SHOULD STATUTORY AUDITORS ATTEND AGM

COMPULSORILY?

PREAMBLE
The Company
auditors who
representatives
Annual General
shareholders.

jurisprudence in India enshrines statutory

audit the accounts of a company as
of the shareholders who appoint them at every
meeting {AGM} to look after the interest of the

In a significant case of Deputy Secretary v S N Dasgupta, AIR,

1956 , Cal 414, it was held by the court that the auditor is the
servant of the shareholders and whose duty is to examine the
affairs of the company on their behalf at the end of a year and
report to them what he has found. The auditors owe a number
of duties to the company and its shareholders.
It is an obvious statutory inference that at the AGM where the
audited accounts are placed and approved by the shareholders,
the statutory auditors should be present to attend to any
queries / doubts the shareholders may have.
In that context the question arises whether the attendance of
auditors at the AGM should be compulsory or not.
Section 231 of the Erstwhile Companies Act 1956 had
mandated that all notices of, and other communications
relating to, any general meeting of a company which any
member of the company is entitled to have sent to him shall
also be forwarded to the auditor of the company; and the
auditor shall be entitled to attend any general meeting and to
be heard at any general meeting which he attends on any part
of the business which concerns him as auditor.
From this provision it is amply clear that the erstwhile law had
given a right to the auditor to attend any general meeting,

including AGM and he has similar right to be heard at the

meeting on business concerning him as an auditor, notably the
final accounts which he has audited.
As can be seen from the erstwhile law, it was not mandatory
for a statutory auditor to attend any general meeting, only that
he had a right to get the notice of any general meeting, with
corresponding right to attend and be heard thereat.
COMPANIES ACT 2013
With the advent of the new Companies Act 2013 the position
has undergone some change.
The process involved in incorporating the new provision is
worth noting. While examining the Companies Bill 2011 the
Standing Committee on Finance {2011-12} of Parliament on
Companies Bill 2011 dated June 2012 had suggested in its 57 th
Report of that:
Attendance of auditors be made mandatory only in annual
general meeting instead of in all the general meetings
Against this suggestion the Ministry of Corporate Affairs had
mentioned that:
These provisions are same as under section 231 of present
Companies Act, 1956 and was repeated in the 2009 Bill.
Honble Committee did not make any recommendation to
modify these provisions. No difficulty has ever been faced in
giving effect to the relevant provision.
From the above it appears that the suggestion did come from
the Standing Committee that attendance of auditors be made
mandatory for AGM. For other general meetings the attendance
be optional.

From the aforesaid background the following section has been

brought in the statute book by way of Companies Act 2013.
Notes on Clauses in Companies Bill 2011 mentions as follows:Clause 146. This clause corresponds to section 231 of the
Companies Act, 1956 and seeks to provide that auditor or his
representative, qualified to be an auditor, shall get all the
notices of general meetings and shall attend the same and be
heard on any part of the business concerning him as the
auditor.
The section is as follows:Section146. - All notices of, and other communications
relating to, any general meeting shall be forwarded to the
auditor of the company, and the auditor shall, unless otherwise
exempted by the company, attend either by himself or through
his authorised representative, who shall also be qualified to be
an auditor, any general meeting and shall have right to be
heard at such meeting on any part of the business which
concerns him as the auditor
ANALYSIS OF THE SECTION
This provides that: All notices of, and other communications relating to, any
general meeting mandatorily be forwarded by the
company to its statutory auditor.
Auditor is statutorily required to attend any general
meeting either by himself or through his authorised
representative, who shall also be qualified to be an
auditor.
Auditor is however permitted to be exempted by the
company to attend the general meeting.

 Auditor shall have the right to be heard at such general

meeting on any part of the business which concerns him
as the auditor.
General meeting will include AGM as well as Extraordinary
General meeting or any other general meeting
The pertinent matter here is that although the statutory auditor
has been statutorily mandated to attend any general meeting,
the concerned company may exempt him from attending. It is
reasonable to interpret and also keeping in view the practises
of good corporate governance that the exemption will be
granted by the concerned company on justified and reasonable
grounds.
CONCLUSION
Keeping in view the onerous duties of statutory auditors in a
company and the fact that an AGM is an ideal forum for them
to discuss issues with the shareholders, give clarifications, allay
doubts etc relating to accounts, it may have been better law to
have made the attendance of auditors or his representative at
the AGM mandatory without any exemption or with very limited
exemptions. Perhaps review of this law would be made in not
too distant future.
{AMITAV GANGULY}