Counter Puzzle of Auditor Appointment

No doubt the Companies Act, 2013 is not a law but collection of legal puzzle. Compliance of its provisions became hell. This is not just because of poor drafting of law but poor reading of law. We student of the Companies Act, 2013 need to unlearn the Companies Act, 1956 first and finally. We need to know, learn, understand and educate ourselves that the Companies Act, 1956 is now only for reference purpose only.

In last post, we discussed puzzle of ADT – 1 here but every coin have second side also. In that post we start reading form the charging sub – section and in this post we will start reading form the compliance required by the Ministry i.e. ADT – 1 itself.

There is no doubt Form ADT – 1 is required to be filed as per the fourth proviso to sub – section (1) of Section 139. Accordingly, the company shall inform the auditor concerned of his or its appointment, and also file a notice of such appointment with the Registrar within fifteen days of the meeting in which the auditor is appointed.

From last post we are clear that appointment includes reappointment but not ratification. Now the question arise, whether Form ADT – 1 is required to be filed for all appointments of auditors or appointments made as per sub – section (1) only. Because sub – section (1) is charging section this is applicable to all appointments of auditors. But language of sub – section (5), (6) (7) starts with use of words “Notwithstanding anything contained in sub-section (1)”. Sub – section – (8) does not start with these words.

When we look into form ADT – 1, it asks details of appointment of auditors due to casual vacancy [Field 7 of the Form ADT – 1] apart from asking whether auditor have been appointed in General Meeting.

This seems casual approach towards interpretation of sub – section (5), (6) and (7). It seems MCA want to play safe regarding appointments made under these sections. The form also does not seek any document like (a) copy of order of Comptroller and Auditor General for appointment under sub – section (5); (b) Board Resolution for Appointment of First Auditor under sub – section (6); and (c) copy of order of CAG or Board Resolution in case of First Auditor of Government Company.

Ministry of Corporate Affairs played safe in drafting of instruction kit for this Form ADT – 1. The instruction kit does not refer any other sub – section of section 139 except sub – section (1). The Instruction against Field 5 of the Form, instruction kit does not make reference to any appointment under sub – sections (5), (6) and (7). Just make a sub – field for date of appointment of auditor whether appointment was not made in an Annual General Meeting.

Now refer to purpose of the form. According to instruction kit, on appointment/ reappointment of an auditor at the annual general meeting, the company shall file a notice of such appointment / reappointment with the Registrar within fifteen days of the meeting in which the auditor is appointed / reappointed.

Conclusion:

Fourth proviso to sub – section (1) of Section 139 read with Para “Purpose of the eForm” of instruction kit of Form ADT – 1; it is clear that Form ADT – 1 is mandatory to be filed only in case of appointment/reappointment of an auditor at the annual general meeting.

MCA by virtue of field 5 of the form ADT -1 does not seems to deny form filled in case of appointment made by Board of Directors, or Members in Extra – ordinary General Meeting.

I suggest that MCA may disable relevant field in form AOC – 4 which ask for SRN number for Form ADT – 1 in all cases of appointment of auditor.

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