TMI Blog2018 (12) TMI 394X X X X Extracts X X X X X X X X Extracts X X X X ..... money which is recoverable from the two sister companies” is also a possible course of action the company can. The appellant seems to be making out a case that the company does not have enough fund to pay the auditors’ fee but we wonder that the poverty of the company does not deter them to fight among themselves rather than concentrated on running the company for mutual benefit of all but fall out of liabilities of such behaviour is made out to be excessive. We do not appreciate this approach. Fees claimed by the auditors on higher side and also is not as per the ICAI norms and at best are entitled for a fees of ₹ 8,00,000/- - Held that:- We have no grounds to doubt that number of days spent is 439 and number of hours spent was 3512 in auditing. As ₹ 36 lakh approx. claimed by auditor are supported by number of days spend and composition of people working on the assignment whereas there is no rational basis for suggesting that ₹ 8 lakhs is a reasonable amount for the duty to be done. It can at best be called a wild guess. We further noted that the appellant has paid nearly ₹ 62,00,000/- for auditing of the sister concerns for the same period as in the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... luru (hereinafter referred to as the Tribunal ). 2. The second appeal being Company Appeal (AT) No.121 of 2018 has been filed by the appellant, M/s Trans India Shipping Services Pvt Ltd, sister concern of 6th respondent in Company Appeal (AT) No.77/2018 against the same impugned order dated 19.1.2018. Smt Jansi Swarup Reddy who is wife of Mr.R.Swarup Reddy, is the Managing Director of M/s Trans India Shipping Services Ltd (appellant in Company Appeal (AT) No.121/2018). Mr. R. Swarup Reddy is appellant in Company Appeal (AT) No.77/2018. Therefore, the appellants in both the appeals are husband and wife (through Company) who are aggrieved by the impugned order. As the facts of case are similar and the appeals have been filed against the same impugned order, therefore, we will decide both these appeals by passing a common order. 3. The brief facts of the case are that originally the Company Petition No.59/2014 was filed before the Company Law Board and during the pendency of the matter before the CLB, M/s Brahmayya Co, were appointed as an independent Auditor vide order dated 7.7.2015 for the purpose of auditing the books of accounts of the 6th respondent including related pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the auditors are best entitled for a fees of ₹ 8,00,000/-. The appellant stated that the auditors should have consulted the company before starting the work of auditing, for fixation of fees as directed by the Company Law Board. The appellant stated that the auditors have not adhered to the directions issued by the Tribunal and further stated that the cash balance lying with the Respondent Company in its bank account at Syndicate Bank is just ₹ 13,46,800/-. The appellant stated that the ICAI norms basing of which the auditors claimed fee is only a recommendatory in nature, therefore, the auditors can not fix the fee by merely quoting the norms of ICAI. The appellant gave the example of the fee paid by the banks basing on the turnover and contended the fee claimed by the auditors is too high in respect of the company whose turnover was only ₹ 60 crores in its entire operation of 33 months. 7. The original petitioners (1st and 2nd respondent herein) in the Company Petition filed their objections to the objections filed on behalf of the appellant. The original petitioners (1st and 2nd respondent herein) supported the stand taken by the Auditors regarding the paym ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounts of 1st respondent company for a period of seven years and one more year is also included i.e. 2013-14. Therefore, considering the voluminous of work, the man-days spent the fees claimed is in accordance with the ICAI norms. Therefore, the fees as claimed by the Auditors M/s Brahmayya Co is to be allowed. Already ₹ 500,000/- was paid out of ₹ 36,16,032/-. The balance amount is liable to be paid to Auditors M/s Brahmayya Co. In the result, the 1st respondent company is directed to pay balance of the Auditors fees of ₹ 31,16,032/-. If the company has no money at present, it has to realise the money which is recoverable from the two sister Companies i.e. M/s Auro Logistics Limited and M/s Trans India Shipping Services Pvt Ltd after paying the amount now available with the company bank account. 10. Being aggrieved by the said order dated 19.1.2018 the appellant has preferred the present company appeal. 11. Learned counsel appearing on behalf of the appellant stated that the Tribunal erred in directing that the 6th respondent to remit to the auditors the entire claimed amount of ₹ 36,16,032/-. The Learned Tribunal did not consider that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pertains to mere confirmation of 3 payments made by 6th respondent to creditor companies. Learned counsel for the appellant further stated that the Tribunal has wrongly held that the auditors have spent 439 man days for auditing the books of accounts whereas the 6th respondent was in operation for just 33 months and the auditors have not discussed the remuneration with 6th respondent before commencing the work as directed by the Learned Company Law Board as the auditors were fully aware of the weak financial position of 6th respondent. Learned counsel for the appellant further stated that the Tribunal erred in holding that the auditors have spent considerable audit time towards investigating the transactions done by the family members of Mr. B. Vekatarami Reddy the then CEO of 6th respondent. Learned counsel for the appellant stated that the Tribunal erred in accepting the unsustainable justification provided by the Auditors that since the audit work assigned to them involved investigations apart from normal audit and in view of the complexity of the case and that they were unable to arrive at the likely man hours before commencement of the audit and the auditors failed to explain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Companies Act, 1956 and direct the Respondents 2 to 4 to restore to the company all funds misapplied or retained by them including the company funds illegally diverted showing them as payments due to Auro Logistics Ltd and Trans India Shipping Services (P) Ltd. Learned counsel further stated that the auditor filed draft report before the Ld. Tribunal and duly raised their invoice of ₹ 36,16,302/- as fee/remuneration having worked for 439 days. Learned counsel for the 1st and 2nd respondent further submitted that the auditor has been given liberty to raise his fee/remuneration and the same was to be paid by 6th respondent. It is further stated that this issued is to be decided by the Tribunal and the respondents have no role in the same. Learned counsel for the 1st and 2nd respondent has sought to invoke the jurisdiction of this Hon ble Appellate Tribunal against the final order dated 19.1.2018 with a sole aim of delaying the adjudication of the company petition pending before the Tribunal. Lastly the learned counsel for the 1st and 2nd respondent submitted that the Tribunal has proceeded as per law and the order dated 19.1.2018 does not deserve any interference. 18. Rejoin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the Tribunal erred in directing 6th Respondent to remit to the auditors the entire claimed amount of ₹ 36,16,032/- and the appellant has only ₹ 1346800/- in their bank account. In this connection, we have noted that the auditors were appointed by the Tribunal and the liability for payment of the amount of audit fee is of the Company. Therefore, the Respondent company is liable to pay the audit fee of the auditors. Thus there is nothing wrong with such diections which calls for our interference with the same. 24. The other point argued by the appellant is that the Tribunal ought to have considered alternative methods for recovering monies to pay audit fees of auditors including auctioning of Respondent company movable assets instead of directing recovering from two companies. We have considered this issue and we are of the opinion that it is the duty of the Respondent Company to pay the audit fee of the auditors. It is not the duty of the Tribunal to direct the company to consider the other methods for recovering monies. As regards the Tribunal s observations in the impugned order that if the company has no money at present, it has to realise the money which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er ICAI norms seems reasonable. 27. During the course of arguments, the 7th respondent has justified the fees claimed on the basis of norms of ICAI and having meticulously spent the time on the assignment and the composition of people constituting audit team. Hence, 7th respondent asserted that the fees charged is reasonable looking into the context of the work which was required to do. 28. In the course of arguments, we toyed with idea if the 7th Respondent appearing in person through Mr. N.S. Sudarshan Gupta would consider voluntarily accepting to reduce the fees to some extent. The 7th respondent fairly stated that it would accept the orders of the Tribunal and another ₹ 4 or 5 lakhs may be reduced. However, going through the material on record and the impugned order for which the audit was involved and the mandays which were required to be spent as well as the expenditure made on audit of sister concerns, we feel it would be improper for us to reduce fees, least it set a precedent and generating litigations with the hope of getting reduction through the Tribunal by agitating the fees. When the auditor is showing the fees on the basis of ICAI norms we find it imprope ..... X X X X Extracts X X X X X X X X Extracts X X X X
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