# Resignation by Auditor

## The Filing Obligation

When an auditor resigns from a company, he is not free to walk away silently. He must file a statement indicating reasons and other facts in Form ADT-3 with:

The Company, AND
The Registrar of Companies (ROC)

Within 30 days of the date of resignation.

## Special Case — Government Companies

If the company is a Government Company or a company controlled by Government, the auditor must also file the statement with C&AG.

## Penalty for Default

If the auditor fails to file Form ADT-3 within 30 days:

First default: Penalty = lower of ₹50,000 OR amount equal to remuneration of auditor.
Continuing failure: Further penalty of ₹500 per day for every day after the first during which failure continues.
Maximum cap: ₹2 lakhs.

## Memory Hook

Form: ADT-3 (Three for Resignation)
Time: 30 days
Files with: Company + ROC + (CAG if government)
Penalty: ₹50,000 or remuneration (lower) + ₹500/day, capped at ₹2 lakhs.

Worked example

### Example 1

Q. Mr. R, statutory auditor of a Government company, resigns on 1st March 2026. He files Form ADT-3 with the company and ROC on 20th March but does not file with CAG. Has he complied?

A. No. For a Government company, the auditor must additionally file with CAG. By not filing with CAG within 30 days (i.e., by 31st March), Mr. R is in default and liable to penalty under Section 140(3).

### Example 2

Q. An auditor (remuneration ₹40,000) fails to file Form ADT-3 entirely. Penalty after 100 days of continuing failure?

A. First default = lower of ₹50,000 or ₹40,000 (remuneration) = ₹40,000. Continuing penalty = ₹500 × 100 = ₹50,000. Total = ₹90,000, subject to overall cap of ₹2 lakhs (not breached). Penalty payable = ₹90,000.

⚠️ Common exam mistakes

Using wrong form (ADT-2 is for removal, ADT-3 is for resignation, ADT-4 is for fraud).
Filing only with company and forgetting ROC (or vice versa).
Forgetting the additional CAG filing in case of government companies.
Computing first-default penalty as ₹50,000 always — it is the LOWER of ₹50,000 or remuneration.
Forgetting the ₹2 lakhs overall cap.

Bare-Act text Section 140(2) · Companies Act, 2013 · click to expand

The auditor who has resigned from the company shall file within a period of thirty days from the date of resignation, a statement in the prescribed form with the company and the Registrar, and in case of companies referred to in sub-section (5) of section 139, the auditor shall also file such statement with the Comptroller and Auditor-General of India, indicating the reasons and other facts as may be relevant with regard to his resignation.

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Resignation by Auditor [Section 140(2) & (3)]

Worked example

⚠️ Common exam mistakes