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Mumbai University · FY LLB · Sem II
Examine whether the following persons are eligible for appointment as auditor under the Companies Act, 2013: (i) Mr. Pra
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Examine whether the following persons are eligible for appointment as auditor under the Companies Act, 2013: (i) Mr. Prakash (CA) — whose relative Mr. Aakash holds securities of ABC Ltd. of face value ₹70,000 (market value ₹1,10,000). Directors want to appoint Mr. Prakash as auditor. (ii) Mr. Ramesh (practicing CA) — indebted to MNP Ltd. for ₹6 lakhs. Directors want to appoint him as auditor. (iii) Mrs. KVJ, spouse of Mr. Kumar (CA), is the store keeper of PRC Ltd. Directors want to appoint Mr. Kumar as auditor.
Q3Answer the following questions by giving reasonsAttempt Any Two • 6 marks each • Total: 12 marks2024
(3)Examine whether the following persons are eligible for appointment as auditor under the Companies Act, 2013: (i) Mr. Prakash (CA) — whose relative Mr. Aakash holds securities of ABC Ltd. of face value ₹70,000 (market value ₹1,10,000). Directors want to appoint Mr. Prakash as auditor. (ii) Mr. Ramesh (practicing CA) — indebted to MNP Ltd. for ₹6 lakhs. Directors want to appoint him as auditor. (iii) Mrs. KVJ, spouse of Mr. Kumar (CA), is the store keeper of PRC Ltd. Directors want to appoint Mr. Kumar as auditor.
Legal Provision

Section 141(3) of the Companies Act, 2013 lists disqualifications for appointment as a Statutory Auditor.

(i) Mr. Prakash — Relative's Securities

Under Section 141(3)(d)(i), a person shall not be appointed as auditor if his relative holds securities of the company having face value exceeding ₹1,00,000.

In this case, Mr. Aakash (relative of Mr. Prakash) holds securities of ABC Ltd. with a face value of ₹70,000 — which is below the ₹1,00,000 threshold. The market value of ₹1,10,000 is irrelevant — the disqualification test is based on face value, not market value.

Conclusion: Mr. Prakash is eligible to be appointed as auditor of ABC Ltd. The disqualification under Section 141(3)(d)(i) is not triggered because the face value of ₹70,000 does not exceed ₹1,00,000.

(ii) Mr. Ramesh — Indebted to MNP Ltd.

Under Section 141(3)(d)(ii), a person is disqualified if they are indebted to the company in an amount exceeding ₹5,00,000, or if they have given a guarantee or provided any security in connection with the indebtedness of any third person to the company exceeding ₹1,00,000.

Mr. Ramesh is indebted to MNP Ltd. for ₹6 lakhs, which exceeds the ₹5,00,000 threshold under Section 141(3)(d)(ii).

Conclusion: Mr. Ramesh is disqualified from being appointed as auditor of MNP Ltd. His appointment would be in violation of Section 141(3)(d)(ii); any such appointment would be void.

(iii) Mr. Kumar — Spouse is Store Keeper of PRC Ltd.

Under Section 141(3)(f), a person is disqualified if a relative of theirs is a director or is employed in the company in a financial capacity. A "Store Keeper" manages inventory and physical assets; this is generally considered an operational, not a financial, capacity — unlike a CFO, accountant, or financial controller.

Additionally, Section 141(3)(d)(iii) disqualifies a person if their relative is an officer or employee of the company. However, the relevant question is whether a store keeper constitutes an officer "in financial capacity."

Conclusion: Mr. Kumar is eligible to be appointed as auditor of PRC Ltd. A store keeper's role is operational/administrative, not financial in nature — Section 141(3)(f)'s disqualification (employment in a financial capacity) is not triggered. However, if the company's AoA or any other provision creates a broader restriction, that should also be checked. Subject to no other disqualification, Mr. Kumar's appointment is valid.