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{"id":291441,"date":"2023-05-06T12:00:05","date_gmt":"2023-05-06T06:30:05","guid":{"rendered":"https:\/\/www.scconline.com\/blog\/?p=291441"},"modified":"2023-05-08T15:25:07","modified_gmt":"2023-05-08T09:55:07","slug":"supreme-court-upholds-constitutionality-of-section-1405-of-the-companies-act-fraud-by-auditors","status":"publish","type":"post","link":"https:\/\/blog.scconline.gen.in\/post\/2023\/05\/06\/supreme-court-upholds-constitutionality-of-section-1405-of-the-companies-act-fraud-by-auditors\/","title":{"rendered":"Supreme Court| Section 140(5) of the Companies Act constitutional; Proceedings do not come to an end on resignation\/ removal of an auditor"},"content":{"rendered":"\n
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Supreme Court:<\/b> The Bench of MR Shah<\/b>* and MM Sundresh, JJ has held that Section 140(5)<\/a> of the Companies Act, 2013<\/a> that deals with Removal, Resignation of Auditor and Giving of Special Notice” appears in Chapter X of the Act which is titled as “Audit and Auditors”, is not discriminatory, arbitrary and\/or violative of Articles 14<\/a>, 19(1)(g)<\/a> of the Constitution of India<\/a> and that subsequent resignation of an auditor after the application is filed under Section 140(5) by itself shall not terminate the proceedings under Section 140(5) of the Act.<\/p>\n

Section 140(5) of the Companies Act – Explained<\/h4>\n

Section 140(5) of the Act empowers the Tribunal (NCLT), either suo motu<\/i> or on an application made to it by the Central Government or by any person concerned, to take action against the auditor who has acted in a fraudulent manner or is abetting or colluding in fraud with the management of a company. If on completion of an enquiry it is found by the Tribunal that an auditor of a company has, whether directly or indirectly, acted in a fraudulent manner or abetted or colluded in any fraud by, or in relation to, the company or its directors or officers, it may by order direct the company to change its auditors.<\/p>\n

It is to be noted that,<\/p>\n