Binding Effect of Non-Compete Clauses on Transferee in Liquidation { GH Energy vs. Flovel Hydro Technologies Company Appeal (AT) No. 87 of 2024 dated April 8, 2026 }
Facts:
In the course of a court-monitored liquidation, shares of a company were transferred to a new purchaser. The original shareholder was bound by non-compete obligations under a Joint Venture Agreement and Share Purchase Agreement. The Articles of Association required any transferee of shares to accept and be bound by existing obligations as a pre-condition for transfer.
Issue:
Whether a purchaser of shares in a liquidation process is bound by the non-compete obligations and other contractual liabilities of the original shareholder.
Held:
The NCLAT held that the transferee steps into the shoes of the original shareholder and is bound by all existing rights and obligations, including non-compete clauses, especially where the Articles of Association mandate such binding as a condition precedent to share transfer.
