The Companies (Auditor’s Report)Order,2015, is unlawful thus not enforceable.
The Ministry of Corporate Affairs on 10th April, 2015, has issued on its website the Companies (Auditor’s Report) Order,2015(the Order) though the Order is not Gazetted. The Order is illegal and is in complete mockery of the provisions of the law under which the Central Government is authorised to issue such order. How the Order is illegal, unlawful and therefore not enforceable is explained here. Provisions of section 143(11) of the Companies Act,2013, authorise the Central Government to issue the Order in question. Provisions of section 143(11) is reproduced below in its entirety for ready reference and better understanding:
“ 143(11) The Central Government may, in consultation with the National Financial Reporting Authority, by general or special order, direct, in respect of such class or description of companies, as may be specified in the order, that the auditor’s report shall also include a statement on such matters as may be specified therein.”
From the above cited provisions of section 143(11) it is crystal clear that the Central Government as and when wants to issue an order under the said section it can do so only in consultation with National Financial Reporting Authority(NFRA). Without consultation with NFRA the Central Government is not competent to issue such order.
Now have a look at the Order dated 10/4/2015, first paragraph which is reproduced as under:
“ S.O._(E).- In exercise of the powers conferred by sub-section (11) of section 143 of the Companies Act,2013 and in supercession of the Companies (Auditor’s Report) Order,2003, published in the Gazette of India, Extraodinary, Part II, Section 3, sub-section (i), vide number G.S.R. 480(E), dated the 12th June,2003, except as respects things done or omitted to be done before such supercession, the Central Government, after consultation with the Institute of Chartered Accountants of India, constituted under the the Chartered Accountants Act,1949 (38 of 1949), hereby makes the following order, namely:-.. ”
(Underlining has been done by the author to give emphasis)
From the above, on behalf of Central government one thing remains apparently admitted that the order which the government has issued is under the authority of power given to it by section 143(11) of the companies Act,2013. The power given by the section 143(11) to the Central Government is subject to Central Government consulting the National Financial Reporting Authority constituted under section 132 of the Companies Act,2013 before issuing any order under this section but what the Central government has done is that it has consulted the Institute of Chartered Accountants of India, constituted under the Chartered Accountants Act,1949, which is not competent to give any consultation to the Central Government so far as it relates to exercise of power by the Central Government u/s 143(11).
In view of the above the order issued by the Central Government is unlawful and thus has no legal force at all. A simple Writ Petition in any High Courts of India will result in striking down this order of the Central Government on the ground that while exercising its power u/s 143(11) the central government has exceeded its authority by substituting and superceding a statutory authority with a statutory body which has no relevance in section 143(11).
CS Anmol Jha
CAclubindia
