TaxTMI 
TaxTMI 
2001 (5) TMI 906
X X X X Extracts X X X X
X X X X Extracts X X X X
.... thereafter, respondent No. 3 by a letter dated 15-12-1999, submitted the name of the petitioner for appointment as cost auditor of the respondent No. 3 in the prescribed form for approval of the Central Government in terms of section 233B of the Companies Act, 1956 ('the Act'). Respondent Nos. 1 and 2, however, by an order dated 4-4-2000, informed respondent No. 3 that the appointment of the petitioner as cost auditor could not be approved. Respondent No. 3, therefore, was called upon to submit a fresh proposal proposing the name of some other cost auditor in the place of the petitioner. Being aggrieved by the aforesaid order, the present petition has been preferred by the petitioner seeking for quashing of the aforesaid letter dated 4-4-2....
X X X X Extracts X X X X
X X X X Extracts X X X X
....spondent No. 3 in respect of appointment of the cost accountant. According to him, the provisions of section 224 are applicable to the facts and circumstances of the case and in terms of the aforesaid provision there is a mandate on the Central Government to act positively on the proposal sent by the company to the Central Government and, therefore, in the instant case the decision of respondent Nos. 1 and 2 of not giving approval to the proposal of the company is bad in law and is liable to be set aside. 5. The counsel appearing for the respondent, however, refuted the aforesaid allegations and submitted that the relevant provision which is applicable to the facts and circumstances of the case is section 233B and, therefore, while judging....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he provisions of section 224, the petitioner should have been appointed as the cost auditor of the company. He also submitted that the word used in the said provisions of section 224 is 'shall' and, therefore, it is mandatory for the Central Government to accord approval to the proposal of respondent No. 3 as it is. 7. I have considered the said provision of section 224 which relates to the procedure for appointment of auditors. Such auditors are appointed by respondent No. 3 either in its annual general meeting or by its board of directors, as the case may be. The provisions of section 233B, on the other hand, deal with the power of the Central Government to direct external audit of a particular company by cost accountants. A conjoint rea....
X X X X Extracts X X X X
X X X X Extracts X X X X
....uthority who is empowered to exercise the said power in a manner which is not arbitrary or unreasonable, after taking into consideration all the relevant factors. While doing so if it is found by the said authority that no approval could be granted as sought for, it would have also the power to disapprove the proposal which is inherent in the empowerment itself. In the present case, when a proposal was sent by respondent No. 3 for appointment of the petitioner as its cost accountant in terms of section 233B, neither the provisions of section 224 of the Companies Act were attracted nor was the Central Government statutorily bound to accord its approval to the said proposal. 8. In my considered opinion a discretion definitely vested on the C....