Auditors’ appointment not mutually exclusive: DCA

ENS ECONOMIC BUREAU

NEW DELHI, SEPTEMBER 18: THE department of company affairs (DCA) has clarified that the provisions of the sub-clauses (a) to (c) to sub-section 1 of section 224-A of the Companies Act of 1956, relating to the appointment of an auditor in certain cases with the approval of the company by special resolution, were not mutually exclusive. It would, therefore, apply to all cases of shareholdings in any combination by any of the institutions mentioned in the three clauses, said a statement from the department.

This clarification has been issued following consultations with the department of legal affairs and the Solicitor General. The department had received a large number of representations from companies and industry associations that the three sub-clauses to sub-section 1 of section 224-A of the Act should be treated as mutually exclusive. Sub-section 1 of section 224-A of the Act states: (1) In the case of a company in which not less than 25 per cent of the subscribed share capital is held, whether singly or in any combination, by — (a) a public financial institution or a government company or the Centre ; or (b) any state government, or any financial or other institution established by any provincial or state Act in which a State holds not less than 51 per cent of the subscribed share capital; or (c) a rationalised bank or an insurance company carrying on general insurance business, the appointment or re-appointment at each annual general meeting of an auditor or auditors share be made by a resolution.