Re: Kingston Cotton Mills Ltd. If auditor is found negligent in performing his duty then he may be sued in the Civil Court for damages. Legal position of Director: It is difficult to define the exact legal position of the Directors of a Company. The company atleast seven days before the general meeting should inform its members about the candidature of person for the office of director by serving individual notices on members through electronic mode to members who have provided their e-mail id and in writing to all other members. The chairman and auditor were criminally prosecuted on the following grounds : 1. Every company in compliance with the sections 224, 225 and 226 of the Companies Act, 1956 appoints an auditor in a general meeting.
Damages for deceit or fraud 3. Offenses Criminally Liable :- 1. A was contended in his argument that he was only expertise in Human Resource Management. Penalty for failure to disclose fraud As per Section 143 12 , if in the course of the performance of his duties as auditor, he has reason to believe that an offence involving fraud is being or has been committed against the company by officers or employees of the company, Auditor shall immediately report the matter to the Central Government. The kind of stringent measures prescribed against auditors gives the picture that the Act indeed expects the auditors to be bloodhounds in discharging their duties and not merely be watch dogs.
Legal Case :- Leeds Estate Building Society vs Sphephered 1887 : In this case auditor did not care to see the provisions of carried out articles. The auditor should inform the shareholders about the violation of the provisions of the Sections of the Companies Act. For False Records Section 539 of Companies Act, prescribes severe criminal punishment; if any false or fraudulent entry is made in any register, books of accounts or records of the company. Companies of this kind may be called chartered companies. Any other person who has authorized the issue of the prospectus.
Limited liability Partnership as an auditor Sec. To find whether proper books and accounts as required by law have been maintained and whether they represent a true and fair view, the auditor is appointed. If the articles do not name the chairman, the director may elect a chairman of the meeting. Criminal offences: Like any individual, auditors are also bound by the laws of the country. The Committee is of the view that the present framework of penalties does not have the desired deterrent effect and needs to be reviewed. It was held by the Supreme Court in Institute of Chartered Accountants v. Liability of Outgoing Director in a Cheque Bounce Matter Section 141 of the Negotiable Instrument Act dealing with Cheque bounce matters and provide for offence committed by company.
Moreover there is nothing to prevent the company from protecting its property. Most violations are of procedural nature. Inadequate, wrong or fraudulent disclosures, or actions that do not allow shareholders democracy or a competitive market for corporate control to operate also need to be addressed through suitably deterrent provisions. Therefore, under this section the auditor will be liable if 1. In order to decide Director liability, consider following hypothetical example- Mr. Provisions regarding loans to directors do not apply16.
Details related to the Minimum Subscription 4. The State shall have to discharge an important responsibility not only in framing of the law, appropriately recognizing stakeholder rights, but also in its effective implementation and administration. K Mukherjee, that auditors have a fiduciary relation with the shareholders of the company who are in a position of beneficiaries. C and D were independent Directors and also they not participated in day to day affairs of the Company. If auditor gave his consent for the inclusion of such statements in the prospectus. In case of an offence committed by a company, apart from the company itself, the law makes relevant individuals accountable. In such cases, it would be appropriate for them to seek rehabilitation or place their company in liquidation on voluntary basis.
Whether the auditor has obtained all information which is to the best of his knowledge necessary for making the report; 2. But where the casual vacancy is caused by resignation of an auditor, the Board cannot fill up the casual vacancy but the vacancy so caused by resignation, shall be filled by the company in general meeting. The old Companies Act provides avoidance of provisions relieving liability of officers and auditors of company under section 201. If the statement signed by the auditor was not true infect. B, C and D: Mr. In given case, all directors were aware about the fact and also they approved the annual statement without considering their reliability.
Neeta bhalla case 2005 , the liability of Director depend on his role which he play in the Company. The responsibilities of such directors have to be correspondingly higher. If a breach of duty is to be attributed to a Board on basis that board member were present at a meeting which had approved a wrongful act, then the liability of each Director is joint and several. It the Directors or officers of the company refuse to supply some information on the ground that in their opinion it is not necessary to furnish it, he has a right to mention the fact in his report. Such structure could be vested with powers to impose penalties for offences other than those punishable with imprisonment, or imprisonment and fine. If the criticism is based on facts audit report is considered a privileged document. The Company Law Board has now issued a fresh order viz.