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CA Intermediate · Corporate and Other Laws · Audit and Auditors

CA Deshpande is the statutory auditor of Rathi Foods Ltd. Her husband holds shares of Rathi Foods Ltd with a face value of Rs 80,000, and she and her relatives hold no other securities of the company. Under section 141 of the Companies Act, 2013, what is the correct position regarding her eligibility?

She is eligible. Section 141 disqualifies an auditor only if a relative holds securities of the company exceeding the prescribed face value of Rs 1,00,000. Her husband's Rs 80,000 holding is within that limit, so no disqualification arises and no member approval is needed.

  1. AShe is disqualified because a relative holds any security of the company
  2. BShe is eligible, as the relative's holding is within the prescribed limit of face value Rs 1,00,000Correct
  3. CShe is disqualified because any relative holding is prohibited unless acquired before appointment
  4. DShe is eligible only if the company's members approve the holding by special resolution

Explanation

Section 141 disqualifies a person whose relative holds securities of the company exceeding a prescribed face value of Rs 1,00,000. Here the relative's holding is Rs 80,000, which is below that limit, so she is not disqualified. A holding by the auditor herself would be disqualifying, but the relative holding up to the limit is allowed.

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