Limitations on an investor’s capacity to sell his stake in an organization as a rule track down its direction through most Shareholders Agreements. Be it through a right of first refusal, follow along or limitations of an all the more outright nature, for example, a lock”in or prohibition on offering offers to any contender and so forth. As respects the enforceability of such limitations, the position has been gotten comfortable the situation of privately owned businesses by the Supreme Court of the land holding that such limitations and all others forced under a Shareholders Agreement are to be integrated into the contract reports of an organization (i.e., Memorandum and Articles of Association) for them to be enforceable. Be that as it may, the law isn’t as obviously settled in that frame of mind of public organizations.
Basically, privately owned businesses have specific qualities, critical of which is the liberated right to limit share moves. Section 3(iii) of the Companies Act characterizes privately owned business as an organization, which by its articles-
“(a) limits the option to move its portions, if any;
While public company is an organization which is certainly not a privately owned business .
Furthermore, besides, the portions of a public organization are uninhibitedly adaptable. Such a trademark isn’t brought out by surmising alone. The Companies Act, 1956 (“Act”), the essential regulation managing all organizations in India, explicitly gives that the portions of a public organization are unreservedly adaptable . Prior share move in broad daylight organizations was administered by s.111 of the Act by which the force of the Board of Directors to reject enlistment of move should be practiced in light of a legitimate concern for the organization and the general body of the investors . In any case, after the revision of s. 111 by the Depositories Act, 1996. Sub-section (14) was added by the revision to s. 111 which rejected public organizations from its domain. Section 111A was embedded by s. 30 of the Depositories Act, 1996. This section applies to public organizations as it were. This section sets out that “dependent upon the arrangements of this part, the offers or debentures and any interest in that of an organization will be uninhibitedly adaptable”.
Be that as it may, the inquiry has been brought up in a few cases in different High Courts with respect to whether there can be any limitations on the exchange of offers and whether the Board of Directors have the ability to decline the exchange of offers.
THE POWER OF THE BOARD OF DIRECTORS TO REFUSE TO REGISTER THE TRANSFER OF SHARES
The Board of Director’s ability to reject the exchange of offers as integrated in the articles of affiliation is a legitimately substantial power approved by s. 82 of the Act that offers will be moved in the way given in the Articles of Association  . Thus, dependent upon the limitations, if any, which might have been forced by the Articles an investor has an outright right to arrange off his portions or debentures  . In such manner, the Supreme Court of India in VB Rangaraj v VB Gopalakrishnan  held: “The main limitation on the exchange of the portions of an organization is as set down in its Articles, if any.”
In a previous judgment  , the High Court while depending on prior points of reference held that since the precautionary freedoms over share moves of a public company were not integrated in the Articles they are not enforceable. Consequently, the exchange can be implemented exclusively for the reasons expressed in the Articles of Association  .
Yet, an opposite stand has been taken in Western Maharashtra Development Corpn. Ltd. v. Bajaj Auto Ltd  , by excellence of which any limitation on the adaptability of offers in a public company, as in the respondent organization is “evidently unlawful”. Hon’ble Justice D.Y. Chandrachud of Bombay High Court, in his judgment brought up that right of free adaptability of offers as given in s. 111A(2) of the Act is a liberated right. The Court managed accordingly:-
“53. The arrangement contained in the law for the free adaptability of offers in a public Company is established on the rule that individuals from people in general high priority the opportunity to buy and, each investor, the opportunity to move. The guideline of free adaptability should be given an expansive aspect to satisfy the object of the law. Forcing limitations on the standard of free adaptability, is a regulative capacity, just in light of the fact that the propose of free adaptability was articulated as an issue of administrative arrangement when Parliament brought Section 111A into the Companies’ Act, 1956. That is a limiting statute which oversees the talk on adaptability of offers. “Adaptable” is of the largest conceivable import and Parliament by utilizing the adage “unreservedly adaptable”, has built up the official purpose of permitting moves of portions of public organizations in a free and proficient section.”
A comparable view was taken on in Pushpa Katoch v. Manu Maharani Hotels Ltd. also, Ors.  . For this situation, four sisters had set up a lodging organization and legally consented to offer their stake in the inn to one another prior to offering their stake to any outsider. While this family plan was kept recorded as a hard copy and recognized by the leading body of the organization, the said course of action was not kept in that frame of mind of the organization. The court, noticing the shortfall of any precautionary right of refusal just held that regardless of whether such freedoms were remembered for the Articles they would be in opposition to the Act. Subsequently, the organization for this situation can’t abrogate the rule of free adaptability of portions of public organization (explicit arrangement of the Act) as typified in s.111A (2) of the Act by consolidating any arrangement in spite of it in the Articles of Association of the organization  . Section 9 of the Act plainly specifies that the Act will have impact despite anything opposite consolidated in the Articles of Association or any understanding. Further it expresses that on the off chance that there is a clashing arrangement it will be void to the degree it is in opposition to the Act. Consequently, any arrangements integrated in the Articles of the respondent organization in spite of the Act, putting chains on the free adaptability, would be hit by s. 9 of the Act  .
ASSUMING THE REFUSAL IS BONA FIDE AND IN THE INTEREST OF THE COMPANY
The object of any such arrangement in the articles of affiliation is to arm the Directors with ability to be practiced in extraordinary and uncommon situations where the exchange of offers might be viewed as unfortunate in light of a legitimate concern for the organization. Regardless of whether it were the situation that most of the investors would have invited the transferees, it was anything but a situation that impacted the matter without a doubt. 
The inner discipline for a deliberate association is a make a difference to be protected by the actual association by demanding severe adherence to the provisions of that agreement.  Moreover, the Andhra Pradesh High Court held that assuming the endorsement of move by the Board of Directors would place the organization in break of the legally binding commitments under the Shareholders’ arrangement and henceforth, the Board will be legitimized to deny the exchange  .
It is all around settled that if a caution as to registering moves is given by the articles to the Directors, the Court won’t exercise of such prudence except if it is demonstrated that the Directors are not practicing it genuine or are acting in alternate ways abusively, fancifully or in some alternate way mala fide.  Where organization gives explanations behind its refusal to enlist move of offers, that reason alone should be inspected as positive or negative.  The force of refusal should be practiced in a true blue way and in light of a legitimate concern for the organization and the general collection of investors. 
Adequate CAUSE FOR THE REFUSAL
The stipulation to Sub-segment (2) was not consolidated under s.111A at first. It was embedded through the Depositories Related Laws (Amedment) Act, 1997. Since the Depositories Act conceived electronic method of move, without contribution of the organization concerned, amendment of register of individuals after registration of move under particular conditions, was given under Sub-segment (3). Afterward, taking into account the way that still manual exchanges are pervasive, so as to guarantee that registration of move of offers isn’t rejected by organizations aimlessly; the stipulation to Sub-segment (2) was embedded later  which read-“Gave that assuming an organization without adequate reason won’t enlist move of offers in the span of two months from the date on which the instrument of move or the hint of move, by and large, is conveyed to the organization, the transferee might engage the [Tribunal], and it will direct such organization to register the exchange of offers.”
In Canara Bank v. Ankit Granites Ltd.  it has been seen that the portions of a public company are unreservedly adaptable and assuming the exchange is rejected without adequate reason, the transferee might interest the Company Law Board, which will look at regardless of whether such refusal is with adequate reason. In the event that the refusal is without the adequate reason, this Board will guide the organization to enlist the exchange.
“Adequate reason” has not been made sense of anyplace in the Act, thus we should shift focus over to the points of reference in such manner. In McDowell and Co. Ltd. v. Shaw Wallace and Co. Ltd  . the Company Law Board has held that if there should be an occurrence of a public organization, the term ‘adequate reason’ would cover just 3 grounds as determined in Section 111A (3) viz. assuming the exchange is in repudiation of the arrangements of SEBI Act, or Regulations made there under, the arrangements of Sick Industrial Companies Act or some other regulation in force for now. As such, a public organization can’t deny registration on some other ground incorporating rebelliousness with the arrangements of the Articles. The Company Law Board, on account of Estate Investment Company Private Limited and Anr., v. Siltap Chemicals Limited  , has completely expressed that “refusal on some other ground in regard of a public organization can’t be viewed as adequate reason for such refusal”.
As an end, it is critical to take note of the goal of the governing body in making share moves liberated from any limitations is profoundly appeared in the erasure of S. 22A(3) and (4) of the Securities Contracts Regulations Act 1956, which engaged the Board of Directors of an organization to reject share moves. S. 22A of the Securities Contracts Regulations Act specified the different reasons for declining the exchange of offers in a recorded public company. In any case, this part was precluded by the Depositories Act 1996 by righteousness of what Section 111A was embedded in the Companies Act 1956 which presently oversees both recorded and unlisted public companies. By embedding subsection (14) in Section 111 of the Companies Act, it is presently given that this segment, which connected with the ability to deny enlistment of move of offers and allure against such refusal, will be appropriate just to the privately owned businesses. Subsequently, this part will have no application to public organizations now.
Because of recently embedded subsection (3) in Section 108 of the Companies Act, move of offers can now occur between a transferor and transferee straightforwardly in the records of the store without following the nitty gritty strategy under Section 108 (of submitting move structure, and so forth) if the two of them are placed as advantageous proprietors in the records of a vault. It is currently certain that the portions of a public organization have now been made unreservedly adaptable completely. As a matter of fact, move of dematerialised shares happens in the records of the actual safe. The safe is expected under Section 13 of the Depositories Act to outfit data about the exchange of protections in the names of the helpful proprietors to the organization at standard stretches.