Auditor independence breach and participation in corporate management justifies removal u/s144(1)(h) over 2016-18 fee receipts; appeal dismissed

Whether the auditor should be removed for lack of independence and participation in corporate mismanagement: the tribunal found audited balance sheets for 2016-17 and 2017-18, signed by the auditor, showing receipt of management fees and continued fee charging in later years. Under s.144(1)(h) Companies Act, 2013 this conduct undermines auditor independence and indicates involvement in management, justifying removal. Outcome: NCLAT held the impugned order valid, declined to issue notice and dismissed the appeal.

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Issues: Whether the impugned NCLT order dated 09.05.2025 removing the appellant firm as auditor of the company should be set aside.

Analysis: The Tribunal examined the grounds on which the NCLT removed the auditor, focusing on alleged lack of auditor independence and rendering of prohibited non-audit services as reflected in audited balance sheets for 2016-17 and 2017-18 and subsequent years. The Tribunal considered Section 144 of the Companies Act, 2013 which prohibits auditors from rendering certain services (including management services and accounting/book-keeping) and noted the record showing the appellant charged management/other fees in the relevant years. The Tribunal also had before it documentary material alleged to show tampering and certificates purportedly issued to explain or alter disclosures. Procedural applications (exemption from filing certified copy, exemption for annexures, and condonation of delay) were dealt with: exemptions were allowed subject to filing legible/certified copies within the prescribed time and the three-day delay in filing the appeal was condoned on the stated medical grounds.

Conclusion: The appeal challenging the removal of the appellant as auditor is dismissed; the NCLT order removing the auditor is upheld and the dismissal is against the appellant (i.e., in favour of the Respondent).

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