLUDING REMARKS

The ED raids on Vedanta Limited are part of a FEMA probe into brand fee and royalty transactions with its UK parent. While no penalties have been imposed yet, the investigation raises concern about profit shifting and compliance with foreign exchange rules. Investors should watch for regulatory updates and the impact on Vedanta’s ongoing demerger.

However, it would be premature to state as a confirmed fact that Vedanta committed profit shifting or violated FEMA until the investigation reaches a formal conclusion.

# YOUR COMPLIANCE PARTNER R V SECKAR, FCS, LLB 79047 19295,