Free Transferability of shares of a Public[Listed] Co under Sec:111-A has gained momentum in recent years. Vested interests are in favour of availing Right of First Refusal (ROFRs) keeping aside the validity of Sec: 111-A.
Definition of Sec: 111-A is, again, defined in different meanings. Legal Experts have drawn it to favour their corporate clients whereas the Hon’ble Justice Dr.D.Y.Chandrachud in the case of Westren Maharashtra Development Corporation Ltd[WMDC] v/s Bajaj Holdings Ltd [BHIL] has clearly mentioned that, such ROFR is void since it restrains free transferability of shares and Sec: 111-A is violated by such restrain.
Honestly, from all the similar cases, it has clearly appeared that ROFRs are nothing BUT an agreement in advance to conduct a future act- ONLY to favour the parties to such ROFRs. But effectively, the term or facility of such ROFR is grossly misused by the corporate world since the outcome of the same is always against  the company in general &  most imporantly- the retail investors of the listed company.
In the above referred case of WMDC v/s BHIL, the latter has ROFR for the former’s majority [27%] stake in Marashtra Scooters Ltd[MSL]. But as the matter was unsolved due to the valuation of the stake, the matter is subjudice and hard earned money of retail investors is blocked since years. Even state treasury of Maharashtra has occured significant loss in crores due to this. It is only the ROFR’s misuse that has caused this problem. Had there been certain riders in ROFRs as per the law, this would have been solved much earlier. ROFRs should be done as a part of corporate strategy only. But at the same time riders like the correct method of valuation of the stake in question should be attached to the same UNDER THE LAW. In the above case, BHIL, misusing the advantage of ROFR has ignored the valuable investments lying in MSL, while valuing WMDC’s stake in it. For known fact, BHIL has obvious interest in WMDC’s stake in MSL only for MSL’s valuable investments worth crores of rupees particularly in Bajaj Group. But at the same time, BHIL is not ready to pay the for the said stake for its intrinsic value and the matter is dragged into court by BHIL to delay the matter with a clear intion to usurp public money.
It is clearly evident form the above case that ROFRs should not be done in general and compulsorily contain certain riders that would take care of justice to the small and retail investors of the company. ROFRs, in its present form, need to be corrected in the interest of the public at large. By any means, one would agree that laws are to facilitate the situation BUT at the same time it cannot go bring injustice to anyone. Hence, till any such changes are made in ROFRs, such terms in agreements should be treated as void.
On behalf of all the small investors, for whom support of legal experts is out of reach, would request these section of intellectuals to pay a kind attention and render their service in the name of honesty and morality.
Sunil M. Sheth
[ Aggrieved MSL shareholder ]