Appointment:
The appointment of auditors is dealt with in section 224 of the Companies Act, 1956, the provisions of which are as under:
Every company, even a private company, must appoint an auditor or auditors to audit its Annual Accounts. There are following three authorities to appoint auditors:
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ADVERTISEMENTS:
1. Directors:
The first auditors of a newly floated company are appointed by the Board of Directors within one month of the registration of the company, and the auditors so appointed shall hold office till the conclusion of the First Annual General Meeting.
The Directors are also empowered to fill any casual vacancy in the office of an auditor except one which is caused by prior resignation. The auditor so appointed shall hold office until the conclusion of the next Annual General Meeting. But if the vacancy is caused by the resignation of an auditor, it shall only be filled by the company in General Meeting.
ADVERTISEMENTS:
2. General Meeting:
(i) It the Board of Directors fails to appoint the auditor, the company shall appoint the first auditor in General Meeting.
(ii) Every company shall at each General Meeting appoint an auditor or auditors to hold office from the conclusion of that meeting until the conclusion of the next Annual General Meeting.
(iii) The company shall, within seven days of the appointment, give intimation thereof to every auditor so appointed.
ADVERTISEMENTS:
(iv) An auditor so appointed shall, within thirty days of the receipt from the company of the intimation of his appointment, inform the Registrar in writing that he has accepted or refused to accept the appointment.
3. Central Government:
Where, at an Annual General Meeting, no editors are appointed or reappointed, the Central Government may appoint a person to fill the vacancy.
The company shall, within seven days of the Central Government’s jeer under sub-section (3), becoming exercisable, and give notice of that act to the Government. If a company fails to give such notice, the company and every officer of the company who is in default, shall be punishable with fine which may extend to five thousand rupees.
4. Appointment by Special Resolution:
Section 224 A has been introduced by the Companies (Amendment) Act, 1974, to specify the cases in which the appointment of an auditor would require a special resolution. In the case of a company in which not less than 25% of the subscribed share capital is held, whether singly or in any combination, by- _
(i) A Public Financial Institution or a Government or the Central Government or any State Government.
(ii) Any financial or other institution established by any Provincial or State Act or in which a State Government holds 51% of the subscribed capital.
(iii) A Nationalised Bank, or an Insurance Company carrying on general insurance business the appointment or re-appointment of an auditor or auditors shall be made by a special resolution.
Where any company referred to in sub-section (1) omits or fails to pass at its annual general meeting any special resolution appointing as auditor or auditors, it shall be deemed that no auditor or auditors had been appointed by the company at its annual general meeting and thereupon the provisions of sub-section (3) of section 224 shall become applicable in relation to such company.
For the purpose of this section:
(a) “General insurance business” has the meaning assigned to it in the General Insurance (Emergency Provisions) Act, 1971 (17 of 1971).
(b) “Nationalised bank” means a corresponding new bank as defined in the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970) or in the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 (40 of 1980).
If a special resolution has not been passed for the purpose, it shall be deemed that the appointment has not been made and the Central Government will get right under section 224 (3) to make an appointment.
Compulsory Re-appointment: Section 224 (2) provides that subject to the provisions of sub-section (I-B) and section 224-A at any Annual General Meeting the retiring auditor, by whatever authority (Board of Directors, General Meeting or Central Government) appointed, shall be re-appointed, unless:
(i) He is not qualified for re-appointment;
(ii) He has given a notice in writing of his unwillingness to be re-appointed;
(iii) A resolution is passed at that meeting to the effect that he shall not be re-appointed or that somebody else be appointed in his place.
(iv) a notice has been given of an intended resolution to appoint some person or persons in the place of a retiring auditor and by reason of death, incapacity or disqualification of that person or of all those persons, as the case may be, the resolution cannot be proceeded with.
Section 619 of the Companies Act has made special provisions in the case of Government Companies. The auditor of a Government Company shall be appointed or re-appointed by the Central Government on the advice of the Comptroller and Auditor-General of India.
According to section 619 (1), In case of a Government Company the following provisions mentioned in sub-sections (2), (3), (4), (5) of section 619 shall apply, notwithstanding anything contained in sections 224 to 233.
Provided that the limits specified in section 224 (IB) and (IC) of the Companies Act shall apply in relation to the appointment or re-appointment of an auditor.
