NEW DELHI: The National Company Law Tribunal (NCLT) has ordered Entertainment City to document a 4.26% equity transfer to Parmesh Construction Company, a Bhutani Infra Group entity, overruling objections from joint venture partner Unitech Holding concerning alleged violations of shareholder agreements.
Parmesh Construction Company Ltd (PCCL) purchased a 3.70% stake from IIRF Holdings V Ltd and a 0.56% stake from Vistra ITCL (India) Ltd.
Unitech Holding Ltd (UHL) opposed the sale, arguing it breached their Right of First Refusal (RoFR) and lacked the necessary 30-day notice under the relevant Articles of Association and Shareholders Agreement.
The two-member NCLT bench ruled that the transfer remained valid despite the incompletion of the broader disinvestment of the company’s entire equity capital.
It established that the share transfer from the minority investors to PCCL was legitimate and mandated that Entertainment City Limited (ECL) officially record the transfer in its Member Register for PCCL.
“The Respondent No 1 (ECL) shall register the shares transferred by Respondent Nos 5 and 6 (minority shareholders) to the Appellant (PCCL), respecting the communications from Respondent Nos 5 and 6 to the Respondent No 1’s Board,” stated the NCLT bench.
The NCLT’s directive followed two conflicting petitions—one from PCCL aiming for registration as a shareholder of ECL, and another from UHL seeking to annul the share transfer in their favor.
ECL manages shopping malls and amusement parks, including “The Great India Place” and “Worlds of Wonder,” covering 147 acres in Noida, and is a joint venture between UHL and International Amusement Ltd (IAL), with UHL holding a 41.95% stake and IAL 53.15%.
On January 20, 2020, the Supreme Court overhauled Unitech’s Board, instructing the government to establish a new seven-member Board and imposing a moratorium on legal proceedings against Unitech and its subsidiaries, while the new Board was tasked with developing a resolution framework.
The Supreme Court later expanded the new management’s authorities to oversee and manage the entire Unitech Group, including all affiliates and subsidiaries, granting them the power to appoint or dismiss directors and trustees across entities.
Following this expanded mandate, a public bidding process commenced in August 2023 for the complete divestment of ECL’s equity, setting the stage for the share transfer dispute between PCCL and UHL.
PCCL was awarded the bid and finalized a term sheet on December 14, 2023, for acquiring 100% of ECL at an enterprise value of Rs 1,347 crore in phases.
The conflict arose after PCCL acquired shares from IIRF Holdings and Vistra ITCL through share purchase agreements on March 28, 2024, which were subsequently transferred via the depository system reflecting PCCL’s ownership in NSDL records.
UHL contested the transfer, alleging violations of RoFR provisions, a Deed of Adherence execution, and prior notice requirements under shareholder agreements and the Articles of Association.
However, the NCLT dismissed these claims, noting that all shareholders, including UHL, had opted for a total 100% divestment of ECL equity through a public bidding process and had offered shares to outside investors.
The NCLT found that initiating the disinvestment effectively waived their RoFR and associated conditions, reaffirming that the minority shareholders’ share transfer to PCCL was valid and properly communicated to ECL.
“All shareholders, including Respondent No 2 (UHL), opted to disinvest and offer to sell their shares according to the Process Document. Hence, all shareholders, including Respondent No 2, had essentially waived their Right to First Refusal,” clarified a bench composed of Ashok Kumar Bhardwaj (Judicial Member) and Atul Chaturvedi (Technical Member).
Nevertheless, the NCLT cautioned that while the transfer registration by IIRF Holdings and Vistra ITCL to PCCL cannot be denied, proper consideration must be given to Unitech’s role.
PCCL was advised against transferring these shares without adhering to provisions laid out in the company’s Articles of Association and the applicable laws.
“Registration of shares transferred from Respondent Nos 5 and 6 to the Appellant (PCCL) does not establish any Right of First Refusal concerning the shares held by other shareholders, allowing them to transfer shares independently of any claims from the petitioner/appellant,” the NCLT stated in its comprehensive 61-page order.
