To Appoint a Person as Auditor Other Than Retiring Auditor U/S 140 of The Companies Act, 2013

5 November 2016 • Nupur Singhal


To Appoint a Person as Auditor Other Than Retiring Auditor U/S 140 of The Companies Act, 2013

5 November 2016 • Nupur Singhal

Appointment of Auditor

As per Section 139(6) of the Companies Act, 2013, the first auditor of the company shall be appointed by the Board of Directors within 30 days from the date of incorporation who shall hold office till the conclusion of first AGM.

Section 139(1) states that the shareholders of the company shall appoint an auditor at its first annual general meeting who shall hold office till the conclusion of sixth AGM subject to ratification at every AGM.

Person other than the retiring auditor is proposed to be appointed

Where a person other than the retiring auditor is proposed to be appointed as an auditor or where it is proposed that the retiring auditor shall not be re-appointed, a special notice under Section 115 of the companies Act, 2013 has to be given proposing that such a resolution would be moved at the next annual general meeting.

This provision is attracted only when the retiring auditor is not to be appointed after the completion of his term of 5 years or whatever his tenure is. It is to be noted that ratification of auditor appointment at every AGM shall not be treated as completion of the term of auditor. And therefore, if an auditor is to be removed during the tenure of his office, then Central Government approval is required as provided in Section 140(1).

Special Notice procedure

  • Notice shall be given by members holding minimum 1% of the total voting power or shares on which an aggregate sum of not less than Rs. 5,00,000 has been paid up as on the date of the notice. (Section 115 of the Companies Act, 2013)
  • The notice shall be sent not earlier than 3 months but at least 14 days before the date of general meeting.
  • The company shall give its members notice of the resolution at least 7 days before the meeting as prescribed in Rule 23 of the Companies (Management and Administration) Rules, 2014.

Rights available to the Retiring Auditor

  1. On receipt of the special notice, the company should send a copy thereof to the auditor to be removed. The Department has advised to send the notice by registered post acknowledgement due. (Circular No. 2/81, dated 17.10.1981).
  2. He has the right to send give representation of a reasonable length.
  3. The company is under the obligation to forward the said representation to all the members unless it is received too late.
  4. When the representation is not sent as above, the auditor has the right to get the representation read out in the relevant meeting.
  5. Representation made by the auditor shall also be filed with the Registrar when it is not sent to the members.
  6. Special notice is not required for the removal of the first auditor or auditors.


However, the company or any other person aggrieved may apply to the Tribunal not to send the representation and not to read it out in the meeting on the ground that the rights conferred by this section are being wrongly used by the auditor.

Explanatory Statement

The provisions of Section 173(2) (now Section 102 of Companies Act, 2013) as to the explanatory statement are not applicable in respect of the resolution for the removal, because the company merely acting in pursuance of a special notice received by it to move the resolution, is not a resolution proposed by the company [Life Insurance Corporation of India v. Escorts (1986) 59 Comp Case 548 (SL)].


  1. We were newly incorporated Company our 1st AGM was due on 31 December ,2021. however, our AGM was held late i.e. May, 2022. Our 1st auditor KPMG was reappointed in 1st AGM i.e on May 2022 for 5 years. However, later on they denied to become auditor and also didn’t tender resignation letter. We have not filed ADT-1 for thier re- appointment yet. New auditor have given consent letter in December 2022 for the period 2021-26. How can we make this default good

    1. Dear Reader,

      In this instant case, we are assuming that the Company has complied with all the applicable provisions (Section 139 of the Companies Act, 2013) w.r.t. the appointment of KPMG as a statutory auditor (for e.g. obtaining their consent and eligibility letter before such appointment). Firstly, it is advisable to file Form ADT-1 with additional fees to report the said appointment to rectify the procedural non-compliance.

      Further, the provisions of Section 140(2) of the Companies Act, 2013 (“the Act”), provide an option to the statutory auditor to resign from office if he does not want to continue in a company for any reason.

      Furthermore, as per Section 139(8) of the Act, a new auditor can be appointed by a company in case of a casual vacancy in the office of an auditor (i.e., through removal, resignation or death).

      Thus, as per the facts cited by you, it is advisable to have word with the present auditor to vacate the office via resigning and then proceed with the appointment of a new auditor in terms of the provisions of Section 139(8) of the Act.

      In case the issue persists, you can seek professional help in the matter.

  2. Dear Sir

    Kindly explain why Special notice is not required for the removal of the first auditor or auditors ?

    As per Section 139(9) of the Companies Act, 2013, every auditor is eligible to be re-appointed at an Annual General Meeting except in following case

    a. Auditor has completed a consecutive tenure of five years or, as the case may be, ten years, as provided under sub-section (2) of Section 139.
    b. Auditor is disqualified for re-appointment
    c. Special resolution has been passed at that meeting appointing some other auditor or providing expressly that he shall not be re-appointed.
    d. Auditor has given notice to the Company expressly writing his unwillingness to be re-appointed.

    Hence first auditor also eligible for re-appointment except in situation given above.

    Accordingly special notice is required from members for appointment of new auditor other then first auditor unless re-appointment of first auditor fall under above exception.

    1. The tenure of the first auditor expires on the conclusion of the first Annual General Meeting, if the Company wishes to appoint another person as the statutory auditor, it can do so via an ordinary resolution at the 1st AGM.
      However, in case the Company wishes to appoint (before the date of 1st AGM) some other person as the auditor then Section 140 shall be complied and a special notice and CG approval will be required to remove the first auditor as well.

  3. ADT-1 ( Appointment of Auditor) dealt with section sec 139(1) which read with Appointment and Reappointment and to be completed within the prescribed time limit , but how if the same is dealt with 139(6) , where the auditor is not appointed by AGM but by the directors. Section 139(6) over rides it and no mandatory clause for to file ADT_1… Yes If the same auditor who was appointed by the directors is reappointed in AGM then we need to but could you explain under which rule if appointed under 139(6).. makes it mandatory under CA act 2013

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