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Section 142: Remuneration of auditors

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Section 141 All 470 Sections of Companies Act Section 143
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Company Sec 2(20) Director Sec 2(34) Tribunal Sec 2(90)

Legal Commentary & Landmark Judgments: Section 142

Section 142 of the Companies Act, 2013 regulates the determination of statutory auditor remuneration, mandating that audit fees be fixed by the company in general meeting or pursuant to an authorized shareholder mechanism to preserve auditor independence from executive management.

  • Exclusive Shareholder Determination: The remuneration of the statutory auditor of a company must be fixed in the general meeting or in such manner as the company in general meeting may determine by resolution.
  • Board Power Confined to First Auditors: The Board of Directors is statutorily authorized to fix the remuneration only of the first auditor appointed by it under Section 139(6); all subsequent appointments require shareholder authorization.
  • Scope of Remuneration and Prohibited Inclusions: Remuneration includes the audit fees and reimbursement of expenses incurred in connection with the audit and facilities provided, but excludes any fees paid for other services rendered at the request of the company (subject to Section 144 prohibitions).
Key Landmark Precedents:
  • Radhakissen Chamria v. Durga Prosad Chamria, AIR 1932 Cal 328: The Calcutta High Court held that an auditor cannot maintain a legal claim or action for remuneration against a company beyond what has been expressly voted and sanctioned by the shareholders in general meeting.
  • S.K. Bhattacharya v. Union of India, (1998) 92 Comp Cas 502 (Cal): The High Court affirmed that vesting the power to determine auditor remuneration exclusively in the general body of shareholders is a cardinal statutory principle designed to insulate the auditor from undue management influence.
Courtroom Practice & Strategic Litigation Guidance:

In corporate secretarial practice, ensure that the AGM notice contains a specific resolution authorizing the Board of Directors to fix the auditor's remuneration in consultation with the auditor, including reimbursement of out-of-pocket expenses. Failure to adopt such an empowering resolution deprives the Board of legal authority to disburse audit fees, exposing payments to recovery actions by minority shareholders under Section 241.

Section 141 All 470 Sections of Companies Act Section 143