A Socio-Legal Inquiry Into The Dormancy Of Class Action Suits Under The Companies Act, 2013
- IJLLR Journal
- 22 minutes ago
- 2 min read
Laasya Priya Venkatesan, Sastra Deemed University
Introduction
The corporate landscape in India underwent a major transformation with the enactment of the Companies Act, 2013. The Act sought to align Indian corporate law with the global standards while simultaneously fortifying investors’ protection mechanisms. Among the Act’s most progressive innovations was the introduction of class action suits under section 245 and 246, making a milestone moment in the evolution of shareholder democracy and depositor rights in India. After getting inspired by the recommendations of the J.J. Irani Committee and catalyzed by corporate scandals like the infamous Satyam Scandal- which exposed the vulnerability of the minority shareholders in the absence of collective redressal mechanisms- this act and these provisions were framed and designed to empower the aggrieved shareholders to seek remedies against corporate wrongdoing through unified legal action. This is where class action suits come into picture.
Chapter 1- Legislative Genesis of Class Action Suits in India
The institution of class action suits is an essential component of contemporary legal systems that ensures the protection of rights of large numbers of people. It provides a common forum for individuals with the same grievances to file their claims. In India, given its multiplicity of the population, the necessity of such collective solutions has gained much prominence as a result of increased commercial dealings, corporate investments, and consumer transactions. The Indian judiciary earlier used to rely mostly on individual remedies, where the affected party had to seek litigation individually. This mostly resulted in access barriers on account of prohibitive costs, complex procedures, and scarce resources.
Against this backdrop, the introduction of class actions represents a major paradigm shift in Indian law. Statutes now permit groups like shareholders, depositors, and consumers to seek recourse in court collectively. This shift has been enormously motivated by the demand to promote corporate responsibility, safeguard consumers' and small investors' interests, and facilitate the mechanism to respond to mass harm. The legislative path—from the initial concepts of representative actions in the Code of Civil Procedure to the present-day frameworks detailed in the Companies Act, 2013 and the Consumer Protection Act, 2019— mirrors India's changing approach towards justice and regulation in an integrated economy.
