The First Auditor shall be appointed in the company by Board of Director under section 139(6) or 139(7) of the Companies Act, 2013( in Short, ‘CA,2013)1. Now Section 139(6) of CA, 2013 stated for appointment of first auditor of company other than Government Company and Section 139(7)of CA,2013 states for appointment of First auditor for Government company.
APPOINTMENT OF FIRST AUDITOR OF COMPANY OTHER THAN GOVERNMENT COMPANY
i. Appointment by Whom– The Board of Directors
ii. Time limit for appointment by Board- Within 30 days from the registration of company
iii. Failure of Board to appoint the first auditors within 30 days –consequence
a. Appointment shall be by members in Extraordinary General Meeting within 90 days.
b. The appointment requires an ordinary resolution
iv. Article naming the first auditors are void- The only method of appointment of first auditors is laid down in section 139 (6). Therefore, the auditors of newly formed company cannot be appointed through the MOA or AOA. [ICAI, compendium of opinions]
v. Tenure of office- The first auditor shall hold his office until the conclusion of the first AGM
vi. No Notice of Appointment-
a. There is no requirement regarding intimation of appointment to the first auditors by the company
b. Similarly, First auditors or company are not required to inform the registrar as to whether they have accepted the appointment or not.
APPOINTMENT OF FIRST AUDITOR OF COMPANY
i.Appointment by Whom– CAG
ii. Time limit for appointment. by CAG Within 60 days from the registration of company
iii. Failure of Board to appoint the first auditors within 60 days –consequence
a. Appointment shall be made by Board of Director
b. Within the next 30 days
iv. Failure of Board to appoint the first auditor within the next 30 days –consequence
a. Appointment shall be made by Members in EGM
b. Within the next 60 days
v. Tenure of office- The first auditor shall hold his office until the conclusion of the first AGM
A clause 139(6) or 139(7) with “Notwithstanding anything contained in sub-section (1) of Section 139 or sub-section (7) of CA, 2013 is appended to a section in the beginning with a view to give the enacting part of section in case of conflict on overriding effect over the Act. NON OBSTANTE CLAUSE may be used as a legislative device to overriding the provision mentioned with such clause.
The legislature is quite competent to create a legal fiction to enact Rule of Companies (Audit and Auditors) Rules, 2014 for purpose of appointing the auditors of the company in the CA, 2013. Such Rules are made with power conferred by Section 139(1) or 139(2) or 139(4) of CA, 2013. Nowhere Section 139(6) or 139(7) are mentioned the power or delegation permitted by enabling Acts. Section 3(51) of General Clauses Act, 1897 contains definition of Rule in the following words “ Rule” shall mean a rule made in exercise of a power conferred by any enactment and include a regulation made under any enactment.
Rule 4(2) of the Companies (Audit and Auditors) Rules, 20142 (Notified on 31.03.2014) has been stated about the filling of Form ADT-1 in the appointment of auditors of the company in section 139(1) of CA, 2013. The section 139(6) or 139(7) is not mentioned in Rule 4(2) the Companies (Audit and Auditors) Rules, 2014 intentionally.
Therefore, Form ADT-1 may not be submitted before ROC in time of appointment of First Auditor of Company under section 139(6) or 139(7) of CA, 2013.
1. 139(6) of Companies Act, 2013
Notwithstanding anything contained in sub-section (1), the first auditor of a company, other than a Government company, shall be appointed by the Board of Directors within thirty days from the date of registration of the company and in the case of failure of the Board to appoint such auditor, it shall inform the members of the company, who shall within ninety days at an extraordinary general meeting appoint such auditor and such auditor shall hold office till the conclusion of the first annual general meeting.
139(7) of Companies Act, 2013
Notwithstanding anything contained in sub-section (1) or sub-section (5), in the case of a Government Company or any other company owned or controlled, directly or indirectly, by the Central Government, or by any State Government, or Governments, or partly by the Central Government and partly by one or more State Governments, the first auditor shall be appointed by the Comptroller and Auditor-General of India within sixty days from the date of registration of the company and in case the Comptroller and Auditor-General of India does not appoint such auditor within the said period, the Board of Directors of the company shall appoint such auditor within the next thirty days; and in the case of failure of the Board to appoint such auditor within next thirty days, it shall inform the members of the company who shall appoint such auditor within sixty days at an extraordinary general meeting, who shall hold office till the conclusion of the first annual general meeting.
Conditions for appointment and notice to Registrar–
1) The auditor appointed under rule 3 shall submit a certificate that –
a. the individual or the firm, as the case may be, is eligible for appointment and is not disqualified for appointment under the Act, the Chartered Accountants Act, 1949 and the rules or regulations made there under;
b. the proposed appointment is as per the term provided under the Act;
c. the proposed appointment is within the limits laid down by or under the authority of the Act;
d. the list of proceedings against the auditor or audit firm or any partner of the audit firm pending with respect to professional matters of conduct, as disclosed in the certificate, is true and correct.
2) The notice to Registrar about appointment of auditor under fourth proviso to sub-section (1) of section 139 shall be in Form ADT-1.
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