Section 140 — Removal, resignation of auditor and giving of special notice

(1) 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 a pproval 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.
(2) The auditor who has resigned from th e 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 suc h statement with the
Comptroller and Auditor-General of India, indicating the reasons and other facts as may be relevant with
regard to his resignation.
1[(3) If the auditor does not comply with the provisions of sub -section (2), he or it shall be liable t o a
penalty of fifty thousand rupees or an amount equal to the remuneration of the auditor, whichever is less,

1. Subs. by Act 22 of 2019, s. 23, for sub-section (3) (w.e.f. 2-11-2018).

and in case of continuing failure, with a further penalty of five hundred rupees for each day after the first
during which such failure continues, subject to a maximum of 1[two lakh rupees].]
(4) (i) Special notice shall be required for a resolution at an annual general meeting appointing as auditor
a person other than a retiring auditor, or providing expressly that a retiring auditor shall not be
re-appointed, except where the retiring auditor has completed a consecutive tenure of five years or, as the
case may be, ten years, as provided under sub-section (2) of section 139.
(ii) On receipt of notice of such a reso lution, the company shall forthwith send a copy thereof to the
retiring auditor.
(iii) Where notice is given of such a resolution and the retiring auditor makes with respect thereto
representation in writing to the company (not exceeding a reasonable lengt h) and requests its notification
to members of the company, the company shall, unless the representation is received by it too late for it to
do so,—
(a) in any notice of the resolution given to members of the company, state the fact of the
representation having been made; and
(b) send a copy of the representation to every member of the company to whom notice of the
meeting is sent, whether before or after the receipt of the representation by the company,
and if a copy of the representation is not sent as aforesaid because it was received too late or because of the
company’s default, the auditor may (without prejudice to his right to be heard orally) require that the
representation shall be read out at the meeting:
Provided that if a copy of representation is not sent as aforesaid, a copy thereof shall be filed with the
Registrar:
Provided further that if the Tribunal is satisfied on an application either of the company or of any other
aggrieved person that the rights conferred by this sub -section are being a bused by the auditor, then, the
copy of the representation may not be sent and the representation need not be read out at the meeting.
(5) Without prejudice to any action under the provisions of this Act or any other law for the time being
in force, 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 in directly, 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:
Provided that if the application is made by the Central Government and the Tribunal is satisfied that
any change of the audit or is required, it shall within fifteen days of receipt of such application, make an
order that he shall not function as an auditor and the Central Government may appoint another auditor in
his place:
Provided further that an auditor, whether individual or firm, against whom final order has been passed
by the Tribunal under this section shall not be eligible to be appointed as an auditor of any company for a
period of five years from the date of passing of the order and the auditor shall also be liable for action under
section 447.
Explanation I.—It is hereby clarified that the case of a firm, the liability shall be of the firm and that of
every partner or partners who acted in a fraudulent manner or abetted or colluded in any fraud by, or in
relation to, the company or its director or officers.