2017 (10) TMI 1196 - HC - Companies Law

Removal of an auditor prior to expiry of his term - maintainability of the application filed by respondent no.2 before the RD on the ground of limitation - Held that - It is the petitioner s case that the extraordinary General Body meeting was called on 01.10.2015 and the General Body meeting was held on 26.10.2015, wherein a special resolution was passed to remove the petitioner as the auditor. However, the application in Form ADT-2 was made on 14.11.2015. This Court is of the view that the aforesaid controversy need not delay the matter and thus, it is directed that it would be open for the respondent no.2 company to file a fresh application notwithstanding the application filed earlier which is pending for consideration. The respondent no.2 may thereafter hold a General Body meeting for removal of petitioner, if the permission to do so is granted by the Central Government (the RD).

Summary

Issues:
1. Impugning an order recalling the removal of a statutory auditor.
2. Jurisdiction of the Regional Director (RD) under Section 140(1) of the Companies Act, 2013.
3. Challenge to the maintainability of the application based on limitation under Rule 7 of the Companies (Audit & Auditors) Rules, 2014.

Impugning the Order:
The petitioner, a Chartered Accountant, challenged an order recalling his removal as a statutory auditor. The order was passed by the Regional Director (RD) based on an application by the respondent seeking permission for the removal. The petitioner argued that the original order was a consent order and could not be recalled. However, the court found the RD's jurisdiction limited to accepting or rejecting the application for removal under Section 140(1) of the Companies Act, 2013. The court noted that the original order did not resolve the dispute and directed the RD to consider the application and pass a final order within four weeks.

Jurisdiction of the Regional Director:
The court emphasized that the RD, as a delegate of the Central Government, has a restricted jurisdiction concerning the removal of an auditor before the term's expiry. The RD's role is to consider applications for permission to remove an auditor, as per the Companies Act, 2013. The court upheld the RD's decision to proceed with the respondent's application for the petitioner's removal and directed a timely final order.

Challenge Based on Limitation:
The petitioner raised a challenge regarding the application's maintainability due to a perceived delay in filing. The petitioner argued that the application for removal was not submitted within the specified timeframe under Rule 7 of the Companies (Audit & Auditors) Rules, 2014. Despite this contention, the court directed the respondent to file a fresh application if necessary, allowing for a new General Body meeting for the petitioner's potential removal, subject to Central Government approval.

In conclusion, the court addressed the issues raised by the petitioner comprehensively, emphasizing the limited scope of the RD's jurisdiction, the importance of adhering to statutory timelines, and the need for a timely resolution in matters of auditor removal. The judgment provided clarity on the legal aspects involved and offered specific directives for the parties involved to proceed in accordance with the law.