M/S Sachin Hari Mohan Gupta And Co Chartered Accountant vs. Sengar Security And Labor Services PVT LTD

Held

The Court held that the observation in the concluding paragraph of the order dated March 2, 2023, stating that "since the period of appointment of the petitioner has expired, nothing further is required to be directed in the matter" was de hors the record. The Court reasoned that at the time of the hearing on March 2, 2023, the petitioner's tenure as Statutory Auditor was indeed alive and was set to expire on March 31, 2023. The Court had allowed the writ petition and set aside the order of the Regional Director, which had led to the petitioner's removal. Consequently, the petitioner's position as Statutory Auditor was revived. The Court clarified that the date of passing the order, March 2, 2023, should be reckoned, irrespective of the later upload date. Therefore, the contention that another auditor was appointed and conducted audits was of no consequence as the petitioner's position was restored. The Court distinguished the cited judgments, stating they were based on a different factual matrix where the appointment itself was challenged, unlike the present case where the challenge was to the removal order. The review petition was allowed to the extent of deleting the erroneous observation, and the position of the petitioner as on March 2, 2023, was revived, requiring fulfillment of all statutory requirements under the Companies Act, 2013.

Facts

The petitioner, M/s Sachin Hari Mohan Gupta and Co., through its partner Sachin Gupta, filed a review petition seeking to rectify an observation in a previous order dated March 2, 2023, passed in W.P. No. 15758/2022. The petitioner was appointed as the Statutory Auditor of respondent No. 1, Sengar Security and Labor Services Pvt Ltd, for a five-year term from FY 2018-19 to 2022-23, ending March 31, 2023. The previous writ petition had allowed the petitioner's plea and set aside an order by the Regional Director, Ministry of Corporate Affairs, which had led to the petitioner's removal. However, the concluding observation in the order stated that since the petitioner's appointment period had expired, nothing further was required to be directed. The petitioner argued this observation was an error apparent on the face of the record, as their tenure was still valid at the time of the hearing.

Key Issues

1. Whether the observation in the order dated March 2, 2023, stating that the petitioner's period of appointment as Statutory Auditor had expired, was an error apparent on the face of the record, considering the petitioner's tenure was valid until March 31, 2023, and the writ petition was heard on March 2, 2023. (Question of law and fact, turning on Section 139 and Section 140 of the Companies Act, 2013). Petitioner's contentions: The petitioner argued that their five-year tenure as Statutory Auditor was valid until March 31, 2023, at the time of the hearing on March 2, 2023. They contended that the observation about their appointment period having expired was factually incorrect and an error apparent on the record, potentially jeopardizing their career due to non-adherence to statutory audit obligations. They relied on the Resolution dated October 30, 2018, re-appointing them under Sections 139 and 141 of the Companies Act, 2013. They also argued that the error arose from a common order passed in analogous writ petitions. Respondent No. 1's contentions: Respondent No. 1 argued that a statutory auditor had already been appointed after the petitioner's disqualification and had conducted the necessary audits. They contended that allowing the review would create complications and render the second auditor's report inconsequential. They relied on cases such as Gokaraju Rangaraju Vs. State of A.P. and M/s Beopar Sahayak (P) Ltd. and others Vs. Vishwa Natha and others, arguing that acts done pursuant to a legally appointed auditor, even if the appointment is later found defective, are not void. They also argued that the order was uploaded after the petitioner's tenure expired, thus no error was apparent.