Prior approval for cost auditor appointment includes discretion to refuse approval on relevant grounds; general auditor rules cannot override section 233B.

Section 233B of the Companies Act, 1956 governing cost auditor appointments required prior Central Government approval, and that requirement carried an incidental power to refuse approval on relevant and reasonable grounds. Section 224, which applied to ordinary statutory auditors, did not compel approval of a cost auditor proposal or override the specific scheme in section 233B. A pending complaint alleging professional misconduct was treated as a relevant circumstance justifying refusal, and the decision was found neither arbitrary nor unreasonable. The challenge to the refusal therefore failed and the writ petitions were dismissed.

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Issues: Whether, in the case of appointment of a cost auditor under section 233B of the Companies Act, 1956, the Central Government had discretion to refuse prior approval and whether section 224 of the Companies Act, 1956 compelled approval of the proposal.

Analysis: Section 224 governs the ordinary appointment of statutory auditors, whereas section 233B specifically deals with cost audit and requires prior approval of the Central Government. The requirement of prior approval necessarily includes the power to withhold approval where relevant circumstances justify such refusal. The Central Government was not bound to approve the proposal merely because the company had forwarded the name of the petitioner. The pending complaint alleging professional misconduct under section 21 of the Cost and Works Accountants Act, 1959 was treated as a relevant circumstance supporting refusal, and the decision was found neither arbitrary nor unreasonable.

Conclusion: The Central Government had discretion to refuse approval under section 233B, section 224 was not applicable to compel approval, and the refusal to approve the petitioner's appointment was upheld.

Final Conclusion: The challenge to the refusal of approval failed, and the writ petitions were dismissed.

Ratio Decidendi: A statutory requirement of prior approval carries with it the incidental power to refuse approval on relevant and reasonable grounds, and a general provision governing ordinary auditor appointments cannot override a specific provision regulating cost auditor appointments.

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