There are many untouched provisions of the Companies Act, 2013 ("the Act") wherein not much emphasis or clarification has been furnished by the appropriate authority or any respected professional. Section 146 of the Act is one of them.
For quick reference, reproducing extract of Section 146
"All notices of, and other communications relating to, any general meeting shall be forwarded to the auditor of the company, and the auditor shall, unless otherwise exempted by the company, attend either by himself or through his authorised representative, who shall also be qualified to be an auditor, any general meeting and shall have right to be heard at such meeting on any part of the business which concerns him as the auditor."
A few questions may arise in a diligent mind -
i. Whether auditor needs to attend general meeting if he has not been served notice of the same by the Company?
In an important case of Deputy Secretary v S N Dasgupta, AIR 1956 Cal 414, 1955 25 CompCas 413 Cal, it was held that the auditor is the watchdog for the various stakeholders and it is his duty to periodically inform the true state of the affairs of the company. The auditors owe a number of duties to the company and its shareholders.
Further, a Meeting called and held without adequate notice and Resolutions passed at such Meetings will be invalid [Parmeshwari Prasad Gupta v the Union of India 1973 AIR 2389]. Considering this point, Auditor should attend it without waiting for notice.
ii. Whether auditor needs to attend general meeting despite non-serving of general meeting notice to him but he has got information from other sources like newspaper, website of authority, website of concerned company?
Keeping in mind the explanation provided in above point (i), auditor should make sure to attend it as he has duty towards the various stakeholders of the Company.
iii. Is it absolute to grant exemption to the auditor?
In granting exemption, management of the Company should make sure that auditor has genuine and unavoidable reason (e.g. sudden death / accident of family member, ill health of auditor, etc.) to not attend the General Meeting. However, if there is any observation or adverse remark furnished by the Auditor in his report then he should be present there in the General meeting either by himself or through his authorized representative.
iv. Generally, it seems that intern or trainee of auditor generally attends general meeting as representative of Auditor. Question arises that, who is going to check or certify,in what capacity, that attendee or representative of auditor is valid representative of auditor as per Sec. 146 of the Act?
Company's management is best positioned to judge whether representative of auditor who is attending the General Meeting, is eligible or not, in case any suspicion arises about representative of auditor.
Although representation letter issued by auditor citing some person as his representative will suffice the purpose, but auditor should also make sure that he provides requisite information (say CA membership no.) in representation letter to avoid any kind of apprehension about the validity of his representative.
v. Who will answer query of shareholder in case exemption given to auditor for general meeting attendance?
It is evident that Chief Financial Officer will be the best person to answer as he has much more knowledge and resources to answer shareholders' query. In his absence or unavailability, person who has detailed knowledge about the company's financial affairs can answer, provided agreed to by the management of the Company.
vi. Can shareholder insist for attendance of auditor despite exemption given by the company?
Yes, shareholder can insist for auditor's attendance. But, Company Secretary's soft skills will come to the rescue here. Company Secretary of the Company can help the shareholder to get his query resolved in his own manner.
In short, to attend general meeting is the duty as well as the right of the Auditor. He should make best efforts to serve various stakeholders (most importantly attendee shareholders) of the Company at the General Meeting.
Disclaimer: The entire content of this write up is author's own understanding and personal view.
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