# Removal of Auditor before Expiry of Term

An auditor enjoys protection of tenure. The Companies Act ensures that removing an auditor before his term ends requires a stringent multi-step procedure to prevent harassment or arbitrary removal.

## Procedure under Section 140(1)

An auditor may be removed before expiry of his term only by following ALL the steps below:

### Step 1 — Board Resolution

The Board must pass a resolution to seek removal.

### Step 2 — Application to Central Government

Within 30 days of the Board Resolution, the company must file Form ADT-2 with the Central Government (CG) seeking approval.

### Step 3 — CG Approval

The Central Government grants its approval after considering the application.

### Step 4 — Special Resolution at General Meeting

Within 60 days of receiving CG approval, the company must hold a General Meeting and pass a Special Resolution for removal.

## Principle of Natural Justice

Before any removal action, the auditor must be given a reasonable opportunity of being heard (Audi Alteram Partem). This is a statutory and constitutional safeguard.

## Applicability to First Auditor

This removal procedure under Section 140(1) also applies to the first auditor appointed under Section 139(6).

## Timeline at a glance

```

Board Resolution → 30 days → ADT-2 to CG → CG Approval → 60 days → SR at GM

↑

Auditor's right to be heard (Audi Alteram Partem)

```

Worked example

### Example 1

Example 1:

The Board of ABC Ltd. on 1 April resolves to remove its auditor. By when must the application to CG be made?

Answer: Within 30 days of the Board Resolution, i.e., by 1 May. The application is to be filed in Form ADT-2.

### Example 2

Example 2:

CG approval is received on 10 June. By when must the company convene a general meeting and pass the Special Resolution?

Answer: Within 60 days from 10 June, i.e., by 9 August.

### Example 3

Example 3:

A company removes its auditor without giving him an opportunity to be heard. Is the removal valid?

Answer: No. The principle of audi alteram partem must be followed. The removal would be procedurally defective and liable to be set aside.

⚠️ Common exam mistakes

Reversing the 30-day and 60-day timelines (30 days is BR → CG; 60 days is CG approval → SR).
Forgetting that CG approval is required — many think SR alone is enough.
Skipping the auditor's right of hearing.
Believing the first auditor cannot be removed under Section 140(1) — the same procedure applies.

Bare-Act text Section 140(1) read with Rule 7 of Companies (Audit and Auditors) Rules, 2014 · Companies Act, 2013 · click to expand

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.

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Removal of Auditor before Expiry of Term (Section 140(1))

Worked example

⚠️ Common exam mistakes