As such, another general meeting has to be convened to appoint a new Auditor.

Accounts and Audit


.9lns. The matter in question was referred to the Research Committee of the Institute of Chartered Accountants of India which opined as follows:
The provisions of Section 240 of the Act do not envisage changing the normal law of the contract. Hence no appointment or reappointment is completed and effective if the Auditor declines the same. Such a case is neither a vacancy caused by resignation nor a casual vacancy. It further opined that the Companies Act clearly envisages that the appointment of the Auditor should, as a general rule, rest with the shareholders. The shareholders have to exercise this power in all cases, except in case of filling casual vacancy or appointing the first Auditors. This power cannot be delegated to the Board of Directors.
As such, another general meeting has to be convened to appoint a new Auditor.
32. Is it in order for an Auditor to continue to function as Auditor when the next
annual general meeting has not been held in time? Can he continue as Auditor in case a new Auditor has been appointed in his place at the annl;Jal general meeting which
was adjourned to a later date? ~ fC.A. (Final) Nov., 1995J
.9lns. Auditor continues to hold office from the conclusion of one AGM till the conclusion of the next AGM [Sec. 224(1)]. If the meeting is adjourned, the Auditor continues to remain in office till the meeting is finally concl~ Even where new Auditor has been appointed in the original AGM, the Auditor shall continue and new Auditor will assume office only after the AGM has been finally concluded.
Also see answer to Q. 30.

33.

(a) What is the procedure for appointment of an Auditor of a company in which 25% of the subscribed capital is held by the Life Insurance Corporation of India? (
OR
When is it necessary for a company to appoint its Auditor by a special
solution? fC.A. (Final) Nov., 1986; Nov., 1989J
(b) State the procedure for appointment of an Auditor in a casual vacancy.

.9lns .

(a) Appointment of an Auditor by Special Resolution
Section 224-A(1) provides that in the case of a company in which 25% or more of the
subscribed share capital is held, whether singly or in any combination by :
(a) a public financial institution or a Government company or Central Govern
ment or any State Government; or
(b) any financial or other institution established by any provincial or State Act in
which a State Government holds not less than 51 per cent of the subscribed
share capital; or
(c) a nationalised bank or an insurance company carrying on general insurance
business; the appointment of Auditor shall be made by a special resolution.
The Department of Company Affairs has chirified that the aforesaid sub-clauses
(a) to (c) to Section 224A (1) are not mutually exclusive.
The provisions of sub-section (1) of that Section would, therefore, apply to all cases of
shareholdings in any combination by any of the institutions mentioned in the three clauses.