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2019 (10) TMI 1329 - Tri - Companies LawAppointment of statutory auditor - Section 140(5) of the Companies Act, 2013 - HELD THAT:- IFIN had itself inadvertently initiated the process for appointment of M/s. M. M. Chitale & Co as Statutory Auditor of IFIN under Section 140(5), but later company accepted its fault and requested the Statutory Auditor that inadvertently letter was issued regarding engagement of M. M. Chitale & Co., whereas letter should have been sent to MCA and the Union of India ,MCA was only authorized to submit an application to NCLT under Section 140(5) of the Act, and after getting sanction of NCLT, Union of India was authorized to appoint statutory auditor. It is also clear from the email correspondence dated 21.7.2019 8:38:05 p.m. that statutory Auditor firm sent a mail to IFIN informing that considering the facts brought out by the email dated 18.7.2019 Statutory Auditor firm submitted that it would be appropriate for the company to obtain a letter from MCA for our firm as statutory auditor for IL&FS Financial Services Ltd for the FY 2018-19 as per Section 140(5) of the Companies Act, 2013. Thus, it is clear that when statutory Auditor got to know that power for the appointment of new auditor under Section 140(5) lies with the Union of India and the Company has inadvertently issued engagement letter instead of suggesting the name to the Ministry of Corporate Affairs. The Statutory Auditor firm suggested the company to obtain an appointment letter from MCA for its firm to be appointed as Statutory Auditor for IL&FS Financial Services Ltd. It is crystal clear that IFIN which had itself initiated the procedure for appointment of Statutory auditor and after that appointed M.M. Chitale & Co as Statutory Auditor, has not started the job and suggested to the company to obtain appropriate letter from MCA for being appointed as the Statutory Auditor - the Statutory Auditor even though appointed under Rules could not start functioning as Statutory Auditor of IFIN on account of legal hurdles of Section 140(5) of the Companies Act, which only empowers Union of India to appoint Statutory Auditor. It is pertinent to mention that R2 contends that after filing the Company Petition No.2062/2019, R2, BSR & Associates LLP, who were the Statutory Auditors for IFIN for the year 2019-2020, resigned on 19.6.2019 and prior to appointment of BSR & Associates, earlier auditor Deloitte Haskins & Sells LLP retired automatically after 2017-18 as per statutory provisions. It is undisputed that first proviso to Section 140(5), authorises Union of India to change or appoint the auditor. It is also clear that company initiated the proceedings for appointment of Mukund M Chitale & Co as statutory auditor of the company and procedure was finalised for appointment. However, Statutory Auditor appointed by Company showed its inability to take up the assignment for want of sanction from Union of India. It is also important to mention that under first proviso to Section 140(5), only Union of India is authorised to appoint statutory Auditor of the company. Since the Statutory Auditor appointed by the Company on account of vacancy created by BSR & Associates has expressed its inability to take up the assignment, without getting the consent of Union of India. In the situation which has arisen on account of Showed inability by the Statutory Auditor, the Union of India got liberty to appoint Statutory Auditor of the Company. There are sufficient grounds for appointment of M/s. M. M. Chitale & Co. as Statutory Auditor of the Company - the appointment of Statutory Auditor made by the company shall be considered as an appointment of Statutory Auditor under first proviso to Section 140(5) of the Companies Act 2013. Application allowed.
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