AN ANALYSIS OF CLASS ACTION SUITS IN INDIA
Author: Ishika Soni, II Year of B.B.A.,LL.B from Narsee Monjee Institute of Management Studies, Hyderabad.
“Class action lawsuits first appeared in the United States in 1842, when Equity Rule 48 granted citizens the ability to file such claims. It was later changed in 1966, giving birth to Rule 23 of the Federal Rules of Civil Procedure, which has molded American class action jurisprudence.”
When a significant number of persons experience the same or comparable type of injury, a class action lawsuit is often launched. A class action permits participants to band together and pool their claims, and expert evidence and class action lawsuit assist the plaintiff in obtaining costs that may or may not be proportionate to the magnitude of the harm. A class-action lawsuit proceeds to demonstrate or engage in unlawful behavior. A class-action lawsuit goes on to prove that certain methods or actions of a single individual or organization, or a class of defendants, were illegal and caused unjustified legal harm, and that compensation is thus owed. These lawsuits ensure that there is still a sense of fairness.
The essential provisions-
There must be a large number of people who have the same interest.' The 'Explanation' for the relevant section states that they do not have to have the same cause of action. According to a Supreme Court decision, 'either the interest must be mutual or they must have a joint grievance that they want to have redressed.'
A declaration of a suit as a representative suit requires court authority, which can be obtained by either the plaintiff or the person defending the complaint.
In addition to the basic requirements, “the CPC has additional provisions for collective actions involving public nuisance or other unlawful activities affecting or expected to impact the public, regardless of whether any special loss has been caused to the individual initiating the action”.
In the case of charitable or religious trusts, however, a representative action may be brought by "only a person who has an interest in the trust." In either situation, a court order is necessary.”
CLASS ACTION IN INDIA
“A class action, also known as a class suit or a representative action, is a type of litigation in which a large number of persons collectively file a claim in court and/or a group of defendants are sued”.
“This is a new clause included in the ‘Companies Act of 2013’, for example, allows for class-action lawsuits, which allow a large number of persons with a shared interest in a topic to sue or be sued as a group”. These requirements are included in “Sections 245 and 246 of the Act”. Investors may file class-action lawsuits under certain clauses if they feel that the company's activities are being handled in a way that is damaging to the firm's, its shareholders, or the public's interests.
WHY CLASS ACTION IS IMPORTANT
“In most cases, you can only file a lawsuit or pursue action if you have locus standi. Locus standi refers to your legal right to file a lawsuit in court”.
Assume you and I had an accident and you occasionally say anything defamatory about me publicly. I now have a legal entitlement towards you, and I may demand reparation in court.
That is, nevertheless, my right. Assume Anshika was there, witnessing to the entire slanderous remark. Can he proceed with an action against you? Most certainly not. He has no locus here, despite the fact that a cause of action exists.
“As a result, one individual cannot generally launch a case on behalf of others. However, class actions are an exception to this rule”.
When it concerns to class action lawsuits, we can't possibly expect each individual to file a separate trial when a group of individuals is damaged. That is not a plausible scenario. If it is required, the system will be cumbersome, and so many victims will be treated unjustly because they do not have the financial means to attend court. “As a result, the Act authorizes a self-appointed spokesperson to file a lawsuit against the accused on account of the whole class”.
“In India, good instances of such class actions may be found in consumer law and corporate law. A provision for representative litigation is also included in the Civil Procedure Code”.
Class actions may be a significant tool for ensuring that the people of India have access to justice. It has developed as a preferred process for resolving problems that impact a large number of people in nations such as the United States.
If you're excited about what class action may achieve in India, you'll have to wait a little longer since such a class action mechanism has yet to be implemented in any substantial manner in India.
It's not as if the United States hasn't experienced enough scenarios that necessitate the commencement of elite class lawsuits. However, due to exorbitant costs, no one prefers to fight through a class action. There are some glitches in the system.
WHAT TYPE OF CLASS ACTION ARE ALLOWED IN INDIA
THE 2013 COMPANIES ACT
“The Satyam debacle, widely regarded as India's Enron moment, demonstrated that under Indian law, shareholders in India did not have access to class action litigation”. The Indian shareholders had no recourse under Indian law, whereas the American investors filed a class action and were awarded a large settlement. As a result, modifications were in the works.
“Section 245, which was notified on June 1, 2016, and the now amended National Company Law Tribunal ("NCLT") Rules of 2016 address class action lawsuits extensively”.
Of course, these proceedings can be filed with “NCLT under Section 245”. This allows members and depositors to file proceedings against the company, directors, auditors, or advisors if it damages the company's interests.
“The threshold was defined only in 2019, 100 members or members with at least 5% stake can be billed as a class”.
“Section 245” is an extensive reading outlining the procedure and available remedies. "Corporate profit" can include many things, and the judge's interpretation in these cases ultimately defines what can be included in that definition.
Interestingly, Section 245 does not extend to banking companies.
CODE OF CIVIL PROCEDURE, 1908
“Rule 8 of Order I, CPC stipulates typical behavior. It states that a group of people can make a claim if they have a common dissatisfaction or interest”.
A proceeding may be filed on behalf of multiple persons who have a common interest in the proceedings. Except for common interests or similar complaints, they should seek similar promotions. These suits are treated like any other suit. Their use is limited due to the various situations described later in this article.
CONSUMER PROTECTION ACT, 1986
According to the “Consumer Protection Act of 1986”, any consumer may file a complaint on behalf of all interested consumers with the Consumer Dispute Redressal Commission.
This law's "Section 12" permits customers, a voluntary consumer group, and one or more consumers who have a common interest to band together. The complaint must be to products or services valued at more than INR 1 crore.
India has now overhauled its entire consumer law. “The Consumer Protection Act of 2019 recently went into effect. Section 17 of the 2019 Act states that the Central Consumer Protection Authority now has the authority to file class-action lawsuits on behalf of consumers”.
The Central Consumer Protection Authority would undertake a preliminary subjective inquiry before commencing a class action. This is in contrast to the earlier approach, in which customers may join together and file complaints with the consumer court.
COMPETITION ACT OF 2002
“Under the country's competition legislation, a group of persons can sue over the negative consequences on the market. Consider a trade organization that believes there is a negative effect or that a player is in a strong position and decides to go to court. This has the potential to be a powerful tool”. Under this law, for example, food merchants or restaurants can band together to sue Zomato or Swiggy for unfair pricing.
“Section 53 of the Competition Act allows a group of individuals who have been harmed as a result of a violation of the law to submit an application with the National Company Law Appellate Tribunal (which now handles competition matters on an appellate level) and seek redress”.
As you can see, we have procedures in place to begin pursuing class-action assertion in India, regardless of the fact that the budgetary part is jumbled, rendering class action cases financially unviable.
This may change if TPF becomes widely used in India.
Many circumstances with plausible claims may be handled in a class-action lawsuit as well as provide ordinary folk with justice, but the establishment of jurisprudence underlying it is crucial. To effect change, the courts and government must be more sensitive to the financial concerns raised by TPF and class action cases.
Furthermore, class lawsuits are essential for imposing corporate governance in the system, increasing stakeholder trust, and assisting in efficiently managing internal politics in a typical promoter-run firm. Class action lawsuits should be prioritized as India seeks for economic success in the next years in order to establish that India Inc. can equal and maintain global corporate governance rules.
Aside from that, regardless of the fact that overseas investors have been retreating post-COVID, Indian investors have kept the stock market afloat. If we do not provide them legal representation when large corporations commit misconduct, we will destroy their faith in India's economy and deceive our own people while foreign investors sue those corporations in their own courts in a class action.
Furthermore, US attorneys must be engaged in this sector of work since it has the potential to deliver considerable advantages in the future and add a new dimension to the practice of law and equal protection under the law in India.