2010 (2) TMI 580 - HC - Companies Law

Oppression and mismanagement - the appellants have been subjected to untold harassment, misery and what not; that the first appellant in particular has suffered a lot in life - Held that - Appellants relying on the provisions of sections 539 to 544 of the Act are all neither relevant nor can be subject-matter for an appeal of the present nature seeking for change of an auditor who had been earlier appointed by the Board with the consent of the parties and as prosecution proceeding is an independent proceeding which is independent of the application under section 397 of the Act and it is open for the appellants to pursue this matter elsewhere, but not through a company application presented under section 397 of the Act and it is therefore, we reject this submission. The professional misconduct is not a matter which normally the Board examines and neither this court examines any such sundry matters and professional misconduct of the chartered accountant is a matter for the Institute of Chartered Accountants which is the disciplinary body. If the appellants have not been advised properly and in our understanding we find that she has been sufficiently taken for a ride and sundry in protracting this litigation for so long. Be that as it may, this is not a matter warranting interference with the order passed by the Board impugned in this appeal under section 10F of the Act. Appeal adismissed.

Summary

Issues Involved:
Appeal under section 10F of the Companies Act, 1956 against the order dated 30-11-2009 passed by the Company Law Board regarding changing the appointed Auditor.

Analysis:
The case involved an appeal under section 10F of the Companies Act, 1956 against an order passed by the Company Law Board related to changing the appointed Auditor. The appellants sought to replace the Auditor appointed by the Board with an independent Auditor from Bangalore. The application was made in a pending company petition under sections 397 and 398 of the Act. The Board had appointed the Auditor to look into the management of funds and other related aspects of the company. The dispute involved the Managing Director, her minor children, another shareholder, and the financier of the company. The Board rejected the request to change the Auditor, stating that it was not practical as the Auditor had been appointed earlier to investigate misappropriations and allegations between the shareholders. The second respondent had offered to exit the company upon proper valuation of shares, which made appointing a new Auditor unfeasible according to the Board.

The appellants challenged the Board's decision, alleging harassment and seeking relief before the adjudicatory forums. However, the Court found that the provisions enabling complaints and prosecutions against erring persons in company management were not relevant to the appeal seeking a change of Auditor. The Court emphasized that professional misconduct of the Auditor falls under the jurisdiction of the Institute of Chartered Accountants, not the Board or the Court. The Court rejected the appeal, stating that the matter did not warrant interference with the Board's decision. Consequently, the appeal was dismissed, leading to the dismissal of all related applications as well.