TMI Blog2019 (10) TMI 1329X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unal. This applicant has been filed by the applicant-Petitioner under the provisions of First Proviso to Section 140(5) of the Companies Act, 2013, for the appointment of Mukund M. Chitale Co., as Statutory Auditor for IL FS Financial Services Ltd (IFIN), for the Financial Year 2018-19 onwards. The applicant further contends that the subject matter of this application is within the jurisdiction of this Tribunal. The applicant contends that some of the Respondents in Company Petition No.2062/2019 filed MA 2258/2019, 2268/2019 and 2270/2019 before this Tribunal, challenging the maintainability of the Applicant-Petitioner's Company Petition No.2062/2019. After hearing the applications at length, this Tribunal was pleased to uphold the maintainability of the Company Petition No.2062/2019, vide its order dated 9.8.2019. The applicant further contends that Respondent No.3, 4 and 1 in Company Petition No.2062/2019 have challenged the order above dated 9.8.2019 before the Hon'ble NCLAT, vide Company Appeal Nos.222/2019, 223/2019 and 224/2019, where the Hon'ble NCLAT while issuing a notice in the said appeals, passed the following order on 20.8.2019: During the pende ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecial Judge (Companies Act) at Greater Mumbai qua the Respondents Direct the Hon'ble NCLT to permit Petitioner No. 1 to appoint an auditor for IL FS Financial Services Ltd in terms of the first proviso to Section 140(5). The applicant further contends that after hearing the SLP, the Hon'ble Supreme Court, vide order dated 26.9.2019, has interalia, directed: Mr. Mehta, learned Solicitor General submitted that after the resignation of the original writ petitioners, the Company had passed a resolution on 11.07.2019 appointing M/s. Mukund M. Chitale Co., Chartered Accountants as Statutory Auditors of the Company, to fill the resultant vacancy but said M/s. Mukund M. Chitale Co., Chartered Accountants have expressed their inability to take up the assignment which would in turn mean that fresh appointment is required to be made to fill up the vacancy. We see no reason why steps in that behalf could not be undertaken with promptitude so that the interest of the company is not prejudiced on any count. Learned Solicitor General submits that appropriate application shall be moved before the NCLT. We grant liberty for moving such an application. If such an ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .7.2019, the EGM was conducted wherein the resolution appointing MMC was passed. After that, MMC, vide its letter dated 17.7.2019, sought a no-objection from R2 for MMC accepting the appointment as IFIN's Statutory Auditor. R2, vide its letter dated 24.7.2019 informed MMC that it did not have any objection, professional or otherwise, to MMC accepting its appointment as IFIN's Statutory Auditor. The Respondent further submits that the Petitioner had not disclosed the above facts in any of its filings before this Tribunal. The Respondent further submits that entertaining and considering the present MA No.3254/2019 would necessarily entail a finding against R2 and R5 as envisaged under Section 140(5) of the Companies Act, 2013. Heard the argument of the Ld. Counsel for the parties and perused the record. The Ld. Counsel for the Respondent has emphasised mainly that by passing an order in MA 3254/2019, would necessarily entail a finding against R2 and R5 as envisaged under Section 140(5). It is further contended by the Respondent that this would constitute a breach and violation of the injunctive directions in the BHC interim order passed by Hon'ble High Court in Writ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er is as under: Mr. Mehta, learned Solicitor General submitted that after the resignation of the original writ petitioners, the Company had passed a resolution on 11.07.2019 appointing M/s. Mukund M. Chitale Co., Chartered Accountants as Statutory Auditors of the Company, to fill the resultant vacancy but said M/s. Mukund M. Chitale Co., Chartered Accountants have expressed their inability to take up the assignment which would in turn mean that fresh appointment is required to be made to fill up the vacancy. We see no reason why steps in that behalf could not be undertaken with promptitude so that the interest of the company is not prejudiced on any court. Learned Solicitor General submits that appropriate application shall be moved before the NCLT. We grant liberty for moving such an application. If such an application is moved, the matter shall be dealt with in accordance with law. On perusal of the above order, it is clear that Hon'ble Supreme Court has considered the resolution of the IFIN dated 11.7.2019 regarding the appointment of M/s. Mukund M. Chitale co., Chartered Accountants as Statutory Auditors of the Company, to fill the resultant vacanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e initiated action to appoint replacement statutory auditor for IFIN for FY 2019-20 by convening AGM at a very short notice on 11.7.2019. It was also informed that as per provisions of Section 140(5), the Central Govt in MCA may by an order of NCLT, appoint a new statutory auditor. Therefore, the company wrote to Mr. M. M. Juneja, RD (WR) as well as Secretary, MCA that the prayer should be made to NCLT to pass an order authorising Central Govt, MCA to appoint new Statutory Auditor. It is also clear that after the said email correspondence on 21.7.2019 at 9.43 p.m., IFIN wrote a letter to M. M. Chitale Co, informing that the company inadvertently issued engagement letter of M. M. Chitale Co instead of suggesting the name of identified firm to MCA for due consideration and after getting decision of NCLT in the ongoing proceedings under Section 140(5) of the Companies Act, 2013. Based on the above, it is clear 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 regardi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5) of the Companies Act, 2013 and Deloitte Haskins Sells LLP term has already expired after the FY 2017-18 after completion of the tenure. Thereafter, the vacancy of Statutory Auditor was filled by the company IFIN by appointment of M/s. M. M. Chitale. However, when it came to the knowledge of the company that authority for the appointment of Statutory Auditor under Section 140(5) lies with the Union of India, and it was informed to the Statutory Auditor M.M. Chjitale then Statutory auditor wrote an email to the company dated 21.7.2019 informing that it would be appropriate for the company to obtain appointment letter from MCA for the firm for the FY 2018-19 as per Section 140(5) of the Companies Act, 2013. It is further written by the Statutory Auditor that they will be able to give acceptance of the appointment after compliance with the provisions of the Companies Act, 2013. Resultantly, no statutory auditor is functioning as Statutory Auditor of IFIN. Hon'ble Supreme Court vide its order passed in SLP stated the statement of Mr. Mehta Ld. Solicitor General and given the liberty to Union of India for moving such application before NCLT for filling the resultant vacancy o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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