The court clarified the limited jurisdiction of the Regional Director in considering applications for the removal of auditors and allowed the respondent to file a fresh application for the removal of the petitioner as the auditor.

VIBHU BAKHRU, J.

CM 43928/2016

1. Allowed, subject to all just exceptions.

2. The application is disposed of.

W.P.(C) 11225/2016 & CM 4874/2017 (delay)

3. The petitioner – a Chartered Accountant by profession – has filed the present petition, inter alia, impugning an order dated 19.10.2016 passed by the Regional Director, Northern Region, Ministry of Corporate Affairs (hereafter ‘the RD’), whereby he has allowed the respondent no.2’s application and recalled the order dated 04.02.2016 and further decided to proceed with respondent no.2 company’s application for permission to remove the petitioner as a statutory auditor.

4. Mr Nandrajog, learned Senior Counsel appearing for the petitioner has contended that the order passed on 04.02.2016 was a consent order and therefore, could not have been recalled by the RD.

5. The contentions advanced on behalf of the petitioner are not persuasive. Respondent no.2 had filed an application seeking permission from the RD (as he is the delegate of the Central Government) for removal of the petitioner as a statutory auditor. This application was made in terms of Section 140(1) of the Companies Act, 2013. Section 140(1) of the Companies Act, 2013 is set out below:

“The auditor appointed under section 139 may be removed from his office before the expiry of his term only by a special resolution of the company, after obtaining the previous approval of the Central Government in that behalf in the prescribed manner:

Provided that before taking any action under this subsection, the auditor concerned shall be given a reasonable opportunity of being heard.”

6. In view of the above, RD’s jurisdiction was limited to accepting the said application and granting permission to remove the petitioner or rejecting such permission. Notwithstanding the limited scope of the matter before the RD, he was persuaded to pass an order on 04.02.2016, inter alia, directing as under:

“I. The Respondent will commence the audit w.e.f. 15/02/2016 at 11:00 A.M. onwards at the Registered Office of the Applicant;

II. The Applicant will provide all necessary assistance to the Respondent;

III. The Respondent will ensure that Audit work will not be held up due to lack of any information or absence of any records. The Respondent is at liberty to make observations in this regard in his Audit Report;

IV. The draft Audit Report so prepared will be addressed to the Board of Directors with a copy to this Forum on or before 15/03/2016;

V. The Applicant will ensure that all necessary infrastructural facility should be provided to the Respondent as directed;

VI. The Applicant and Respondent will ensure that as mutually agreed for the commencement of Audit and submission of draft Audit Report, it is executed that both parties will provide all necessary information and cooperation so that health of the Company and the dignity of the profession will not be affected.

The matter will be heard of 16/03/2016 at 3:30 P.M. onwards.”

7. It is relevant to notice that the said order did not dispose of the application filed before the RD (a delegate of central Government) but was passed as an interim measure to put a quietus to the disputes between the parties. The said order did not serve its intended purpose and the parties have continued with their disputes. It is the petitioner’s case that he attempted to comply with the order and approached respondent no.2 along with his audit team for conduct of audit. This is disputed by respondent no.2. It is in this context that respondent no.2 filed an application for recall of the directions issued by the RD on 04.02.2016. By the impugned order, the RD has decided to proceed with respondent no.2’s application for permission to remove the petitioner as an auditor of the company; which in any case he was required to do.

8. The Court finds no infirmity with the impugned order. As stated above, the jurisdiction of the Central Government (RD as its delegate) is limited to considering the application for permission to remove an