parties to private agreement could agree restrictive covenants relating to transfer of shares

The division Bench of the Bombay High Court holds that in a private agreement parties may agree to certain covenants restricting their right to transfer shares held by them in a public company and such restrictions are not hit by Section 111A of the Companies Act, 1956. Section 111A states that shares of public company are freely transferable.The division bench of the HC held in its decision dated 01/09/2010 that the expression "freely transferable" in Section 111A does not mean that the shareholder cannot enter into consensual arrangement/agreement with the third party (proposed transferee) in relation to his specific shares. The division bench delared that they do not accept the view taken by the single judge in the Western Maharashtra Development Corpn V Bajaj Auto Case dated 15/02/2010!