IMPORTANT POINT
The interpretation of 'sufficient cause' in the context of refusal by a Company to register shares, highlighting that it cannot be reduced to mean only violation or contraventions of law. Any mala fide transfer done with the intention of obstructing the functioning of the company can also constitute sufficient cause for refusing the registration of transfer of shares.

JUDGMENT

1. The present appeal has been filed by the Appellant under Section 10F of the Companies Act, 1956 (hereinafter `the Act') against the impugned judgment and order dated 17th December, 2014 passed by the Company Law Board (CLB). Vide the impugned order, the CLB has held that the reason given by the Appellant to refuse registration of shares of the Respondents do not fall within the ambit of Section 111A of the Act.

2. The appeal at hand arose out of an application filed by the Respondents, namely, Mrs. Laxmi Gupta-Respondent No.1 Mr. Chandra Prakash Pahwa-Respondent No.2, Mr. Kapil Kumar-Respondent No.3, Mr. Madhav Sharan Gupta-Respondent No.4 and Ms. Astha Gupta-Respondent No. 5 against the Appellant Company-M/s Basti Sugar Mills (now `Phenil Sugars Ltd.') seeking a prayer to the effect that their shareholding ought to be registered by the company.

3. The said prayer was allowed by the CLB vide the impugned order which is now under challenge by the company. The said order was initially stayed by this Court on 21st April, 2015 and the matter has remained pending since then.

4. The Respondents were duly served in this matter and had entered appearance on 21st April, 2015. However, for the last several hearings, none has appeared for Respondent Nos.1, 2 and 4.

5. One Mr. Sadaat Salim, ld. Counsel had appeared for Respondent No.3 on the last date of hearing. However, there was no appearance for the said Respondent today on the first call. The Court, accordingly, passed over the matter and directed the Appellant to contact Mr. Sadaat Salim, ld. Counsel. He has entered appearance through video conferencing and submits that he has no instructions to appear from Respondent No. 3.

6. In view of the above, the Respondents are proceeded ex-parte and submissions were heard on behalf of the Appellant.

7. Mr. Naveen Chawla, ld. Counsel for the Appellant submitted that under Section 111A of the Act, the proviso to sub-Section 2 makes it clear that the company has the discretion to refuse the registration of the transfer of shares for sufficient cause. It is his submission that one of the Respondents i.e., Respondent No.4-Mr. Madhav Sharan Gupta was the Auditor of the company and had conducted himself in a manner which was detrimental to the interests of the company itself. The same is clear from the reply which has been filed by the company before the CLB, wherein the reasons has been spelt out clearly that the Respondent No.4 along with his other family members has started making baseless and frivolous complaints against the company to various authorities. In addition, when the company did not wish to continue his services, he sought to purchase shares of the Appellant from the market and sought registration of the said shares.

8. The allegation against the said Respondent is contained in paragraph 4 of the reply filed before the CLB which is relied upon by the ld. Counsel for the Appellant. He further submits that the CLB has also erred in law in holding that the request of the Respondents would have been covered under Section 111(A)(3) of the Act and not under Section 111(A)(2) of the Act.

9. He relies upon the judgment of the Supreme Court in Mackintosh Burn v. Sarkar and Chaudhary Enterprise Pvt. Ltd., (2018) 5 SCC 575, wherein, as per the ld. Counsel, the clear legal position has been laid down to the effect that the refusal can be on any ground which constitutes sufficient cause and need not be only in respect of violation of law as mentioned in 111A (3) of the Act. He submits that the Supreme Court has specifically held that conflict of interest could be a ground for refusing to register the shares.

10. Heard ld. Counsel for the Appellant and perused the record.

11. The Appellant is a company incorporated in the year 1927 and has been engaged in the business of manufacturing and sale of sugar. Respondent No.4 is a chartered accountant who was allegedly responsible for dealing with taxation and other financial functions of the Appellant