AN AUDITOR CAN BE REMOVED WITHOUT APPROVAL FROM CENTRAL GOVT UNDER NEW COMPANY LAW : BY CA NITESH MORE
It is generally said by every expert that an auditor will be removed under new company Law only after obtaining previous approval of central Govt. Sec 140(1) confirms this. However, I think that an auditor can be removed under new company Law without obtaining previous approval of central Govt also .
A) The auditor can be removed under sec 140(1) with previous approval of CG
B) The auditor can also be removed under sec 139(9) without approval of CG
A) Removal by Special Resolution and previous approval of the Central Government: [Sec 140(1)]
v The auditor appointed under section 139 may be removed from his office before the expiry of his term only by a special resolution of the company,
v Previous approval of the Central Government must be taken before removal.
v Before taking any action, the auditor concerned shall be given a reasonable opportunity of being heard.
Example: PWC is an auditor of Reliance Ltd. Company wants to remove PWC in December, 2018. Company has to obtain previous approval of CG &also has to follow other procedures prescribed u/s 140(1).
B) Reappointment of retiring auditor at AGM [Sec 139(9)]: A retiring auditor may be re-appointed at an annual general meeting, if
v he is not disqualified for re-appointment;
v he has not given the company a notice in writing of his unwillingness to be re-appointed; and
v a special resolution has not been passed at that meeting appointing some other auditor or providing expressly that he shall not be re-appointed.
Example: PWC is appointed as an auditor of Reliance Ltd in AGM of Sep 2016 for 5 years. Company in AGM of Sep 2018 appointed E& Y as auditor by passing a special resolution.
Can PWC continue as auditor of company?
Answer: As per sec 139(9), A retiring auditor may be re-appointed at an annual general meeting, if a special resolution has not been passed at that meeting appointing some other auditor. In the above case, as special resolution has been passed appointing E& Y as auditor, hence, PWC cannot continue.