ABC & Associates, Chartered Accountants, were re-appointed as auditors of X Ltd. at its AGM held on 30-09-2024. The Board recommended their…

Provisions: As per section 140 of the Companies Act, 2013, the auditor appointed under section 139 may be removed from his office before the expiry of his term only by a special resolution of the company, after obtaining the previous approval of the Central Government in that behalf in the prescribed manner: Provided that before taking any action under this sub-section, the auditor concerned shall be given a reasonable opportunity of being heard. The law prescribes a specific sequence that must be followed: First, the company must obtain the prior approval of the Central Government for removal of the auditor. Thereafter, a special resolution must be passed by the company in a general meeting to give effect to the removal. Prior Central Government approval is thus a mandatory pre-condition, and the special resolution cannot precede it. Analysis: In the present case, X Ltd. passed the special resolution for removal of ABC & Associates on 25-05-2025 without first obtaining the approval of the Central Government. This reverses the sequence mandated by Section 140(1). Conclusion: Since the special resolution was passed before obtaining the mandatory prior approval of the Central Government, the removal of ABC & Associates as auditor is not valid in law, as it violates the procedural requirement under Section 140(1) of the Companies Act, 2013.