Where the Central Government is of the opinion – (a) That the affairs of any company are not being managed in accordance with sound business principles or prudent commercial practices; or (b) That any Company is being managed in a manner likely to cause serious injury or damage to the interests of the trade industry or business to which it pertains; or (c) That the financial position of any company is such as to endanger its solvency; the Central Government may at any time by order direct that a special audit of the company’s accounts for such a period as may be specified in the order, shall be conducted and may be the same or different order appoint a Chartered Accountant or the Company’s auditor himself to conduct such special Audit. Such an auditor will be known as the special Auditor. Powers and Duties: The special auditor will have the same powers and duties in relation to the Special Audit as an auditor of a company has under section 227.
The Central Government may by order direct any person specified in the order to furnish to the Special Auditor such information or additional information as may be required by the Special Auditor and of failure to comply with such order, such person will be punishable with fine which may extend to five hundred rupees. On receipt of the report of the Special Auditor, the Central Government may take such action on the report as it considers necessary in accordance with provisions of this Act or any other law for the time being in force. Provided that if the Central Government does not like any action on the report within four months from the date of its receipt, that Government shall send to the company either a copy of, or relevant extracts from the report with its comments thereon and require the company either to circulate that copy or those extracts to the members or to have such copy or extracts read before the company at its next General Meeting. The expenses of, and incidental to, any Special Audit under this section, including the remuneration of the Special Auditor shall be determined by the Central Government and paid by the company and in default of such payment, shall be recoverable from the company as an arrear of Land Revenue.