2.1     Query

Appointment of auditors in the case of a company under voluntary liquidation

Whether the provisions contained in sub-sections (1), (1A) and (1B) of Section 224 of the Companies Act, 1956, are applicable to a company which has gone into voluntary liquidation under Section 488 but has not been finally wound up under Section 497 of the Act.

Opinion *                                          January 16, 1987

1. Based on the provisions of Section 488 (1) and (2) of the Act, the Committee is of the opinion that the report of the auditors, which is to accompany the declaration of solvency, is to be made by the existing auditors of the company and hence there is no question of a fresh appointment of auditors for this specific purpose as envisaged by Section 224 of the Companies Act, 1956.

2. A related question may, however, arise whether an auditor will be required to be appointed in a case where the winding-up proceedings last for more than one year from the date of the commencement thereof. By virtue of Section 496 of the Companies Act read with Rule 328 of the Companies (Court) Rules, 1959, the liquidator of a company under voluntary winding-up has to lay before “general meetings” of the company at the end of each year his accounts in the prescribed form. As regards the audit of such accounts, Rule 333 of the Companies (Court) Rules, 1959 provides that the company in general meeting in a members’ voluntary winding-up, and the creditors in creditors’ voluntary winding-up, may, if and when they think fit, appoint an auditor to audit the accounts of the liquidator, and shall fix the fees to be paid to such auditor. In view of this position of law, the Committee is of the opinion that in the case of voluntary winding up of a company, it is left to the members or creditors, as the case may be, to decide whether or not the auditors are to be appointed to audit the liquidator’s accounts. The Committee is also of the opinion that the limits prescribed under Section 224 of the Act do not apply to the appointment of auditors made by creditors in the case of companies which have gone into liquidation.