Resignation of Auditor and Filing of ADT-3 (Section 140(2) & 140(3))
# Resignation of Auditor
When an auditor resigns, the Act requires transparent disclosure of the reasons for resignation, so that stakeholders are informed.
## Filing requirement — Section 140(2)
Within 30 days of resignation, the auditor must file a statement (Form ADT-3) indicating the reasons and other facts relevant to the resignation. The statement must be filed with:
1. The Company (mandatory)
2. The Registrar of Companies (ROC) (mandatory)
3. The Comptroller and Auditor General of India (C&AG) — only in case of a Government Company
> Filing of Form ADT-3 is mandatory — there is no discretion.
## Penalty for non-compliance — Section 140(3)
If the auditor fails to comply with the filing requirement under Section 140(2):
Minimum penalty: ₹50,000 OR an amount equal to the auditor's remuneration, whichever is less.
Continuing default penalty: ₹500 per day, subject to a maximum of ₹2,00,000.
## Quick recall
Form: ADT-3
Time limit: 30 days from resignation
Recipients: Company + ROC (always) + C&AG (if Govt. Co.)
Penalty cap: ₹2,00,000 maximum on continuing default
Worked example
### Example 1
Example 1:
CA Mr. X resigns as auditor of a private limited company on 1 May. By when must he file Form ADT-3 and with whom?
Answer: He must file ADT-3 within 30 days, i.e., by 31 May, with both the Company and the ROC. C&AG filing is not required because it is not a Government Company.
### Example 2
Example 2:
Mr. Y was the auditor of a Government Company and resigned. He filed ADT-3 with the Company and ROC but not with C&AG. Is this compliance complete?
Answer: No. For a Government Company, ADT-3 must also be filed with C&AG. Non-compliance attracts penalty under Section 140(3).
### Example 3
Example 3:
Auditor's annual remuneration was ₹40,000 and he failed to file ADT-3. The default continued for 100 days. Calculate the penalty.
Answer: Initial penalty = lower of ₹50,000 or ₹40,000 (remuneration) = ₹40,000. Continuing penalty = ₹500 × 100 = ₹50,000. Total = ₹90,000, subject to maximum of ₹2,00,000.
⚠️ Common exam mistakes
Forgetting the C&AG filing requirement for Government Companies.
Stating the initial penalty as ₹50,000 fixed — it is the lower of ₹50,000 or the auditor's remuneration.
Missing the ₹2,00,000 cap on continuing penalty.
Confusing ADT-2 (removal application) with ADT-3 (resignation statement).
Bare-Act text Section 140(2) and 140(3) · 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. If the auditor does not comply with the provisions of sub-section (2), he or it shall be liable to a penalty of fifty thousand rupees or an amount equal to the remuneration of the auditor, whichever is less, and in case of continuing failure, with further penalty of five hundred rupees for each day after the first during which such failure continues, subject to a maximum of two lakh rupees.