SC: Completed Trial can't be Remanded for Procedural Lapse Unless Prejudice is Proven  ||  SC: Sessions Courts Cannot Bar Statutory Remission and Commutation Through Special Sentences  ||  SC: Article 311 Bar Inapplicable If Removing Officer Equals Appointing Authority in Status  ||  SC: Contractual Bar Prevents Arbitral Tribunal From Awarding Pre-Reference Interest  ||  SC Frames Guidelines to Prevent POCSO Act Misuse by Parents in Custody Disputes  ||  Delhi HC Directs DLSA to Convey Trial Court’s Encouraging Message and Compensation to POCSO Survivor  ||  Delhi HC: Gravity of UAPA Offence Cannot Justify Prolonged PMLA Detention  ||  Delhi HC Affirms Equestrian Federation's Youth Olympics Selection, Calls for Clearer Norms & Timeline  ||  Delhi HC: Ajeet Bharti Used Caste Superiority to Humiliate Chandrashekhar Azad  ||  Supreme Court: Anti-Suit Injunction Cannot Rest on Speculation of Unenforceable Foreign Decree    

Union of India (UOI) and Ors. Vs. Deloitte Haskins and Sells LLP and Ors. - (Supreme Court) (03 May 2023)

Proceedings under Section 140(5) of Companies Act are maintainable even after the resignation of the auditors

MANU/SC/0518/2023

Company

In present appeals, common question of law pertaining to the interpretation of Section 140(5) of the Companies Act, 2013 and the Investigation Report dated 28th May, 2019 ('IFIN SFIO Report') in respect of IL&FS Financial Services Limited ('IFIN') is raised.

On true interpretation and scheme of Section 140(5) of the Act, 2013, even on resignation by an auditor of a company even during the enquiry/proceedings under Section 140(5) of the Act or even prior to that, there shall not be any termination of the proceedings under Section 140(5) of the Act as observed and held by the High Court.

The intention of the legislature while enacting Section 140(5) of the Act is very clear and the powers conferred upon the Tribunal under Section 140(5) of the Act shall be without prejudice to any action under the provisions of the Companies Act, 2013 or any other law for the time being in force. Therefore, irrespective of any other provisions of the Act, 2013, the Tribunal is vested with the powers under Section 140(5) of the Act to pass a final order against the auditor on the allegation that such an auditor of the company has, directly or indirectly, acted in a fraudulent manner.

Section 140(5) is neither discriminatory, arbitrary and/or violative of Articles 14, 19(1)(g) of the Constitution of India, 1950 as alleged. The impugned judgment and order passed by the High Court quashing and setting aside the application/proceedings under Section 140(5) of the Act, on the ground that as the auditors have resigned and therefore thereafter the same is not maintainable is quashed and set aside. The application/proceedings under Section 140(5) of the Act, 2013 is held to be maintainable even after the resignation of the concerned auditors. It is ultimately for the NCLT/Tribunal to pass a final order on the application filed by the Central Government Under Section 140(5) of the Act, 2013.

The impugned judgment and order passed by the High Court quashing and setting aside the direction under Section 212(14) of the Act, 2013 issued by the Union of India to SFIO is quashed. The impugned judgment and order passed by the High Court quashing and setting aside the prosecution lodged by the SFIO vide Criminal Complaint is also quashed. Now the said Criminal Complaint be proceeded further by the concerned Trial Court in accordance with law and on its own merits. Appeals allowed.

Tags : APPLICATION   PROVISIONS   APPLICABILITY  

Share :        

Disclaimer | Copyright 2026 - All Rights Reserved