M/S. A.P. Steels LTD. And Various Companies (In Liqn) vs. No Respondent

Facts

The Official Liquidator (OL) filed a Company Application seeking to appoint an auditor for the Estate and Establishment Fund Account and Company Paid Staff Terminal Benefit Fund Account for the period 01.04.2021 to 31.03.2022. The OL also prayed for fixing the audit fee, including GST, and permission to pay it from the Estate and Establishment Fund. The OL stated that the same auditor, M/s. T. Badarinath & Associates, had been appointed by the Court for the preceding two periods (01.04.2019 to 31.03.2020 and 01.04.2020 to 31.03.2021). The Court considered the application and the arguments presented by the counsel for the OL.

Held

The Court held that it was appropriate to appoint the same auditor, M/s. T. Badarinath & Associates, to audit the accounts for the period from 01.04.2021 to 31.03.2022, as the period was contiguous to the previously audited periods. The Court approved the proposed audit fee of Rs. 40,000/- (Rupees Forty Thousand only) along with applicable GST, considering it to be reasonable. The Court further permitted the Official Liquidator to pay the audit fee, the cost of the application, and any other office expenses from the funds of the Estate and Establishment Fund Account. The ratio decidendi is that continuity in auditing by the same firm for contiguous periods is efficient and cost-effective, and the Court has the discretion to fix reasonable audit fees and permit payment from company funds under its supervision. No issue was expressly left undecided.

Key Issues

1. Whether the Court should appoint an auditor for the Estate and Establishment Fund Account and Company Paid Staff Terminal Benefit Fund Account for the period 01.04.2021 to 31.03.2022, and if so, which auditor should be appointed, pursuant to Section 462 of the Companies Act, 1956 and Rules 302, 309 & I of the Companies (Court) Rules, 1959? 2. What should be the quantum of audit fee, including applicable GST, payable to the appointed auditor, and from which fund should it be paid? Contentions: Petitioner (Official Liquidator): Argued that for the contiguous periods of 01.04.2019 to 31.03.2020 and 01.04.2020 to 31.03.2021, M/s. T. Badarinath & Associates was appointed by the Court to audit the said accounts. Therefore, it would be appropriate to appoint the same auditor for the current period. The OL proposed an audit fee of Rs. 40,000/- along with applicable GST, which was considered reasonable. The OL also sought permission to pay the audit fee and costs from the Estate and Establishment Fund Account. Revenue/State: No arguments were recorded for the Revenue or State in the judgment.