NCLT clears Bhutani Infra's Entertainment City stake buy over Unitech objections

New Delhi: Insolvency tribunal NCLT has directed Entertainment City to register a 4.26 per cent equity transfer to Bhutani Infra Group entity Parmesh Construction Company, dismissing opposition by JV partner Unitech Holding over alleged shareholder agreement violation.

Parmesh Construction Company Ltd (PCCL) had acquired 3.70 per cent and 0.56 per cent stake from minority investors IIRF Holdings V Ltd and Vistra ITCL (India) Ltd, respectively.

The sale was opposed by Unitech Holding Ltd (UHL), which contended that it violated its Right of First Refusal (RoFR) and a 30-day notice requirement under the Articles of Association/Shareholders Agreement.


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A two-member NCLT bench said the transfer could not be invalidated merely because the proposed disinvestment of the company's entire equity capital was not completed.

It held that the transfer of shareholding by the two minority investors in favour of PCCL was valid and that Entertainment City Limited (ECL) was required to recognise the transfer by entering PCCL's name in its Register of Members.

"The Respondent No 1 (ECL) shall register the shares transferred by Respondent Nos 5 and 6 (minority shareholders) to the Appellant (PCCL), in the name of Appellant in due deference to the letters written by the Respondent Nos 5 and 6 to the Board of Respondent No 1," said the NCLT bench.

The NCLT order came over two cross petitions - one filed by PCCL seeking registration as a shareholder of ECL, and another by UHL seeking to declare the share transfer void and to itself acquire the disputed shares.

ECL, which operates malls and amusement parks, including "The Great India Place" and "Worlds of Wonder" on a 147-acre plot in Noida, is a joint venture between Unitech Holding Ltd (UHL) and International Amusement Ltd (IAL), where the former has a 41.95 per cent stake and the latter holds 53.15 per cent.

On January 20, 2020, the Supreme Court superseded the existing Board of Unitech and directed the government to set up a new seven-member Board. The court also imposed a moratorium on the institution or enforcement of proceedings against Unitech and its subsidiaries, while directing the new Board to prepare a resolution framework.

Subsequently, the apex court expanded the mandate of the new management, clarifying that it would be responsible for the management and control of the entire Unitech Group, including all its affiliates, trusts and subsidiaries, and authorised it to appoint or remove directors and trustees across group entities.

Under this extended mandate, a public bidding process was launched in August 2023 seeking 100 per cent disinvestment of ECL's equity, which formed the backdrop for the share transfer dispute between PCCL and UHL.

PCCL was declared the successful bidder and signed a binding term Sheet on December 14, 2023, for 100 per cent acquisition of ECL at an enterprise value of Rs 1,347 crore in phases.

The dispute arose after PCCL purchased the shares from IIRF Holdings and Vistra ITCL under share purchase agreements executed on March 28, 2024. The shares were subsequently transferred through the depository system, and PCCL's ownership was reflected in NSDL records.

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UHL had challenged the transfer, contending that the transaction violated provisions relating to RoFR, execution of a Deed of Adherence and prior notice requirements under shareholder agreements and the Articles of Association.

However, it was rejected by the National Company Law Tribunal (NCLT), after observing that all shareholders, including UHL, had already decided to divest 100 per cent of ECL's equity through a public bidding process and had offered the shares to outside investors.

It held that by initiating the disinvestment process, the shareholders had effectively waived their RoFR and related conditions.

The NCLT further noted that the minority shareholders had validly transferred their shares to PCCL and had informed ECL about the transaction.

"In the present case, all the shareholders in the company, including the Respondent No 2 (UHL), had taken a decision to disinvest and offered to sell their shares. The shares were offered to be sold to investors in terms of the Process Document. Thus, apparently, all the shareholders, including the Respondent No 2, had waived the Right to First Refusal," said a bench comprising Ashok Kumar Bhardwaj (Judicial Member) and Atul Chaturvedi (Technical Member).

However, the NCLT said that "in the totality of the facts" when the registration of the shares transferred by IIRF Holdings and Vistra ITCL in the name of PCCL "cannot be avoided/refused", due care needs to be taken by the management regarding the role of Unitech.

The NCLT said PCCL would not offer to transfer these shares to it except in due deference to the provisions of the company's Articles of Association and the extant provisions of law.

"The registration of shares transferred to it by Respondent Nos. 5 and 6 in the name of the Appellant (PCCL) would not create any right of First Refusal in its favour, in respect of the shares held in the company by the other shareholders and the shareholders would be entitled to transfer their shares without recognising any such right of the petitioner/appellant," the NCLT said in its 61-page-long order.