Statutory auditor

yes ur point is correct... because if u see from auditors point of view also.. a person who is disqualified to act as an auditor in subsidiary or holding company .. he is disqualified to act in both the sub or holdg. company...

In the given case,, here goverment holds morethan 25% of share capital .. so, special resolution must be passed for both holding & Subsidiary company..

No, your company is not a govt. company (since it holds less than 51% of capital) and hence the subsidiary company is not a subsidiary of a govt. company as specified in Section 224A.  Further, govt. is not directly holding any shares in the subsidiary co.  Hence special resolution u/s 224A is not required for the subsidiary company.

Section 224A is applicable to companies in which govt. holding is equal to or more than 25%

No subsidiary company does not require to pass special resolution for the appointment of Statutory Auditors. As Govt. does not hold the shares of Subsidiary Company.

Can anybody else clear the same

Sec.224A is very clear on this issue and there is no reason for any confusion.  If you ask yourself following questions, the position will be clear:

1) Whether your co. is a govt. co.? 

(Answer is 'No' because holding of govt. does not exceed 50%).

2) Whether at least 25% shares of subsidiary are held by a govt. co.? 

(Answer is obviously 'No' since your co. is not govt. co.)

3) Whether at least 25% shares of subsidiary are held by the govt. directly? 

(Answer is obviously 'No' since govt. is not holding any shares in the subsidiary.)

If the answer to above questions is 'No', then how Sec.224A can get attracted in this case?

I may further add here that where provision in the Act is specific and clear, a different interpretation is not warranted.  One could say that in the given case there is indirect "control" of the govt in the subsidiary co.  However, as far as shareholding is concerned, there is no provision in the Act for holding shares "indirectly".  Sec.224A is very specific and clear.  It talks of "shareholding" only and not "control".  Hence we cannot say that 50% shares of subsidiary are held by the govt.  For shareholding one has to just see the list of shareholders and not go beyond that.  Hope I am clear.

I may further add here that where provision in the Act is specific and clear, a different interpretation is not warranted.  One could say that in the given case there is indirect "control" of the govt in the subsidiary co.  However, as far as shareholding is concerned, there is no provision in the Act for holding shares "indirectly".  Sec.224A is very specific and clear.  It talks of "shareholding" only and not "control".  Hence we cannot say that 50% shares of subsidiary are held by the govt.  For shareholding one has to just see the list of shareholders and not go beyond that.  Hope I am clear.

thanks