Auditors appointment

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eshwar (Querist)
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31 December 2012 A private limited was due to hold its AGM on 29/09/2012 has not yet held it?
because of this there is no appointment of Auditor?
Plus the company wants to change its Auditor but has not yet disclosed the name of the new auditor to its current auditor?
The Board is asking for NOC from the current auditor?
I Want to know what legal non compliance the PVT ltd is into?
Recourse to the Current Auditor?

Ajay Mishra

Ajay Mishra (Expert)
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31 December 2012 Hi

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.
Further, omission or failure to pass a special resolution at an annual general meeting for appointmentof an auditor under section 224A has under mentioned two consequences:—
(a) it shall be deemed that no auditor or auditors had been appointed by the company at its annual general meeting; and
(b) the power of the Central Government under section 224(3), to appoint auditors becomes exercisable.
Circular No. 5 of 1972, dated 21-2-1972 inter alia provides that the Government's power to appoint auditors under section 224(3) becomes available where at an annual general meeting no auditors are appointed or re-appointed. Where auditors are not appointed or re-appointed in accordance with the provisions of the Act including section 224(2), as read with sections 225 and 190, section 224(3) becomes
attracted in the matter.

Ajay Mishra

Ajay Mishra (Expert)
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31 December 2012 Prosecution and penalty for non-compliance
Where the company has defaulted under section 156 and/or 210 of the Companies Act, 1956, that is, where they have not held the annual general meeting and/or have not placed the balance sheet and the profit and loss account before the annual general meeting, prosecutions are rarely launched. The fact that the complaint has to be filed in the court of first class Magistrate having territorial jurisdiction over the place at which the Registered office of the company is situated, which is at the place other than the Head Quarter of the Registrar need not prevent the Registrar from enforcing the penal provision in this regard.
Section 168 contains penal provision for not complying with the provisions of section 166 or 167. It provides that if default is committed in holding the annual general meeting of the company, the company and every officer of the company who is in default shall be punishable with fine which may extend to Rs. 50,000 and if the default is continuing one then with further fine extending upto Rs. 2,500 for every day after the first day during which the default continues.
However, if the books of accounts have been ceased by the police and produced in criminal court, the default is beyond the control of the company and should not be punished.
Failure to hold the meeting in each calendar years is a separate offence different from failure to had it within 15 months of the earlier meeting.
In State of Kerela v West Coast Planters Agencies (P) Ltd. (1958) 28 Comp Cas. 13 (Ker) (DB) it was held that where there was only a single member in a company then not holding the AGM would not amount to a default.
In ROC v Krishna Nambiar (1958) Comp Cas 225, it was held that if there was any default in holding AGM the company immediately becomes punishable but for an officer of the company to be punished it is necessary to prove that he was knowingly responsible for the default.

eshwar

eshwar (Querist)
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31 December 2012 Central Government role is applicable in the case of PVT. LTD. also?????

Ajay Mishra

Ajay Mishra (Expert)
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31 December 2012 Hi

Yes, it will apply on both, public as well as private limited company.

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