Will Infosys face class action law suits in India?

Section 245 of the Companies Act provides such an option

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The Infosys episode seemed to have opened a Pandora’s box. With Mr. Vishal Sikka, who quit as CEO and co-founder N.R. Narayana Murthy — going to town virtually with their blame games, stakeholders have moved swiftly to position their strategies. Indications are Infosys may face a class action suit from U.S. investors. Indian law also permits similar action.

A class action suit allows a number of claimants, who have a common grouse, to pool their resources and file a suit against a company. Such option for company law cases is a well-established principle in foreign jurisdictions, especially in the U.S. The Satyam episode forced company law formulators to incorporate a rule providing for such action in India. Section 245 of the Companies Act, 2013 provides for such an option for Indian investors. Such a suit can be filed before the National Company Law Tribunal (NCLT). Sec. 245 also gives the option to claim damages or compensation or demand any other suitable action against “the company or its directors for any fraudulent, unlawful or wrongful act or omission or conduct or any likely act or omission or conduct on its or their part.”

Public notice

One can sue the firm, its directors, auditors and technical advisers who are party to alleged fraud.

Once the suit is admitted, NCLT will issue a public notice to allow those not having enough qualifying shares to join. Similar applications in other jurisdictions will be consolidated into a single application.