NCLT rules Unitech waived ROFR by starting full stake sale

The National Company Law Tribunal has ordered Entertainment City to register a 4.26% equity transfer to Parmesh Construction Company, a Bhutani Infra affiliate. The decision overrules objections from Unitech Holding, which had argued the transfer violated a shareholder agreement.

The tribunal rejected Unitech's claim that the transfer triggered a Right of First Refusal. The order noted that Unitech had initiated a 100% disinvestment process for its Entertainment City stake. That move, the tribunal said, effectively waived any contractual restrictions on selective transfers.

Unitech's ROFR clause gave it the right to match any third-party offer before a stake changed hands. The tribunal found that a full-sale process changes the legal footing. When a shareholder puts the entire holding up for sale, it abandons the right to pick and choose who buys in. The ROFR no longer applies because the seller is no longer offering a partial stake at a fixed price. It is auctioning the whole block. Legal experts following the case said the ruling aligns with established company law precedent in India: a blanket sale invitation extinguishes pre-emption rights unless the agreement explicitly preserves them.

The order directs Entertainment City to record the transfer within 30 days. Bhutani Infra now holds a direct 4.26% interest, giving it a seat at the table as Entertainment City develops its integrated amusement and hospitality project near Noida.

For Bhutani Infra, the stake is a beachhead. The company has been expanding its real estate footprint beyond commercial and residential into entertainment-anchored precincts. A minority position in Entertainment City gives it visibility into the project's cash flows and land bank without taking on the full development risk. For Unitech, the loss is twofold. It failed to block the transfer and also lost the opportunity to buy the shares itself at a negotiated price. The ROFR route would have let Unitech acquire the 4.26% at the same terms offered to Parmesh. By triggering the full disinvestment, Unitech gave up that option.

The case is one of several pending at the NCLT where ROFR clauses collide with corporate insolvency or restructuring plans. The tribunal's reasoning – that a full-asset sale overrides selective ROFR rights – gives boards and resolution professionals a clearer script. If a stressed company wants to sell a subsidiary or investment, it does not have to honor each individual shareholder's pre-emption rights so long as the sale process is open and competitive. That logic mirrors the Supreme Court's stance in the 2018 Vodafone ruling, where it held that pre-emption rights do not survive a transfer of controlling interest.

Unitech can appeal the order to the National Company Law Appellate Tribunal. The company has 45 days to file. Whether it pursues an appeal will depend on its broader asset-sale strategy. Unitech is already under insolvency proceedings and has been selling non-core assets to service debt. Fighting this ruling could delay cash inflows that lenders expect.

The NCLT registry will issue a certified copy of the order within two weeks. Only then can the transfer be registered.