prpri Analysis of Section – 139 & 140 of Companies Act, 2013 – Part I Analysis of Section – 139 & 140 of Companies Act, 2013 – Part I

Akash Sharma

Akash SharmaAppointment of Auditor/s, casual vacancy 

The Companies Act, 1956 read as :-

As per section 224(3) where at an annual general meeting no auditors are appointed or re-appointed, the central Government may appoint a person to fill the vacancy.

As per section 224(5) the first auditor or auditors of a company shall be appointed by the Board of directors within one month of the date of registration of the company;

Section 224(5)(b) read as If the Board fails to exercise its powers under this sub–section, the Company in General Meeting may appoint first Auditor or Auditors;

Section 224(6)(a) read as Where such vacancy is caused by the resignation of the Auditor, the vacancy shall only be filled by the company in the general meeting;

Section 224(6)(b) read as an auditor appointed in a causal vacancy shall hold office until the conclusion of the next annual general meeting.

Now Companies Act, 2013 read as :-

Section 139(8) Any casual vacancy in the office of an auditor shall (i) in the case of a company other than a company ……. be filled by the Board of Directors within thirty days, but if such casual vacancy is as a result of the resignation of an auditor, such appointment shall also be approved by the company at a general meeting convened within three months of the recommendation of the Board and he shall hold the office till the conclusion of the next annual general meeting;

Now, Comparison between these provisions of Companies Act, 1596 and Companies Act, 2013

1. The Appointment of First Auditor or auditors of the Company after the incorporation by the Board within 30 days from the date of incorporation is same in both Act.

But in case of failure, the company in general meeting could have appointed the first Auditor under Companies Act, 1956, but in case of Companies Act, 2013 failure to appoint Auditor shall be informed to the members of the Company, who shall within 90 days at an #EOGM appoint first Auditor/s who shall hold office until the conclusion of the First Annual General meeting.

2. If casual vacancy was caused by the resignation of the Auditor the vacancy should have only be filled by the company in general meeting under the Company Act, 1956, but in case of Company Act, 2013 appointment shall be made by the Board which shall also be approved by the company at a general meeting convened within 3 months of the appointment by the Board.

3. Where at an AGM no auditor/s were appointed or re-appointed, the CG could have appointed a person to fill the vacancy in Act of 1956, but in case of Company Act, 2013, the existing auditor shall continue.


1. Even if no time limit is provided by the Act for the information to be given by the Board to the shareholders for appointment of first auditor/s it is apparent that an auditor must be appointed at least 3 months before the first Annual General Meeting of the company.

2. In case of a casual vacancy the auditor shall remain an auditor upto the date of forth coming AGM and the shareholders must appoint him or other for next 5 years in that AGM;

3. There is an important omission of Section 224(3) of the 1956 Act which was envisaged to take care of other eventualities which may create some practical difficulties in certain situations now.

4. Therefore, ADT-1 is required to be filed once an auditor is appointed till the forthcoming AGM in casual vacancy and another ADT-1 when he or other is appointed again for five years afresh by the shareholders.

Now, one question is addressed to Law makers, Irani Committee and the MCA. It is apparent that if an Auditor resigns 3 months before the forth coming AGM of the company the Board must appoint an Auditor and shareholders must approve that appointment in an EOGM called and convened within 90 days from such appointment by Board. Now, if the same auditor is appointed by the shareholders in the forth coming AGM then by strict interpretation of law [Sub-section (1) of 139] the same auditor continues for 6 years instead of 5 years including the appointment in casual vacancy. However, if an auditor resigns within 3 months before the next AGM, then the appointment of new auditor by the Board may be approved by the shareholders in the AGM itself than any EOGM for that matter. Then, the question is, whether that approval would be interpreted for appointment for one year as the casual vacancy can continue only for one year? Or, this approval may be interpreted for five years and in that case the auditor continues in office only for five years in the latter situation than six years as in the case of the former?

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  1. Srirang Mahabhagwat says:

    Hi Akash,

    First of all thanks for such an informative article.
    Secondly as far as the Interpretation is concerned the Five Year/Ten Year concept has brought a lot of issues, which would be a recipe for case laws in future.

    Technically speaking you are right that the appointment for casual vacancy will be till the ensuing AGM (if auditor appointed in EGM).

    But if we see logically, if the Auditor is appointed for Five year in the ensuing AGM, then his total tenure will be six years. This will defeat the intentions of the law.

    So as per my opinion even if the appointment is for casual vacancy, in the next AGM the appointment will be ratified only to be further ratified in next three AGM’s.

    Lets seek others opinion on this.

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July 2021