Section 140: Removal, resignation of Auditor and giving of Special notice

1. Removal of Auditor appointed u/s 139 – before expiry of his term     

•  Reasonable opportunity of being heard is to be provided to the concerned auditor
• Previous approval of the CG is required as per manner prescribed
• Special Resolution should be passed approving the above removal

2. In case of resignation by Auditor:

• In case of Non Government Companies Statement of resignation to be filed within 30 days of resignation with Company & Registrar of Companies
• In case of Govt. Company Statement to be filed with the C &AG,              Registrar of Companies and Company
• Statement should include the reasons of resignation and other relevant facts.

3. Penalty for non Compliance of Sub Section 2:

In case of failure in complying above provisions regarding resignation, Auditor shall be punishable with fine of not less than Rs. 50,000/- and up to Rs. 5,00,000/-.

4. Special Notice – Appointment of Auditor

• In case of appointment of other than retiring auditor before the expiry of his term (Five years or ten years )
• Special Notice for resolution to be passed in an AGM, expressing that retiring auditor will not be reappointed.
• Copy of notice to be send to the Auditor
• In Case any written representation is made by the auditor is timely received by the Company, it shall

State the fact of receipt of such   Representation in any notice given to Members.

&

Send a copy of the representation to the members.

• In case WR is not sent to the members, as it is received too late or due to Company’s default, Auditor may require that it should be read out in the meeting and the same shall be filed with the registrar.

NOTE:

In case TRIBUNAL is satisfied on application of Company or any other aggrieved person that rights given to the auditor under this section are being abused by him, then such WR is not required to be sent to members or to be read out at meeting.

5. Removal of Auditor – By TRIBUNAL

Without prejudice any other provisions of the act, If Tribunal is satisfied that auditor is directly or indirectly acted in a fraudulent manner, it can direct the Company to change the Auditor. The tribunal may be satisfied either:

– Suo motu

– Application by other concerned person

– Application by CG

• In case Tribunal is satisfied  By such application, it shall within 15 days of receipt of  such application pass the order for removal of such auditor.

• Another auditor in his place Will be appointed by CG.

NOTE:

1. Any Auditor who is removed by the tribunal under this section will not be eligible to be appointed as auditor in ANY COMPANY for the next five years from the date of passing such order and also liable for actions u/s 447.

2. In case of firm (Audit firm) Liability will be of the firm and of every partner or partners who acted in the fraudulent manner.