#Wake up CAs! Don’t Miss the Opportunity – Are YOU Ready for NCLT/NCLAT?

2013 Companies Act proposes to establish all powerful National Company Law Board (NCLT) and National Company Law Appellate Tribunal ((NCLAT) for dealing with all legal matters involving corporate world. The NCLT will enjoy powers to deal with matters hitherto dealt by CLB, High Courts and BIFR. The professionals like CAs are not entitled to appear before High Court dealing with appeals arising from CLB, mergers and amalgamations and winding-up cases. With the paradigm shift under 2013 Act, CA fraternity is all good for appearing before NCLT for such matters. They can also handle appeals before NCLAT.

NCLT & NCLAT are going to be a reality soon. But Are CAs Ready?

It is a big question with a possible answer – probably not. CA fraternity needs to change this. The change is possible with some effort – effort to learn how to draft petitions or appeals, effort to present arguments cogently and in a pursuasive manner, effort to improve research ability, effort to learn interpretation of statutes, effort to gain knowledge about legal principles; in short, effort to prepare themselves before these forums.

The competition CAs are going to face will be fierce – from lawyers and other professionals. But with excellent financial knowledge, CAs are bound to be a potent force provided they acquire the above mentioned skills. Only those CAs will succeed who are ready to learn, adapt and change and that too quickly.

Time to wake up is NOW. Surprisingly, neither the ICAI, Regional Councils, Branches and Study Circles have paid considerable attention to this. This area presents a huge opportunity and deserves better treatment by these bodies.

Hope is still not lost. The programs should be organized to prepare CAs for this abundant opportunity. Corporate Law is an interesting field BUT requires thorough knowledge of the subject.

Time, Effort and Will is what is required to change the status quo.

Wake up CAs!!

© Ashish Makhija: ashish@ashishmakhija.com

Disclaimer: The views expressed here are views based on my personal interpretation and should not be deemed as legal or professional advise on the subject. If relied upon, the author does not take any responsibility for any liability or non-compliance.

# Is Filing of Form ADT-1 Mandatory For Appointment Of Auditor Under Section 139(6) & (8)?

CA Gopal ji Aggarwal raised an interesting query relating to filing of Form ADT-1

We want to seek your opinion whether the fourth proviso to Section 139(1) for filing the notice of the appointment of auditor is required to be filed with ROC for the First auditors appointed u/s 139( 6) and appointment u/s 139(8) as the said proviso has been made applicable for the auditors appointed in AGM u/s 139(1) only.

Opinion

If one examines Section 139(1), fourth proviso mandates the companies to intimate RoC about auditor’s appointment and the Form is ADT-1. Similar proviso is absent in Section 139(6) and 139(8).

Technically, since similar proviso is not present in Section 139(6) and 139(8), one can conclude that there is no requirement to intimate RoC about appointment of Auditor. This logic also gets strength from Form ADT-1, which refers to Rule 4(2) of Companies (Audit & Auditors) Rules, 2014. Rule 4(2) relates back to fourth proviso to Section 139(1). This means legally Form ADT-1 is required to be filed for appointment of auditor under Section 139(1) and not under Sections 139(6) and 139(8).

To answer this question in a reasonable manner, we have to refer similar provisions of Companies Act, 1956. Section 224(1) was similar to Section 139(1). Sub-section (1A) stated that “Every auditor appointed under sub-section (1) shall within thirty days of the receipt from the company of the intimation of his appointment, inform the Registrar in writing that he has accepted, or refused to accept, the appointment.” Section 224(5) was similar to Section 139(6) and Section 225(6) was similar to Section 139(8).

Sub-section (1A) of Section 224 dealt with filing of intimation with RoC but it only covered the situations under sub-section (1). This means even earlier Form 23B was to be filed for appointments taking place under Section 224(1) and not under Section 224(5) or 224(6).

Now the pertinent question – Whether the auditors were filing Form 23-B for appointments under 224(5) and 224(6)? The answer is yes as filing of Form 23B became mandatory due to its linking with 23AC and 23ACA. In an indirect way, this became essential in all circumstances i.e. appointment under Section 224(1), 224(5) and 224(6).

The MCA has again linked quoting of SRN for auditor’s appointment in Form AOC-4 (see Col. 10). And this Form does not distinguish between appointments under 139(1) or 139(6) or 139(8). Thus, in an indirect manner,  appointment of an auditor in any situation needs to be intimated to RoC or else the company will not be in a position to quote SRN, which is a mandatory field.

To conclude, law does not mandate filing of ADT-1 in situations under 139(6) and 139(8) but looking at overall conspectus of CA 2013, it seems filing of ADT-1 in all circumstances becomes essential (I have deliberately not used the words ‘mandatory’). 

We await MCA to correct the situation.

 Ashish Makhija: ashish@ashishmakhija.com

Disclaimer: The views expressed here are views based on my personal interpretation and should not be deemed as legal or professional advise on the subject. If relied upon, the author does not take any responsibility for any liability or non-compliance.

#Wake up MCA #2: Law Making Through Circulars – A New Trend

Is MCA circular extending time for DPT-4 filing beyond vires?

Section 74 lays down the time limit within which the company having deposits on the commencement of CA 2013 has to file a statement in DPT – 4. MCA, on the basis of reference received from various quarters, extended time for filing by 2 months i.e. up to 31.08.2014. The extension of time has been granted by way of a general circular no. 27/2014.

We are learning new ways of governance and legislation through circulars. Ministry of Corporate Affairs is changing the laws through circulars. The time limit for filing DPT-4 is specified in the Act and the Executive machinery (read MCA) has no power to amend, alter, reduce or enhance the time limit. This a classic example of stepping on the domain of Legislature.

The circular is per se bad in law. On practical side, since it is a beneficial circular, unless challenged, it will be deemed as good. Challenge or no challenge, MCA should refrain from issuing circulars for which it has no power.

Another aspect which has been overlooked is that Section 74(1)(a) allows time limits under two different situations. It mandates filing of statement within a period of three months from such commencement or from the date on which such payments are due.

This means the time limit of 3 months from commencement of  CA 2013 is not sacrosanct. It could be 3 months from the due date. To explain, if the due date is 30th April, then DPT-4 is to be filed on or before 31st July. The MCA’s circular categorically states that time for filing DPT-4 is expiring on 30th June, 2014. It has failed to take into account the alternative limit.

MCA, by issuing such circulars, is compounding confusion. Law making through circulars is a new trend. This trend needs to be halted as MCA should realise that buck stops at them.

© Ashish Makhija: ashish@ashishmakhija.com

Disclaimer: The views expressed here are views based on my personal interpretation and should not be deemed as legal or professional advise on the subject. If relied upon, the author does not take any responsibility for any liability or non-compliance.