Appointment of Auditor of a Government company

A Government company has been defined in section 617 of the Act “as any company in which not less than 51% of the paid-up share capital is held the Central Government or any State Government or Governments or partly the Central Government and partly one or more State Governments and includes a company which is a subsidiary of a Government company as thus defined”. In respect of any government company appointment of auditor is governed the provisions of section 619 of the Act. According to this section, the auditor of a government company shall be appointed or reappointed the Comptroller and Auditor General of India. However, the appointment will be subject to the ceiling discussed below under paragraph 7.3. The aforesaid provisions applicable to the appointment of auditor of government companies also apply to another category of companies, even though they are not government companies as contained in section 619B of the Act. Accordingly, the provisions of section 619 apply to a company in which not less than 51% of the paid-up share capital is held one or more of the following or any combination thereof:

  1.  the Central Government and one or more government companies;
  2.  any State Government or Governments and one or more government companies;
  3.  the Central Government, one or more State Governments and one or more government companies;
  4.  the Central Government and one or more corporations owned or controlled the Central Government;
  5.  the Central Government, one or more State Governments and one or more corporations owned or controlled the Central Government;  one or more corporations owned or controlled the Central Government or the State Government;
  6.  more than one government company; the auditor of such a company shall be appointed the Central Government on the advice of the Comptroller and Auditor General of India.

It should be noticed that the provisions of section 224A which require a special resolution for the appointment of auditor and section 619B have made the acceptance of the position of auditor in a company somewhat difficult. Before acceptance of the appointment given any company, an auditor should specifically satisfy himself that the company is not covered either section 224A or section 619B which require compliance with special procedure; otherwise he may find the appointment to be a nullity.

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