If auditor refuses to accept appointment it shall be deemed that no auditor or auditors had been appointed by the company at its annual general meeting and the power of the Central Government under section 224(3), to appoint auditors becomes exercisable.
Appointment of auditor by the Central Government (Regional Director)
Section 224(3) provides that if no auditors are appointed or re-appointed at an annual general meeting of a company, the Central Government may appoint a person to fill the vacancy. Therefore, the power of the Central Government to appoint auditors becomes exercisable when no auditors are appointed or reappointed at an annual general meeting of a company.
The Company is required to give intimation electronically to the Regional Director (Powers of the Central Government were delegated to the Regional Director) vide Notification No. GSR 288(E) dated 31st May, 1991) in new e-Form 24A prescribed by Notification No. GSR 56(E) dated 10th Feb., 2006.
Obligation has been cast on the company that within seven days of the Central Government's power u/s 224(3) becoming exercisable, it shall give a notice of that fact to that Government; and if a company fails to give such notice, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to five thousand rupees.
Circular No. 5 of 1972, dated 21-2-1972inter alia provides that the Government's power to appoint auditors under section 224(3) becomes available where at an AGM no auditors are appointed or re-appointed. Where auditors are not appointed, section 224(3) becomes attracted in the matter.
No fee is required to be paid for intimation under section 224(4)
As per the Department's Letter No. 35/16/69-CL-III, dated 1-11-1971 the Department is of the view that notices under section 224(4) cannot be considered as applications under the Companies (Fees on Application) Rules and as such are not chargeable with the prescribed fees.
On receipt of such notice in the prescribed e-Form 24A, it is the statutory duty of the Regional Directors to appoint auditors under section 224(3). No fee is chargeable on such notices for appointment of auditors under section 224(3).
XYZ Co. Ltd. reappointed A and B as their joint auditors in the Annual General Meeting.
The AGM authorised the Board for fillup the vacancy on their own in the event of both or
either of auditors declined to accept the assignment. The Board passed a resolution to
appoint C if any of the auditors declined to accept the assignment.
B declined to accept the assignment and Board of Directors appointed C in place of B as
per its resolution.
Answer given by ICAI
Filling up the vacancy of an auditor
In the present case B is one of the joint auditors who was appointed in Annual General
Meeting, but declined to accept the appointment. The Board of Directors as per their
resolution, appointed C as a joint auditor in his place.
In this case, the vacancy created by B is neither caused by resignation of B nor is it a
casual vacancy because B’s appointment had not become effective. Hence, appointment
of C as joint auditor by the Board is not valid. C can only be appointed as joint
shareholders in the General Meeting.
i want clear my confusion that in this case Section 224(3) is not attracted , if not they why sir
if notice for intended resolution is given to appoint another person in place of retiring auditor at AGM and by reason of death or incapacity of that person(new auditor), the resolution is not passed at AGM, then how shall appointment of auditor takes place???
Section 224(3) provides that if no auditors are appointed or re-appointed at an annual general meeting of a company, the Central Government may appoint a person to fill the vacancy.So, it must've been assumed that atleast one among several other joint auditor has accepted our proposal for appointment, therefore there is no need to bring sec224(3) in action.