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TMI Blog2018 (12) TMI 177X X X X Extracts X X X X X X X X Extracts X X X X ..... of Statutory Auditor M/s Shah & Bhatt, CA to be bad in law and to restrain them from auditing. Vide I. A. No. 415 of 2017 Respondent (Petitioner) disputed how when new Auditor M/s. Shah & Bhatt's appointment was approved in EOGM dated 07.12.2017 they could have finalized the Accounts in one day. 2. The Learned Counsel for the Appellants who are original Respondents 1 to 4 in Company Petition, submits that the present Respondents (original Petitioner) filed the Company Petition alleging Oppression and Mismanagement. It appears that the original Petitioner also made allegations regarding accounts. It is stated by the learned counsel for the Appellants that I. A. No. 403 and 415 of 2017 were filed by the original Petitioner and one of the prayer made in I. A. No. 403 of 2017 was to have the accounts re-audit and that the Statutory Auditors M/s. Shah and Bhatt who had been appointed be restrained from doing audit. The dispute relates to the finalization of the Accounts for the Financial Year 2016-17. The learned counsel submits that the earlier Auditor M/s. Mashar Shah and Associates had earlier resigned on 23.10.2017 (Annexure A3-Page 149) and because of which Board Meeting (Annexur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the notice (Page 29-Dairy No. 4664) which was issued for this meeting dated 07.12.2017 as well as Explanatory Statement (Page 30) and the proposed resolution which were sent to the shareholders. It is stated that at all places the Respondents conveyed that on 07.12.2017 new Auditors M/s. Shah & Bhatt were to be appointed. It is stated that the pleading of the Respondents (present Appellants) was also that the appointment was done of the new Auditors on 07.12.2017. Thus according to the Counsel if the appointment was made on 07.12.2017 it is surprising as to how within couple of hours the Auditors completed the audit and even the report was approved by the general body. The learned counsel pointed out Annexure P-5 from the reply which is the EOGM Resolution's abstract. (It appears there is typing error with regard to time in this document. There is no dispute at Bar between the opposite Counsel, that the time was 11:30 AM which has been wrongly printed as 11:30 PM). The learned counsel for the Respondents referred to Annexure P-7 at Page 304 to say that after the appointment at 11:30 AM as per Annexure P5, the Auditors completed their job and the financial statements were approved ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ame of New Auditors in case of casual vacancy on the ground of resignation of Auditors. In view of the said proviso appointment of new Auditor, recommended by the Board of Directors shall be approved by the company at an AGM. Therefore, in the case on hand, the appointment of new Auditor even as per the Resolution of the Board of Directors and the resolution in the AGM placed on record along with rejoinder goes to show that name of the New Auditor was recommended by the Board of Directors and it was approved in the AGM. Therefore, the procedure contemplated under section 139(8) has been followed by the company in appointing the new Auditor M/s. Shah & Bhatt. Therefore, there is no illegality in appointing M/s. Shah & Bhatt as new Auditors of the first respondent company. 24. Next aspect is that when the appointment of New Auditor is approved in the EOGM on 07.12.2017, how it is possible he has audited the accounts of the company for the entire year on 07.12.2017 and they were approved by the Board of Directors and it was decided to place the said accounts before the Board on AGM dated 30. 12. 2017. 25. Contention of the learned senior counsel appearing for the respondents tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s clear from the words of this sub-section that when such casual vacancy due to resignation arises the Board of Directors have to "fill" the vacancy and "such appointment" was required to be "approved" by the general body convened within 3 months of the recommendation. The continuation or otherwise thereafter would depend on the approval at the general meeting. The learned counsel for the Appellant referred to the meeting of the Board of Directors dated 01.11.2017. In the Resolution relating to appointment of the new Auditor, it was mentioned at page 151:- "FURTHER RESOLVED THAT pursuant to the provisions of sub section (8) of Section 139 of Companies Act, 2013 and all the applicable rules made thereunder (and subject to any enactment, re-enactment or amendment thereof) and further subject to the approval of Members in General Meeting of the Company, M/s. Shah & Bhatt. , Chartered Accountants having FRN 140823W, having consented to act as Statutory Auditors in the casual vacancy so caused, be appointed as the Statutory Auditor to hold office as such till the conclusion of next Annual General Meeting of members of the Company at remuneration to be decided by the members of the Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roach of the Petitioner is highly condemnable. " (Emphasis Supplied) Thus the Appellants had pleaded that the new Auditor had been appointed as Tax Auditor and Statutory Auditor on 01.11.2017 subject to approval of the members of the general meeting. It appears from the Impugned Order that NCLT treated the new Auditor appointed only as Tax Auditor and thus further fell into error. 9. The grievance raised by Counsel for Respondent is that original Financial Data had been seized by police so how audit was done. Para 6 of Impugned Order itself shows Respondent himself had pleaded that audit was carried out on the basis of regenerated data, documents and records. In this computer age there could be multiple ways. We will not on this basis jump to doubts. Appellants may give details at the time of disposal of Company Petition. 10. We find substance in the submission of Appellants that when the audit had taken place, without finding at least prima facie from the record that there was error in the audit or that it had not been properly done, directing re-audit was not correct. We are not impressed by the arguments of the learned counsel of the Respondents that only because the notice ..... X X X X Extracts X X X X X X X X Extracts X X X X
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