Jul 28, 2023

SC Upholds Constitutional Validity of Section 140(5) of Companies Act

The SC in Union of India v. Deloitte Haskins & Sells LLP,[1] upheld the constitutional validity of Section 140(5) of the Companies Act which states that the NCLT can direct a company to change its auditors if it is satisfied that the auditor has acted in a fraudulent manner or has abetted or colluded in a fraud with the management of a company. The Court held that subsequent resignation of an auditor after an application under Section 140(5) of the Companies Act is filed, would not by itself terminate such proceedings against such auditor that are before the NCLT.

[1] Union of India v. Deloitte Haskins & Sells LLP, 2023 SCC OnLine SC 557.




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