Removal of Auditor Before Expiry of Term [Section 140]
## Removal of Auditor Before Expiry of Term [Section 140]
### Section 140(1): Removal by the Company
An auditor may be removed before the expiry of his term only through the following procedure:
Step 1 – Board Meeting: Board resolves to remove and authorises the filing of an application to the Central Government (CG).
Step 2 – Application to CG (Form ADT-2): Filed within 30 days of the Board resolution.
Step 3 – CG Approval: Obtain prior approval of the Central Government.
Step 4 – Special Resolution: Company holds a General Meeting within 60 days of receiving CG approval and passes a Special Resolution for removal.
> Important: Before any action is taken, the auditor concerned shall be given a reasonable opportunity of being heard.
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### Section 140(5): Tribunal Direction (Fraudulent Conduct)
If the Tribunal is satisfied (on its own motion, or on application by the CG or any concerned person) that the auditor:
Acted in a fraudulent manner, OR
Abetted or colluded in any fraud by or in relation to the company, directors, or officers —
The Tribunal shall direct the company to change its auditors.
If the application is made by the CG and the Tribunal is satisfied:
Within 15 days of receiving the application, the Tribunal makes an order that the auditor cannot function as auditor.
The CG may appoint another auditor in such a case.
Worked example
### Example 1
Example – Section 140(1): XYZ Ltd.'s Board passes a resolution on 1 March 2025 to remove the auditor. What are the next steps and deadlines?
Answer:
File application in Form ADT-2 to the CG within 30 days (by 31 March 2025).
Auditor must be given a reasonable opportunity of being heard before any action.
On receipt of CG approval, hold a GM and pass a Special Resolution within 60 days of CG approval.
### Example 2
Example – Section 140(5): The CG files an application to the Tribunal alleging that the auditor colluded in fraud. What happens?
Answer: Within 15 days of receiving the application, the Tribunal must make an order preventing the auditor from functioning. The CG may then appoint a replacement auditor.
⚠️ Common exam mistakes
Stating that a company can remove an auditor simply by ordinary or special resolution alone — prior CG approval (via Form ADT-2) is mandatory.
Forgetting the '30-day' window to file Form ADT-2 after the Board resolution.
Confusing Section 140(1) (removal by the company) with Section 140(5) (Tribunal-directed removal for fraud) — these are separate and distinct tracks.
Missing the '15-day' timeline for Tribunal action when the CG makes the application under Section 140(5).
Bare-Act text Section 140(1) and Section 140(5) · 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 as provided under sub-section (1) of section 140 of the Act... The Tribunal either suo motu or on an application made to it by the Central Government or by any person concerned, if it is satisfied that the auditor of a company has, whether directly or indirectly, acted in a fraudulent manner or abetted or colluded in any fraud by, or in relation to, the company or its directors or officers, it may, by order, direct the company to change its auditors.