24 August 2016
Suppose there is Private Limited Company ‘XYZ Pvt. Ltd.’ to which ‘Rotation of Auditors’ is applicable. Facts are as follows: (a) ‘M/s. RS and Associates’ was serving as Auditors of the Company till the FY 2013-14. (b) Then the Company appointed ‘M/s. PQ and Associates’ as auditors on 30/09/2014 for FY 2014-15 (c) Then ‘M/s. PQ and Associates’ resigned as auditors on 29/09/2014 and ‘M/s. RS and Associates’ were appointed as new Auditors. (d) Now, ‘M/s. RS and Associates’ wants to resign resulting into creation of Casual Vacancy. (e) The Company proposes to appoint ‘M/s. PQ and Associates’ as Auditors to fill the Casual Vacancy (which has already served the Company for a period of 1 year)
The issue is, can M/s. PQ and Associates be appointed to fill the Casual Vacancy u/s 139(8) and is the Clause (a) of Explanation II to the Rule 6(3) Companies (Audit and Auditors) Rules, 2014 applicable to M/s. PQ and Associates.
24 August 2016
As per my view, PQ and Associates cannot be appointed as Auditors for Casual Vacancy . It would contravene provision of Section 139(2)/(4) of the Act r/w Rule 6 Companies (Audit & Auditors) Rules, 2014 . The explanation provides that in case a break in the term for a continuous period of five years shall be considered as fulfilling the requirement of rotation
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