Section 137 - Substitution of section 25. - Finance Act, 2021

Substitution of section 25. 137. For section 25 of the principal Act, the following sections shall be substituted, namely:- Appointment of auditors. 25. (1) The Corporation shall, at its first annual general meeting, appoint as many auditors (which may be individual or firm) as it deems fit, and such auditor shall hold office from the conclusion of that meeting till the conclusion of its sixth annual general meeting thereafter, and shall similarly appoint auditor for subsequent periods of five years at a time, and the manner and procedure of selection of auditors by the members at such a meeting shall be such as may be prescribed: Provided that before such appointment is made, the written consent of the auditor to such appointment, and a certificate from the auditor that the appointment, if made, shall be in accordance with such conditions as may be prescribed, shall be obtained from the auditor: Provided further that such certificate shall also declare that the auditor satisfies the criteria provided for eligibility for appointment as an auditor of a company under section 141 of the Companies Act. (2) The Corporation shall not appoint an auditor for more than one term of five consecutive years: Provided that an auditor who has completed the term of appointment shall not be eligible for re-appointment or for fresh appointment as auditor for a period of five years from such completion: Provided further that no audit firm shall be appointed as auditor for a period of five years which, if appointed, as on the date of its appointment, would have a common partner or partners with the audit firm whose term as auditor in the Corporation had expired in the financial year immediately preceding the financial year in which fresh appointment is to be made, or which is associated with the same network of audit firms as the audit firm whose term had expired as aforesaid: Provided also that nothing contained in this sub-section shall prejudice the right of the Corporation to remove an auditor or the right of the auditor to resign from such office of the Corporation. Explanation .-For the purposes of this sub-section, the expression same network includes firms operating or functioning under a common brand name or trade name, or under common control, or which are network firms as defined under any guidelines for networking issued by the Institute of Chartered Accountants of India, constituted under section 3 of the Chartered Accountants Act, 1949 (38 of 1949.). (3) Subject to the provisions of this Act, the Corporation may resolve in a general meeting to provide that- (a) in the audit firm appointed by it, the auditing partner and his team shall be rotated at such intervals as may be resolved by members; (b) the audit shall be conducted by more than one auditor. (4) Any casual vacancy in the office of an auditor shall be filled by the Board within thirty days, but if such casual vacancy is as a result of the resignation of an auditor, such appointment shall also be approved by the Corporation in a general meeting convened within three months of the Board making recommendations in this behalf, and the auditor so appointed shall hold office till the conclusion of the next annual general meeting. (5) Where at any annual general meeting, no auditor is appointed, the existing auditor shall continue to be the auditor of the Corporation. (6) All appointments, including the filling of a casual vacancy of an auditor under this section, shall be made after taking into account the recommendations of the Audit Committee. (7) The remuneration of the auditor shall be fixed in the general meeting or in such manner as may be determined therein. (8) Until the first annual general meeting is held, auditors duly qualified to act as auditors of companies under the law for the time being in force relating to companies shall be appointed by the Board with the previous approval of the Central Government, and shall receive such remuneration from the Corporation as the Central Government may fix. (9) Notwithstanding anything contained in sub-section (1), where an auditor has been appointed previous to the first annual general meeting, either under section 25 [as it stood before the coming into force of section 137 of the Finance Act, 2021] or thereafter under sub-section (8), and the term specified for such auditor s appointment has not expired, and the auditor meets the criteria referred to in sub-section (1), such auditor shall continue till the expiry of the term so specified: Provided that nothing contained in this sub-section or in section 25A shall prejudice the right of the Corporation to remove such auditor or the right of the auditor to resign from such office of the Corporation. (10) An auditor appointed under sub-section (1) or sub-section (8) or sub-section (9) shall provide to the Corporation or its subsidiaries such other services as are approved by the Board, but shall not include any of the services, whether rendered directly or indirectly, that are enumerated in section 144 of the Companies Act: Provided that an auditor who has been performing any non-audit services on or before the coming into force of section 137 of the Finance Act, 2021 shall comply with the provisions of this sub-section before the close of the first financial year in which the said section comes into force. Explanation .-For the purposes of this section, the word firm shall include a limited liability partnership incorporated under the Limited Liability Partnership Act, 2008 (6 of 2009.). Removal and resignation of auditor. 25A. (1) The auditor appointed under section 25 may be removed from office before expiry of the term of appointment only by a special resolution: Provided that before taking any action under this sub-section, an auditor proposed to be removed shall be given a reasonable opportunity of being heard, which shall include the right to represent in writing to the Corporation and, where the auditor requests that such representation be notified to members, to have a copy thereof sent to every member and in case a copy is not sent as aforesaid because it was received too late, to have the representation read out at the meeting, without prejudice to the right to be heard orally. (2) The auditor who has resigned from the Corporation shall file within a period of thirty days from the date of resignation, a statement in the prescribed form with the Corporation, indicating the reasons and other facts as may be relevant with regard to the resignation. (3) Without prejudice to any action under this Act or any other law, if the Central Government is satisfied, in consultation with the Comptroller and Auditor General of India, that any change of auditor is required, it may make an order that the auditor shall not function as such and may appoint another auditor in place of such auditor. Powers and duties of auditors and auditor s report. 25B. (1) Every auditor of the Corporation shall have a right of access at all times to the books of account and vouchers of the Corporation, and shall be entitled to require from the officers of the Corporation such information and explanation as the auditor may consider necessary for the performance of his duties as auditor, and shall, amongst other matters, inquire into the following matters, namely:- (a) whether loans and advances made by the Corporation on the basis of security have been properly secured; (b) whether the terms on which loans and advances have been made are prejudicial to the interests of the Corporation or its members; (c) whether transactions of the Corporation which are represented merely by book entries are prejudicial to its interests; (d) whether so much of the assets of the Corporation as consist of shares, debentures and other securities have been sold at a price less than that at which they were purchased; (e) whether loans and advances made by the Corporation have been shown as deposits; (f) whether personal expenses have been charged to revenue account; (g) where it is stated in the books and documents of the Corporation that any shares have been allotted for cash, whether cash has actually been received in respect of such allotment, and if no cash has actually been so received, whether the position as stated in the account books and the balance-sheet is correct, regular and not misleading: Provided that the auditor shall also have the right of access to the records of all the subsidiaries and associate companies of the Corporation, in so far as they relate to consolidation of the Corporation s financial statements with those of such subsidiaries and associate companies. (2) The auditor shall make a report to the members on the accounts examined by the auditor and on every financial statement which is required by or under law to be placed in general meeting, and such report shall, after taking into account applicable provisions of this Act and any other law for the time being in force, the standards referred to in section 24B, and matters that are required to be included in the audit report under the provisions of this Act or any other law for the time being in force, and to the best of the information and knowledge of the auditor, state that the said accounts and financial statements give a true and fair view of the state of the Corporation s affairs as at the end of its financial year and profit or loss and cash flow for the year. (3) The auditor s report shall also state- (a) whether the auditor has sought and obtained all the information and explanations which to the best of the auditor s knowledge and belief were necessary for the purpose of audit and if not, the details thereof and the effect of such information on the financial statements; (b) whether, in the auditor s opinion, proper books of account as required by law have been kept by the Corporation so far as appears from the auditor s examination of those books and proper returns adequate for the purposes of audit have been received from branches not visited by the auditor; (c) whether any report referred to in the proviso to sub-section (6) has been sent to the Corporation s auditor, and the manner in which the Corporation s auditor has dealt with it in preparing the auditor s report; (d) whether the Corporation s balance-sheet and profit and loss account dealt within the report are in agreement with the books of account and returns; (e) whether, in the auditor s opinion, the financial statements comply with applicable standards; (f) the observations or comments of the auditor on financial transactions and matters which have any adverse effect on the functioning of the Corporation; (g) whether any director is disqualified to be or remain a director under clause (i) of section 4A; (h) any qualification, reservation or adverse remark relating to the maintenance of accounts and matters connected therewith; (i) whether the Corporation has adequate internal financial controls with reference to financial statements in place and the operating effectiveness of such controls; (j) such other matters as may be prescribed. (4) Where any of the matters required to be included in the audit report under this section is answered in the negative or with a qualification, the report shall state the reasons therefor. (5) All qualifications, observations or comments mentioned in there port of the auditor appointed for the Corporation, in respect of financial transactions or matters that have any adverse effect on the functioning of the Corporation, shall be read out in general meeting and shall be open to inspection by any member. (6) In respect of a branch or an office of the Corporation, the accounts shall be audited either by the auditor appointed for the Corporation (herein referred to as Corporation s auditor) in this section or by any other person qualified for appointment as an auditor of the Corporation and appointed as such under section 25, or where the branch or office is situated in a country outside India, the accounts of the branch or office shall be audited either by the Corporation s auditor or by an accountant or by any other person duly qualified to act as an auditor of the accounts of the branch or office in accordance with the laws of that country, and the duties and powers of the Corporation s auditor with reference to the audit of the branch or office and the auditor thereof, if any, shall be such as may be prescribed: Provided that the auditor for a branch or office shall prepare a report on the accounts of the branch or office, examined by such auditor and shall send it to the Corporation s auditor, who shall deal with it in the Corporation s auditor s report in such manner as the Corporation s auditor may consider necessary. Internal auditor. 25C. (1) The Board shall, on the recommendation of the Audit Committee, appoint an internal auditor, who shall either be a chartered accountant or a cost accountant, or such other professional as may be determined by the Board to conduct the internal audit of the functions and activities of the Corporation. (2) The Audit Committee shall- (a) recommend to the Board for the appointment, remuneration and terms of appointment of the internal auditor; (b) in consultation with the internal auditor, formulate the scope, functioning, periodicity and methodology for conducting the internal audit; (c) review and monitor the internal auditor s performance and effectiveness of audit process. Special auditor. 25D. Notwithstanding anything contained in sections 19C, 23A, 25, 25A and 25B, the Central Government may, at any time, appoint such auditor as it deems fit as a special auditor to examine and report on the accounts of the Corporation, and such auditor shall have the same rights of access to the books of account and vouchers of the Corporation and entitlement to require information and explanation from the officers of the Corporation as an auditor of the Corporation has under section 25B. .