General Circular
No. 33/2014, F. No.1/33/13-CL-V, dated 3lst July, 2014
Clarification
with regard to applicability of provisions of Section 139(5) and 139(7) of the
Companies Act, 2013
Doubts
have been raised about applicability of Sections 139(5) and 139(7) of the
Companies Act, 2013 (New Act), which deal with appointment of auditors by
Comptroller and Auditor General of India (C&AG), to 'deemed Government Companies'
referred to in section 619B of the Companies Act 1956 (Old Act) i.e. companies
where ownership or control lies with two or more Government companies or
corporations etc in the manner detailed in section 619B ibid, Stakeholders have
pointed out that the New Act does not contain specific provisions about 'deemed
Government companies' on the lines of section 619B of the Old Act. Clarification
has been sought whether, under the new Act, such deemed Government companies
would be subject to audit by the C&AG in the same manner as Government
Companies.
2. The above issue
has been examined and it is clarified that the new Act does not alter the
position with regard to audit of such deemed Government companies through
C&AG and thus such companies are covered under sub- section (5) and (7) of Section
139 of the New Act.
3. Further, it has
also been observed that the words “any other company owned or controlled,
directly or indirectly .......... by the Central Government and partly by one or
more State Governments” appearing in sub-sections (5) and (7) of section 139 of
the New Act are to be read with the definition of ‘control’ in section 2(27) of
the New Act. Thus documents like articles of association and shareholders
agreements etc envisaging control under section 2(27) are to be taken into
account while deciding whether an individual company, other than those referred
in paragraph 1-2 above, is covered under section 139(5)/139(7) of the New Act.
4. Clarification
has also been sought about the manner in which the information about
incorporation of a company subject to audit by an auditor to be appointed by
the C&AG is to be communicated to the C&AG for the purpose of
appointment of first auditors under section 139(7) of the New Act. It is hereby
clarified that such responsibility rests with both, the Government concerned
and the relevant company. To avoid any confusion it is further clarified that
it will primarily be the responsibility of the company concerned to intimate to
the C&AG about its incorporation along with name, location of registered office,
capital structure of such a company immediately on its incorporation, It is
also incumbent on such a company to share such intimation to the relevant
Government so that such Government may also send a suitable request to the
C&AG.
5. This issues
with the approval of the competent authority.
.
.
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