139. Appointment of auditors
(1) Subject to the provisions of this Chapter, every company shall, at the first
annual general meeting, appoint an individual or a firm as an auditor who shall hold office
from the conclusion of that meeting till the conclusion of its sixth annual general meeting and
thereafter till the conclusion of every sixth meeting and the manner and procedure of selection
of auditors by the members of the company at such meeting shall be such as may be prescribed:
Provided that the company shall place the matter relating to such appointment for
ratification by members at every annual general meeting:
Provided further that before such appointment is made, the written consent of the
auditor to such appointment, and a certificate from him or it that the appointment, if made,
shall be in accordance with the conditions as may be prescribed, shall be obtained from the
auditor:
Provided also that the certificate shall also indicate whether the auditor satisfies the
criteria provided in section 141:
Provided also that the company shall inform the auditor concerned of his or its
appointment, and also file a notice of such appointment with the Registrar within fifteen days
of the meeting in which the auditor is appointed.
Explanation.—For the purposes of this Chapter, “appointment” includes reappointment.
(2) No listed company or a company belonging to such class or classes of companies
as may be prescribed, shall appoint or re-appoint—
(a) an individual as auditor for more than one term of five consecutive years;
and
(b) an audit firm as auditor for more than two terms of five consecutive years:
Provided that—
(i) an individual auditor who has completed his term under clause (a) shall
not be eligible for re-appointment as auditor in the same company for five years
from the completion of his term;
(ii) an audit firm which has completed its term under clause (b), shall not
be eligible for re-appointment as auditor in the same company for five years from
the completion of such term:
Provided further that as on the date of appointment no audit firm having a common
partner or partners to the other audit firm, whose tenure has expired in a company immediately
preceding the financial year, shall be appointed as auditor of the same company for a period
of five years:
Provided also that every company, existing on or before the commencement of this Act
which is required to comply with provisions of this sub-section, shall comply with the
requirements of this sub-section within three years from the date of commencement of this Act:
Provided also that, nothing contained in this sub-section shall prejudice the right of
the company to remove an auditor or the right of the auditor to resign from such office of the
company.
(3) Subject to the provisions of this Act, members of a company may resolve to
provide that—
(a) in the audit firm appointed by it, the auditing partner and his team shall be
rotated at such intervals as may be resolved by members; or
(b) the audit shall be conducted by more than one auditor.
(4) The Central Government may, by rules, prescribe the manner in which the companies
shall rotate their auditors in pursuance of sub-section (2).
Explanation.—For the purposes of this Chapter, the word “firm” shall include a limited
liability partnership incorporated under the Limited Liability Partnership Act, 2008.
(5) Notwithstanding anything contained in sub-section (1), 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 Comptroller and Auditor-General of India
shall, in respect of a financial year, appoint an auditor duly qualified to be appointed as an
auditor of companies under this Act, within a period of one hundred and eighty days from
the commencement of the financial year, who shall hold office till the conclusion of the
annual general meeting.
(6) 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.
(7) 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 the next thirty days, it shall inform the members of
the company who shall appoint such auditor within the sixty days at an extraordinary general
meeting, who shall hold office till the conclusion of the first annual general meeting.
(8) Any casual vacancy in the office of an auditor shall—
(i) in the case of a company other than a company whose accounts are subject to
audit by an auditor appointed by the Comptroller and Auditor-General of India, be filled
by the Board of Directors within thirty days, but if such casual vacancy is as a result of
the resignation of an auditor, such appointment shall also be approved by the company
at a general meeting convened within three months of the recommendation of the Board
and he shall hold the office till the conclusion of the next annual general meeting;
(ii) in the case of a company whose accounts are subject to audit by an auditor
appointed by the Comptroller and Auditor-General of India, be filled by the Comptroller
and Auditor-General of India within thirty days:
Provided that in case the Comptroller and Auditor-General of India does not fill
the vacancy within the said period, the Board of Directors shall fill the vacancy within
next thirty days.
(9) Subject to the provisions of sub-section (1) and the rules made thereunder, a
retiring auditor may be re-appointed at an annual general meeting, if—
(a) he is not disqualified for re-appointment;
(b) he has not given the company a notice in writing of his unwillingness to be
re-appointed; and
(c) a special resolution has not been passed at that meeting appointing some
other auditor or providing expressly that he shall not be re-appointed.
(10) Where at any annual general meeting, no auditor is appointed or re-appointed, the
existing auditor shall continue to be the auditor of the company.
(11) Where a company is required to constitute an Audit Committee under section 177,
all appointments, including the filling of a casual vacancy of an auditor under this section
shall be made after taking into account the recommendations of such committee.