TMI Blog2018 (12) TMI 177X X X X Extracts X X X X X X X X Extracts X X X X ..... cause of the present Impugned Order the Respondent is raising contentions and disputes even with regard to the subsequent Audit of 2017-18 claiming that unless 2016-17 gets settled, the accounts of 2017-18 cannot be looked into. A litigation may remain pending for years and dispute relating to Accounts of a particular year may be raised. It does not mean that for years to come finalization of Accounts should be kept suspended or in doubts. For the above reasons, the Appeal is allowed. The Impugned Order directing re-audit of the accounts is quashed and set aside. The Respondent would be at liberty to question the audit done of 2016-17 at the time of final hearing of the Company petition. The accounts of subsequent Financial Years may be settled but would be subject to the decision of the Company Petition. Disposed off accordingly. No Costs. - Company Appeal (AT) No. 104 of 2018 - - - Dated:- 5-10-2018 - Mr. A. I. S. Cheema, Member (Judicial) And Mr Balvinder Singh, Member (Technical) For The Appellant(s) : Mr. Anandh Venkataramani, Mr. Rajsekhar Rao and Ms. Anannya Ghosh, Advocates For The Respondent(s) : Mr. Vivek Sibal, Ms. Anushree Kapadia and Ms. Priyanka Rathi, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of new Auditor on 07.12.2017, it was not possible that audit of the entire year would get completed in a couple of hours so as to approve the audited accounts on same day. 3. The Learned Counsel submits that the NCLT took note of the Resolution of the Board of Directors as on 01.11.2017 and EOGM which was held on 07.12.2017 and while dealing with the reasons in Impugned Order wrongly interpreted Section 139(8) of the Companies Act, 2013 (Act in brief). It is stated that NCLT wrongly assumed that the appointment was of 07.12.2017 and on such basis went on to direct re-audit of the accounts. According to the counsel without setting aside the earlier audit done and without doubting the correctness of audit done, such direction for re-audit could not have been passed. The argument is that before directing the re-audit, there has to be material to show that the audit already done was not correct and on mere surmises re-audit could not be directed. 4. Against this the learned counsel for the Respondents (original petitioner) submitted that if the Impugned Order is seen, only re-audit has been directed and that the same will not prejudice anybody. If the audit done by the Statut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of Board of Directors dated 01.11.2017 and the EOGM dated 07.12.2017. Para 20 reproduced Board Resolution of 01.11.2017 and in Para 21 Resolution of 07.12.2017 was reproduced as under:- 21. Resolution pertaining to the new Auditor in the EOGM held on 07.12.2017 is as follows: RESOLVED THAT pursuant to the provisions of section 139 (8) and other applicable provisions, if any of the Companies Act, 2013 as amended from time to time or any other law for the time being in force (including any statutory modification or amendment thereto or re-enactment thereof for the time being in force), M/s. Shah Bhatt, Chartered Accountants, Ahmedabad (Firm Registration No. 140823W) be and hereby appointed as Statutory Auditors of the company to fill up the casual vacancy caused by the resignation of M/s. Mashar Shah Associates, Chartered Accountants, Ahmedabad at a remuneration and out of pocket expenses, as may be decided by the Board of Directors of the Company, in consultation with them . 6. Impugned Order in Para 22 to 25 reads as under:- 22. A reading of both the resolutions would go to show that the Board of Directors only recommend name M/s. Shah Bhatt were appoi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e name of Auditor and that appointment as such is not to be done by the Board of Directors. It is stated that the Board Resolution was based on Section 139(8) and made appointment of Statutory Auditor and further appointed the same Auditor as Tax Auditor and the position of law will not change only because while putting up the matter to EOGM, under misconception word appointment was used instead of approval . Sub-section 8(i) of Section 139 reads as under:- (8) Any casual vacancy in the office of an Auditor shall- (i) in the case of a company other than a company whose accounts are subject to audit by an auditor appointed by the Comptroller and Auditor-General of India, be filled by the Board of Directors 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 company at a general meeting convened within three months of the recommendation of the Board and he shall hold the office till the conclusion of the next annual general meeting; 8. Section 139 relates to appointment of Auditors. This sub-section (8) deals with casual vacancy arisen in the office of an Auditor. In the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Para 4:- ( 4). The new Auditor upon getting the No objection from the earlier Auditor and earlier Auditor upon tendering the resignation in writing to the Company, the new Auditor was appointed on 1st November 2017 in the duly convened board meeting of the members of the board of directors of the Company and appointment is subject to the approval by the members in the General Meeting. The said new Auditor appointed as tax Auditor and has started statutory function expeditiously considering the stipulated time limit to get the accounts audited and successfully completed the audit on the date of approval of the members of the company in the Extra Ordinary General Meeting as held on 07.12.2017. The members in the Extra Ordinary General Meeting approved the appointment of new Auditor and hence the loud allegation made that on the day such Auditor was appointed has audited and not followed the principles of accounting and gave his report and such hue and cry as made is unfounded and misleading. As on 23.10.2017 the earlier Auditor tendered resignation and hence the board of directors were put into untold hardship and on 01.11.2017 new Auditor was appointed as tax Auditor and sta ..... X X X X Extracts X X X X X X X X Extracts X X X X
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