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Ravi AgrawalRavi Agrawal asked 3 years ago

It is mentioned in the provision that Central Government may appoint the auditor if the application is moved by C.G to the Tribunal. We have to construe it as “MAY” or “SHALL”?

3 Answers
RaviRavi Staff answered 3 years ago

Hello Ravi
As per Sec 140 (5)
Option 1 Tribunal can issue order for removal of auditor
Option 2 Tribunal can issue order for removal of auditor on application of concerned person
Option 3 Tribunal can issue order for removal of auditor on application of central government
in option 1 / 2 tribunal will direct company to change auditor and company will change auditor as per instructions given.
Only in option 3 central government will get right to appoint auditor
you can see bare text below
(5) Without prejudice to any action under the provisions of this Act or any other law for the time being in force, the Tribunal either suo motu or on an application made to it by the Central Government or by any person concerned, if it is satisfied that the auditor of a company has, whether directly or indirectly, acted in a fraudulent manner or abetted or colluded in any fraud by, or in relation to, the company or its directors or officers, it may, by order, direct the company to change its auditors:
Provided that if the application is made by the Central Government and the Tribunal is satisfied that any change of the auditor is required, it shall within fifteen days of receipt of such application, make an order that he shall not function as an auditor and the Central Government may appoint another auditor in his place:
Provided further that an auditor, whether individual or firm, against whom final order has been passed by the Tribunal under this section shall not be eligible to be appointed as an auditor of any company for a period of five years from the date of passing of the order and the auditor shall also be liable for action under section 447.

Auditaudit Staff answered 3 years ago

Thank you sir!!

Auditaudit Staff answered 3 years ago

That means Central Government will have a “RIGHT” and not “OBLIGATION”. Hence it may appoint the auditor by itself or may direct the company to appoint.

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