NCLT removes auditor for the first time under new Companies Act

The NCLT has removed the statutory auditor of Zen Shaving and allowed the Ministry of Corporate Affairs to appoint an independent director in his place

The National Company Law Tribunal (NCLT) has removed the statutory auditor of Zen Shaving and allowed the Ministry of Corporate Affairs (MCA) to appoint an independent director in his place. This is the first time the NCLT has passed such an order against an auditor under the Companies Act, 2013.

Metals and chemicals manufacturer Zen Shaving had applied to be listed for an initial public offering (IPO) on the Pune Stock Exchange.

In its order, the NCLT noted that family members of the auditor, Mukesh Maneklal Choksi, are shareholders of Zen Shaving. Also, the auditor had not examined the company’s books before giving the audit certificate.

The NCLT has also observed that the actions of the company make it seem like a shell company. 

The tribunal has asked Zen Shaving and its auditor to file a counter affidavit within 15 days, and posted the matter for further hearing on February 2. The MCA had also sought that Choksi be debarred from being an auditor of any company for the next five years.

The regional director, western region, MCA has alleged the company’s stocks were not listed on the Pune Stock Exchange and it siphoned of investors’ money by not paying them when the IPO did not work out.

Apart from that, the company has not issued financial statements after 1995 and changed its registered office frequently. 

The NCLT said the company had failed to list on the exchange despite giving such an assurance in the prospectus, filed in October 1996.