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Case Law Details

Case Name : Western Maharashtra Development Corporation. Ltd Vs. Bajaj Auto Limited (Bombay High Court)
Appeal Number : MANU/MH/0109/2010
Date of Judgement/Order :
Related Assessment Year :
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Western Maharashtra Development Corpn. Ltd. Vs Bajaj Auto Limited [MANU/MH/0109/ 2010]

In a decision, which is likely to have a wide impact on joint ventures/investment in public companies, the Bombay High Court (“Court”) has recently held that any clause in an agreement which restricts the free transfer ability of shares of public companies is void and non- enforceable, even if such restrictive clause is incorporated in the Articles of Association of the company.

Background/Facts

Western Maharashtra Development Corporation (“Petitioner”) entered into a Protocol Agreement (“Agreement”) with Bajaj Auto Limited (“Respondent”) pursuant to which Maharashtra Scooters Ltd. (“MSL”) was incorporated as a public limited company as per the provisions of the Companies Act, 1956 (“Act”). The Petitioner and the Respondent held 27% and 24% of the shareholding of MSL respectively.

In order to ensure that the parties controlled at least 51% of the equity share capital of MSL, the Agreement contained a Clause (“Clause 7”) whereby the Petitioner and Respondent were restricted from transferring their shares to any other person without first offering the same to the other party at such rate as may be agreed to between the parties or decided upon by arbitration.

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