Facts of the Case

The Official Liquidator filed Company Application No. 37 of 2022 under Section 462 of the Companies Act, 1956, read with Rules 302, 309 and 9 of the Companies (Court) Rules, 1959, seeking appointment of an auditor for auditing the Estate and Establishment Fund Account and the Company Paid Staff Terminal Benefit Fund Account for the period 01.04.2021 to 31.03.2022.

The application further sought fixation of the auditor’s fee together with applicable GST, permission to pay the audit fee from the Estate and Establishment Fund Account, and a direction that the cost of the application and other office expenses be met from the same fund.

The record showed that for the earlier periods 01.04.2019 to 31.03.2020 and 01.04.2020 to 31.03.2021, M/s T. Badarinath & Associates, Chartered Accountants, had already been appointed by the Court through Company Application No. 2 of 2021 and C.A. No. 18 of 2021 dated 23.04.2021 to audit the relevant accounts.

Issues Involved

The principal issues before the High Court were whether the same Chartered Accountant who had audited the immediately preceding accounting periods should be appointed for the contiguous period from 01.04.2021 to 31.03.2022; whether the proposed audit fee of Rs. 40,000/- plus applicable GST was reasonable; and whether the Official Liquidator could pay the audit fee, application costs and other office expenses from the Estate and Establishment Fund Account.

Petitioner’s / Applicant’s Arguments

The learned counsel appearing for the Official Liquidator submitted that M/s T. Badarinath & Associates, Chartered Accountants, had already been appointed by the Court to audit the accounts for the two immediately preceding periods.

Since the proposed audit period from 01.04.2021 to 31.03.2022 was contiguous to the earlier audited periods, the Applicant sought appointment of an auditor for the subsequent period and requested approval of the audit fee.

The Official Liquidator also sought permission to pay the audit fee from the Estate and Establishment Fund Account and to meet the cost of the application and other office expenses from the same fund.

Respondent’s Arguments

The order does not record any separate substantive arguments or objections on behalf of a respondent. The proceedings, as reflected in the judgment, were considered on the application of the Official Liquidator and the submissions advanced by learned counsel appearing for the Applicant. No contrary contention is specifically noted in the order.

Court Order / Findings

The High Court found that the period proposed to be audited, namely 01.04.2021 to 31.03.2022, was contiguous to the earlier audit periods of 01.04.2019 to 31.03.2020 and 01.04.2020 to 31.03.2021.

On that basis, the Court considered it appropriate to appoint the same auditor for auditing the accounts for the period 01.04.2021 to 31.03.2022.

The Court further approved an audit fee of Rs. 40,000/- (Rupees Forty Thousand only) plus GST, as applicable, holding the amount to be reasonable.

The Official Liquidator was permitted to pay:

  • the approved audit fee;
  • the cost of the Company Application; and
  • other office expenses,

from the funds of the Estate and Establishment Fund Account.

Accordingly, the Company Application was ordered. No costs were awarded.

Important Clarification

This order is primarily an administrative and supervisory company-court order concerning the audit of funds/accounts under the control of the Official Liquidator. The Court’s reasoning was materially based on continuity of the audit period: because the same Chartered Accountant had audited the immediately preceding periods, appointment of the same auditor for the next contiguous period was considered appropriate.

The order also specifically confirms that the audit remuneration of Rs. 40,000/- plus applicable GST was considered reasonable and could be paid from the Estate and Establishment Fund Account.

Further, the judgment does not record any contested adjudication on rival factual claims, nor does it set out any separate respondent-side objection. Therefore, no respondent argument should be inferred beyond what is expressly recorded in the order.

Sections / Rules Involved

·         Section 462 of the Companies Act, 1956 — provision invoked in the Company Application concerning audit-related oversight in the liquidation proceedings.

·         Rule 302 of the Companies (Court) Rules, 1959 — invoked in connection with the audit of the Official Liquidator’s accounts.

·         Rule 309 of the Companies (Court) Rules, 1959 — also expressly invoked in the application.

·         Rule 9 of the Companies (Court) Rules, 1959 — invoked as part of the Court’s procedural/inherent jurisdiction.

Link to download the order -

https://www.mytaxexpert.co.in/uploads/1783329902_1161compressed.pdf

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