Himalayan Co. Ltd. reappointed Ram and Ramita as their joint auditors in the Annual General Meeting. The AGM authorized the Board for fill up the vacancy on their own in the event of both or either of auditors declined to accept the assignment. The Board passed a resolution to appoint Prabhat if any of the auditors declined to accept the assignment. Later on, Ramita declined to accept the assignment and Board of Directors appointed Prabhat in place of Ramita as per its resolution.
In the present case Ramita is one of the joint auditors who was appointed in Annual General Meeting, but declined to accept the appointment. The Board of Directors as per their resolution, appointed Prabhat as a joint auditor in her place. In this case, the vacancy created Ramita is neither caused resignation of Ramita nor is it a casual vacancy because Ramita‟s appointment had not become effective. Hence, appointment of Prabhat as joint auditor the Board is not valid. Prabhat can only be appointed as joint auditor shareholders in the General Meeting.