An Analysis Of The Impact Of Class Actions On Corporate Governance

Tirth Rajpopat, OP Jindal Global Law School

Introduction

A class action lawsuit is a legal mechanism that allows a group of individuals with a similar grievance or a set of grievances against a company to come together and share legal representation. This approach reduces the time and cost associated with individual court cases. For those with limited resources or smaller claims, class actions are particularly important due to their potential for efficiency. In foreign jurisdictions like the USA, class actions have a long history and have even been used by workers to address issues such as discrimination and unfair treatment. However, pertaining to the context of this paper, it is important that we develop a basic understanding of class actions under Indian company law jurisdiction.

A shareholder or depositor may file a claim with the National Company Law Tribunal (NCLT) in accordance with Section 245 of the Companies Act of 2013, alleging that the management or conduct of any company other than banking companies is being conducted in a manner that is contrary to the interests of the company, its members, or depositors. Such a class action may involve lawsuits brought against the business, its directors, experts, consultants, or any other individual for any unlawful, dishonest, or wrongdoing behaviour. For any incorrect or deceptive representations made in the report of the auditor, as well as any misconduct or fraud by act or omission, against them, lawsuits may also be initiated.

This paper will examine how class actions affect corporate governance and how they might advance more openness, responsibility, and shareholder protection.