# Re-appointment of Retiring Auditor

## When Re-appointment Happens Automatically

A retiring auditor may be re-appointed at the AGM if all three conditions are met:

1. He is not disqualified for re-appointment.

2. He has not given written notice to the company of his unwillingness to be re-appointed.

3. No Special Resolution has been passed at the AGM appointing some other auditor or providing that he shall not be re-appointed.

## Default Rule

If no auditor is appointed at the AGM, the existing auditor continues in office.

## Appointing an Auditor OTHER Than the Retiring Auditor

This requires careful procedure under Section 140(4) read with Section 115.

### Step 1 — Special Notice Required

If the retiring auditor has not completed his term, a Special Notice is needed to move a Special Resolution at the AGM for either:

Appointing a person other than the retiring auditor, OR
Expressly providing that the retiring auditor shall not be re-appointed.

Who can give Special Notice? Members holding:

≥ 1% of total voting power, OR
Shares on which ≥ ₹5 lakhs has been paid-up

Timing of Special Notice: Sent to the company not earlier than 3 months but at least 14 days before the meeting.

### Step 2 — Company Forwards to Retiring Auditor

On receipt, the company sends a copy of the notice to the retiring auditor.

### Step 3 — Retiring Auditor's Right of Representation

The retiring auditor may make written representation to the company and request its notification to members.

If he does so, the company shall:

State the fact that representation has been made in the notice to members.
Send a copy of the representation to every member to whom notice of the meeting is sent.

### Step 4 — NCLT Safeguard Against Abuse

If NCLT is satisfied (on application by the company or an aggrieved person) that the auditor is abusing the right of representation to secure needless publicity for defamatory matter, then:

The copy of representation need not be sent, and
It need not be read out at the meeting.

## The Logic

The statute gives the retiring auditor a procedural shield — he cannot simply be quietly dropped. Members must know that an auditor is being replaced and the auditor gets a chance to tell members why. The NCLT route only kicks in if this shield is being misused.

Worked example

### Example 1

Q. Mr. K, the auditor of L Ltd., has completed only 2 years of his 5-year term. The company wants to replace him at the next AGM. What is the procedure?

A. Since his term is not complete: (i) members holding ≥1% voting power or shares with ≥₹5 lakhs paid-up must give Special Notice (not earlier than 3 months, at least 14 days before AGM); (ii) company must send copy to Mr. K; (iii) Mr. K may make written representation and ask for it to be sent to members; (iv) at the AGM, a Special Resolution must be passed to appoint another auditor or expressly not to re-appoint Mr. K.

### Example 2

Q. A company receives a Special Notice to remove its auditor. The auditor sends an inflammatory representation accusing the management of corruption with no evidence. Can the company refuse to circulate it?

A. Not on its own. The company (or any aggrieved person) must apply to NCLT. If NCLT is satisfied that the representation is being abused to secure needless publicity for defamatory matter, NCLT can direct that the representation need not be sent to members or read out at the meeting.

⚠️ Common exam mistakes

Confusing 'removal' (Section 140(1) — requires CG approval) with 'not re-appointing at end of term' (Section 140(4) — Special Notice + SR).
Thinking the Special Notice can be sent by any member — minimum 1% voting power or ₹5 lakhs paid-up threshold applies.
Forgetting the 3-month outer and 14-day inner timing windows for Special Notice.
Assuming the company can unilaterally suppress the auditor's representation — only NCLT can.
Missing that if no auditor is appointed at AGM, the existing auditor continues — there is no 'vacancy'.

Bare-Act text Section 140(4) read with Section 115 · Companies Act, 2013 · click to expand

Special notice shall be required for a resolution at an annual general meeting appointing as auditor a person other than a retiring auditor, or providing expressly that a retiring auditor shall not be re-appointed, except where the retiring auditor has completed a consecutive tenure of five years or, as the case may be, ten years, as provided under sub-section (2) of section 139.

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Re-appointment of Retiring Auditor & Special Notice [Section 139(9)-(11), 140(4)]

Worked example

⚠️ Common exam mistakes