Chapter XXIII - Government Companies

Chapter orientation

Why Chapter XXIII is short in sections but wide in accountability

Chapter XXIII contains only Sections 394 and 395. In practice, however, those provisions sit at the end of a much larger accountability chain involving Government ownership, CAG appointment of auditors, statutory audit, supplementary audit, the annual general meeting and legislative scrutiny.

Two statutory sections

Section 394 governs companies in which the Central Government is a member. Section 395 governs State-only Government companies and extends the reporting model to liquidation.

Four accountability layers

Companies Act compliance, CAG audit oversight, administrative Ministry/Department supervision, and Parliament/State Legislature reporting.

Key timing dependency

The annual report on working and affairs must be prepared within three months of the AGM at which the audit report and CAG comments/supplement are placed.

Core risk

A delay in finalising accounts can cascade through audit, CAG review, AGM and legislative laying, weakening public accountability.

Statutory perimeter

Section 2(45): who is a Government company?

"Government company" means any company in which not less than fifty-one per cent of the paid-up share capital is held by the Central Government, or by any State Government or Governments, or partly by the Central Government and partly by one or more State Governments, and includes a company which is a subsidiary company of such a Government company.

Finin2min decoding: The direct ownership threshold is at least 51%. The definition also pulls in a subsidiary of a Government company even where the Government does not directly hold 51% in that subsidiary.

Element	Legal test	Practical control
Entity form	Must be a company under the Companies Act framework	Do not automatically include a statutory corporation or department
Threshold	Not less than 51% of paid-up share capital	Reconcile register of members, depository data and Government nominee records
Combined ownership	Central and one or more State Governments can be aggregated	Prepare Government-holder bridge by Government
Subsidiary inclusion	Subsidiary of a Government company is included	Apply Section 2(87) control test and group chart
DVR shares	Notification overlay treats paid-up share capital as total voting power where DVR shares exist	Calculate both economic capital and voting power

Classification

What is not automatically the same thing?

Label	What it means	Why it matters
Government company	Section 2(45) status based on ownership/subsidiary test	Sections 394/395 and Government-company exemptions
Government-controlled other company	A wider control concept used in Sections 139 and 143	CAG may appoint/direct auditor even if Section 2(45) is not met
CPSE / SPSE	Administrative public-enterprise classification	DPE or State policy, MoU, governance and performance review
Statutory corporation	Entity created under a special Central/State Act	Special statute controls incorporation, accounts and audit
Government department	Part of Government itself, not a separate Companies Act company	Government accounting and appropriation framework
Listed Government company	Government company with listed securities	Companies Act + SEBI LODR + stock exchange disclosure

Ownership analysis

Direct, combined, subsidiary and indirect-control examples

Direct Central ownership

Central Government holds 51% or more: Section 2(45) satisfied.

Combined Government ownership

Central holds 30% and two States together hold 25%: aggregate Government holding is 55%.

Subsidiary route

A 60%-owned Government company holds 70% of another company: the subsidiary falls within the definition.

Below 51%, but controlled

Government holds 49% but has contractual or board control: not automatically Section 2(45), yet Sections 139/143 may still cover the company.

Section 8 company without share capital

Government-company analysis needs the applicable legal and notification framework; do not force a paid-up-capital test mechanically.

Temporary dilution

Fresh issue to a strategic investor may move ownership below 51%; assess status from the effective allotment/transfer and subsidiary/control consequences.

High-risk assumption: The public-sector label used in budgets, CAG reports or administrative records is evidence, but the statutory test must still be independently documented.

Audit architecture

Why Chapter XXIII cannot be read without Sections 139 and 143

The statutory auditor remains responsible for expressing the audit opinion. The CAG appoints the auditor for covered companies, may issue directions, receives the audit report, and may conduct a supplementary audit or cause a test audit. CAG comments or supplements are then circulated and placed at the AGM together with the audit report.

Section 139 interface

Appointment timelines for Government and Government-controlled companies

Situation	Who appoints?	Time limit / fallback	Tenure
Annual statutory auditor	CAG	Within 180 days from commencement of financial year	Till conclusion of AGM
First auditor	CAG	Within 60 days of registration	Till conclusion of first AGM
First auditor - CAG default	Board	Next 30 days	Till first AGM
First auditor - Board default	Members at EGM	Next 60 days after Board failure	Till first AGM
Casual vacancy	CAG	Within 30 days	As legally applicable
Casual vacancy - CAG default	Board	Next 30 days	As legally applicable

Appointment file: CAG appointment letter, auditor acceptance, eligibility certificate, audit fee approval, independence declarations, branch/unit allocation, reporting timetable and CARO/sectoral applicability.

Board and Audit Committee

Appointment authority does not remove governance responsibility

CAG appoints

The company cannot substitute its preferred statutory auditor for the CAG appointee.

Company remains responsible

Board approves financial statements, maintains books and internal controls, and supplies complete records.

Audit Committee role

Where Section 177 applies, the committee reviews financial reporting, internal controls, auditor performance, related-party matters and management responses.

Audit fee

The company must fix and communicate remuneration in accordance with the Act and appointment terms, without impairing independence.

Non-audit services

Section 144 and CAG appointment conditions restrict prohibited services and wider conflicts.

Timetable governance

The Audit Committee should monitor audit milestones, unresolved observations, CAG queries, AGM readiness and legislative-reporting dependencies.

Section 143(5)

CAG directions to the statutory auditor

For a Government company or another company owned or controlled directly or indirectly by Government, the CAG may direct the manner in which accounts are to be audited. The statutory auditor’s report must include:

directions issued by the CAG;
action taken on those directions; and
impact on the accounts and financial statements.

Direction area	Typical evidence expected
Government support	Equity, grants, guarantees, subsidies and budgetary support reconciled to sanction terms
Public assets	Title, utilisation, encroachment, impairment and safeguarding
Procurement / contracts	Tender compliance, variations, claims, liquidated damages and vendor controls
Projects	Cost and time overruns, capitalisation, idle assets and economic benefit
Receivables / dues	Government dues, disputed balances, ageing and recoverability
IT systems	ERP controls, data integrity, cybersecurity and access
Related parties / JVs	Approvals, arm’s-length basis, reporting and consolidation
Internal controls	Design and operating effectiveness, remediation and monitoring

Section 143(6) and (7)

Supplementary audit, comments and test audit

Supplementary audit

Within 60 days from receipt of the statutory audit report, CAG may conduct supplementary audit through authorised persons and require additional information.

Comment or supplement

CAG may comment upon or supplement the statutory audit report. Material observations are considered after management and auditor responses.

AGM circulation

CAG comments/supplement must be sent to every person entitled to the audited financial statements and placed at the AGM at the same time and in the same manner as the audit report.

Test audit

CAG may order a test audit for a covered company; Section 19A of the CAG DPC Act applies to the report.

Not a second statutory opinion

The statutory auditor’s opinion remains the primary audit opinion; CAG review adds public-accountability oversight.

Management response discipline

Responses should be evidence-based, approved at the right level and consistent with Board papers, accounts and disclosures.

Do not close the AGM pack early: the final dispatch and AGM documentation must incorporate CAG comments/supplement where issued.

Management responsibility

What the company must complete before the auditor and CAG can work

Responsibility	Minimum evidence
Books and records	Complete ledgers, vouchers, unit/branch returns and reconciliations
Financial statements	Board-approved standalone and consolidated statements with schedules
Accounting estimates	Impairment, provisions, ECL, employee benefits, decommissioning and fair values
Government transactions	Support, grants, guarantees, directions and receivables reconciled
Internal financial controls	Process narratives, risk-control matrices, testing and remediation
Legal / claims	Counsel confirmations, arbitration, tax disputes and contingent liabilities
Related parties	Complete Government/group/JV mapping and approvals
Fraud / vigilance	Whistleblower, CVC/vigilance, investigation and fraud-reporting assessment
Subsequent events	Events through approval and audit-report dates
Going concern	Cash flow, Government support assumptions and board assessment

Annual close calendar

Backward plan from legislative accountability

Milestone	Target control	Owner
Financial-year start	Confirm CAG auditor appointment and audit plan	Company Secretary / CFO
Quarterly close	Resolve audit issues, related parties, grants, project balances and IFC defects	CFO / Audit Committee
Year-end close	Freeze records and complete balance confirmations	Finance
Board approval	Approve financial statements and Board report	Board
Statutory audit report	Complete audit and send report to CAG	Statutory auditor
CAG review window	Respond promptly to supplementary-audit queries	Management / auditor
AGM dispatch	Include audit report and CAG comments/supplement	Company Secretary
AGM	Place and consider complete packet	Board / members
Annual report under 394/395	Prepare within 3 months after AGM	Administrative Ministry / State Government
Legislative laying	Lay as soon as may be after preparation	Responsible Government department

The three-month Chapter XXIII clock starts after the AGM - but effective compliance requires planning from the first day of the financial year.

Section 394

394Annual reports on Government companies

(1) Where the Central Government is a member of a Government company, the Central Government shall cause an annual report on the working and affairs of that company to be - (a) prepared within three months of its annual general meeting before which the comments given by the Comptroller and Auditor-General of India and the audit report is placed under the proviso to sub-section (6) of section 143; and (b) as soon as may be after such preparation, laid before both Houses of Parliament together with a copy of the audit report and comments upon or supplement to the audit report, made by the Comptroller and Auditor-General of India. (2) Where in addition to the Central Government, any State Government is also a member of a Government company, that State Government shall cause a copy of the annual report prepared under sub-section (1) to be laid before the House or both Houses of the State Legislature together with a copy of the audit report and the comments upon or supplement to the audit report referred to in sub-section (1).

Finin2min decoding: Where the Central Government is a member, it is responsible for causing a separate annual report on the company’s working and affairs to be prepared within three months after the relevant AGM and laid before both Houses of Parliament. If a State Government is also a member, that State lays the same report and audit material before its Legislature.

Practical example: A Central Government company holds its AGM on 25 September 2026. The Section 394 annual report should be prepared by 24 December 2026. It must then be laid before Parliament as soon as practicable, together with the statutory audit report and CAG comments/supplement.

Professional control: Record the AGM date, calculate the three-month deadline, obtain the final CAG packet, secure Ministry approval, track translation/printing where needed, and retain proof of laying before each House.

Section 394 routing

Central-only and Central-plus-State structures

Ownership/member pattern	Annual report preparation	Legislative destination
Central Government is a member; no State member	Central Government causes preparation	Both Houses of Parliament
Central + one State member	Central causes preparation; State uses copy	Parliament + relevant State Legislature
Central + multiple State members	Central causes one Section 394 report; each member State lays copy	Parliament + each relevant State Legislature
Central Government indirect control but not a member	Section 394 wording must be tested carefully	Do not assume; analyse Section 2(45), membership and other reporting law
Subsidiary Government company	Government-company status may arise through subsidiary limb	Identify which Government is legally a member and assign reporting route

Responsibility matrix: distinguish the company, administrative Ministry, Department of Public Enterprises, CAG audit office, Parliamentary secretariat and each State nodal department. Chapter XXIII duties sit with Government, but the company must supply the complete report package.

Annual report design

What a high-quality report on working and affairs should contain

Section	Recommended content
Identity and mandate	Legal status, Government ownership, administrative Ministry and public-policy mandate
Performance dashboard	Physical output, service delivery, capacity, project and MoU indicators
Financial results	Revenue, profitability, cash flows, capital employed, net worth, borrowings and support
Government support	Equity, grants, subsidies, guarantees, sovereign/State backing and conditions
Projects and assets	Major projects, delays, cost overruns, idle assets, land and asset monetisation
Governance	Board composition, vacancies, committees, meetings, independence and evaluation
Audit and accounts	Statutory opinion, qualifications, Emphasis of Matter, CARO, CAG comments and management action
Risk and controls	Enterprise risks, internal financial controls, cybersecurity, fraud and vigilance
Public accountability	Procurement, related parties, customer/service outcomes, environmental and social impacts
People	Workforce, productivity, industrial relations, diversity, training and safety
Subsidiaries/JVs	Performance, support, exposure, consolidation and governance
Outlook	Future plan, funding, reform/restructuring, disinvestment or closure status

Chapter XXIII annual report is not merely the company’s glossy annual report: it is a Government-caused accountability report and must be complete enough for legislative scrutiny.

Legislative process

How to make "laid before" auditable

Complete packet

Annual report on working and affairs + statutory audit report + CAG comments/supplement.

Correct House(s)

Both Houses of Parliament for Section 394(1); relevant House or both Houses of State Legislature under Sections 394(2)/395.

No fixed post-preparation day count

The Act says "as soon as may be"; document internal target and reasons for any delay.

Session planning

Coordinate with the administrative department and legislative secretariat; do not wait until the report is complete to identify the next session.

Language and printing

Plan translation, authentication, print/e-publication and confidential/sensitive information review.

Evidence

Preserve laying list number, date, House, session, covering memorandum and uploaded/publication copy.

Control failure: The annual report is prepared within three months but remains in internal approval for nine months. The preparation deadline may be met, yet "as soon as may be" accountability is not demonstrated without documented justification.

Section 395

395Annual reports where one or more State Governments are members

(1) Where the Central Government is not a member of a Government company, every State Government which is a member of that company, or where only one State Government is a member of the company, that State Government shall cause an annual report on the working and affairs of the company to be - (a) prepared within the time specified in sub-section (1) of section 394; and (b) as soon as may be after such preparation, laid before the House or both Houses of the State Legislature together with a copy of the audit report and comments upon or supplement to the audit report referred to in sub-section (1) of that section. (2) The provisions of this section and section 394 shall, so far as may be, apply to a Government company in liquidation as they apply to any other Government company.

Finin2min decoding: Where the Central Government is not a member, each State Government member bears responsibility for the report and legislative laying. The same three-month period applies. The reporting model also continues, so far as possible, for a Government company in liquidation.

Practical example: Three States hold 20%, 20% and 15% in a company, and no Central Government holding exists. Each member State should have a coordinated process to cause the report to be prepared and to lay the required packet before its Legislature.

Professional control: Execute an inter-State responsibility protocol covering drafting lead, shared final report, approvals, translation, CAG packet, target laying dates and evidence from every Legislature.

State-only multi-member companies

Avoiding duplicated or inconsistent reporting

Risk	Why it arises	Control
Different report versions	Each State has its own approval process	Adopt one locked master report and controlled translations
Different laying dates	Legislatures sit on different calendars	State-specific session plan and tracker
Missing CAG supplement	One State uses an early draft packet	Release only after final AGM/CAG pack
Inconsistent management response	Departments edit responses independently	Single Board-approved response repository
No clear drafting lead	Section 395 places responsibility on every State member	Execute a nodal-State coordination memorandum
Public disclosure mismatch	Company website differs from laid document	Hash/version control and publication reconciliation

Section 395(2)

Government companies in liquidation

Reporting does not disappear

Sections 394/395 apply so far as may be even when ordinary operations have ceased.

Change the report lens

Focus on liquidation progress, asset realisation, claims, litigation, employees, Government exposure, guarantees and expected completion.

Audit interface continues

Liquidator accounts and applicable CAG/statutory audit responsibilities must be planned.

No misleading performance narrative

Clearly distinguish pre-liquidation operations from liquidation activity and recoveries.

Government support disclosure

Identify continuing budget support, guarantees, environmental/remediation costs and residual obligations.

Closure evidence

Final dissolution/strike-off/IBC status and treatment of records, unclaimed amounts and claims must be tracked.

Section 462 overlay

Government-company exemptions: use only after eligibility testing

The Central Government issued a Government-company exemption notification in 2015 and amended it in 2017, 2018 and 2020. The consolidated notification modifies or relaxes selected Companies Act provisions for qualifying Government companies.

Control point	Professional interpretation
DVR shares	For the Government-company definition, paid-up share capital is construed as total voting power where differential voting rights have been issued.
Filing-default condition	Exemptions are available only where the Government company has not defaulted in filing financial statements under Section 137 or annual return under Section 92.
Provision-specific	Each relaxation has its own scope, entity conditions and wording; never apply a blanket "Government company exemption".
Listed status	Some relaxations are unavailable or narrower for listed Government companies.
Subsidiary status	Some entries specifically cover subsidiaries of qualifying Government companies; verify exact wording.
Date control	Use the consolidated notification as amended on the transaction/compliance date.

Gate before every exemption: (1) confirm Section 2(45) status, (2) confirm no Section 92/137 filing default, (3) read the exact entry, (4) test listed/subsidiary conditions, and (5) document Board/secretarial reliance.

DPE / State policy overlay

Companies Act compliance is the floor, not the whole governance system

CPSE corporate governance

DPE guidelines cover Board composition, committees, disclosure, code of conduct, subsidiary oversight and compliance grading.

Quarterly reporting

Administrative Ministries may require quarterly governance-compliance reports and annual grading/certification.

MoU performance

CPSE performance evaluation operates through current DPE MoU guidelines and is separate from Section 394 reporting.

Administrative directions

Policy directions should be formally recorded and assessed under directors duties, accounting standards and disclosure rules.

State enterprises

State-specific PSU, finance department and legislative-committee requirements may add further controls.

Public Enterprises Survey

Sector-wide reporting is separate from the company-specific Chapter XXIII annual report.

Hierarchy rule: reconcile the Companies Act, CAG requirements, DPE/State directions, SEBI/sector regulations and the company’s Articles. A policy direction cannot silently override a statutory duty.

Listed Government companies

Public ownership plus capital-market accountability

Area	Additional layer
Board composition	Companies Act, SEBI LODR and applicable DPE requirements
Audit Committee	Expanded listed-entity responsibilities and stock-exchange disclosures
Financial results	Quarterly/annual results, limited review, audit and CAG timetable alignment
Related parties	Companies Act + SEBI materiality and shareholder approval framework
Material events	Prompt disclosure of Government decisions, support, disinvestment, restructuring and appointments where material
Annual report	SEBI annual-report contents plus Board report, audit reports, CAG comments and governance certification
Shareholder equality	Government shareholder rights do not eliminate protections for public/minority shareholders
Insider trading	Government nominees and officials may possess unpublished price-sensitive information

Directors and Government nominees

Public ownership does not dilute fiduciary duties

Company duty

Directors act for the company under Section 166, not merely as delegates of the nominating Government.

Policy directions

Material Government instructions should be formally documented, legally reviewed and reflected in Board reasoning.

Conflicts

Nominee directors must disclose interests and comply with recusal/approval requirements.

Information sharing

Confidential or price-sensitive company information cannot be shared without a lawful basis and controls.

Board vacancies

Long vacancies can undermine committees, audit oversight and DPE/SEBI compliance.

Decision record

Board minutes should show alternatives, public-policy objective, financial impact, risk, dissent and approvals.

Internal control framework

High-risk accounts and processes in Government companies

Risk area	Control objective	Audit evidence
Government grants	Recognise and use only under sanction conditions	Sanction letters, utilisation certificates, reconciliations
Guarantees / support	Complete disclosure and going-concern assessment	Guarantee register, support letters, cash-flow model
Land / public assets	Title, custody, valuation and permitted use	Title deeds, GIS/asset register, physical verification
Procurement	Transparent approvals, competition and change control	Tender file, bid evaluation, contract variations
Projects	Accurate cost, completion and impairment	Project ledger, milestone certificates, feasibility
Employee benefits	Complete actuarial and statutory obligations	Actuarial report, payroll, pension/gratuity records
Receivables from Government	Existence, confirmation and recoverability	Department confirmations, ageing, dispute file
Subsidiaries/JVs	Governance, support, consolidation and impairment	Board packs, SHA, audited accounts, valuation
Fraud/vigilance	Detection, escalation, investigation and reporting	Whistleblower log, CVC/vigilance reports, Section 143(12) analysis
IT/cyber	Integrity of financial and operational data	Access logs, change management, DR tests

CAG query response

A defensible response protocol

1. Log
Query, source, date, owner, due date

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2. Reconcile
Books, contracts, approvals and disclosures

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3. Evaluate
Accounting, legal, control and public-interest impact

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4. Approve
CFO, legal, auditor, Audit Committee/Board as needed

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5. Close
Evidence, adjustment, disclosure and remediation

Response red flags: unsupported future assurances, changing facts between teams, unexplained ledger differences, legal conclusions without counsel, and management responses inconsistent with Board-approved statements.

Failure consequences

Why there is no safe "administrative delay"

Section 450 exposure

Where no specific penalty exists, the general penalty may apply, subject to legal assessment and adjudication.

Related statutory defaults

Late AGM, accounts, annual return, Board report or audit compliance carry their own consequences.

Exemption loss

Section 92/137 filing default can disqualify the company from Government-company notification relaxations.

Legislative criticism

CAG and legislative committees may flag arrears and delayed laying as accountability failures.

Financing / rating impact

Qualified accounts, unresolved Government dues and delayed reporting can affect lenders and ratings.

Director/officer accountability

False statements, fraud, failure to maintain records or inadequate controls can trigger personal exposure.

Section 450 currently provides a base penalty of Rs. 10,000 and a continuing penalty of Rs. 1,000 per day, capped at Rs. 2 lakh for the company and Rs. 50,000 for an officer or other person, where no specific penalty or punishment is provided elsewhere.

Applied learning

Ten practical decision cases

Scenario	Issue	Professional conclusion
Case 1 - 50% Central, 1% State	Aggregate Government holding is 51%.	Government company; Central is a member, so Section 394 route applies and the State also lays the copy under Section 394(2).
Case 2 - 49% Government, decisive board rights	Below Section 2(45) direct threshold.	May be Government-controlled other company for Sections 139/143; test Chapter XXIII separately.
Case 3 - Subsidiary of a 60% State company	State has no direct shares in subsidiary.	Subsidiary limb can make it a Government company; identify member Government for Section 395 routing.
Case 4 - AGM on 30 September	Annual report completed on 5 January.	Three-month preparation deadline appears missed; document cause and remedial laying plan.
Case 5 - CAG comments arrive after draft AGM notice	Notice pack prepared too early.	Update/circulate in compliance with Section 143(6) proviso and meeting law; do not omit CAG material.
Case 6 - Three State shareholders	No Central member.	Every State member has Section 395 responsibility; use a common master report and separate laying evidence.
Case 7 - Company in liquidation	No active operations.	Section 395(2) continues reporting so far as may be; report liquidation progress and public exposure.
Case 8 - Listed CPSE	Claims Government-company exemption.	Test exact notification entry, filing-default condition and listed-company exclusion/SEBI overlay.
Case 9 - DVR shares	Government owns 48% capital but 58% voting power.	Apply the Government-company exemption notification’s voting-power construction and document analysis.
Case 10 - Statutory corporation	Created under a special Act, not incorporated under Companies Act.	Not automatically a Section 2(45) company; apply its own statute and CAG framework.

Professional checklists

Year-end, AGM and legislative-laying controls

Year-end

CAG auditor appointment
Audit plan and directions
Government balances
Grant/support conditions
Project and asset verification
Related parties/JVs
IFC and fraud assessment

AGM packet

Board-approved statements
Statutory audit report
CAG comments/supplement
Management action note
Board report and annexures
Correct dispatch and website
AGM minutes/evidence

Legislative laying

3-month deadline tracker
Working and affairs report
Correct Parliament/State route
Translation/authentication
Administrative approval
Laying list/date/session
Public version reconciliation

Finin2min Q&A

Twenty rapid answers

Is every PSU a Government company?

No. PSU is a broad administrative label. Apply Section 2(45) to the legal entity.

Is exactly 51% enough?

Yes, the definition says not less than 51%, subject to the applicable voting-power notification overlay.

Does a Government-company subsidiary qualify?

Yes, the definition expressly includes a subsidiary company of a Government company.

Who appoints the annual statutory auditor?

The CAG appoints the auditor for covered Government and Government-controlled companies under Section 139(5).

Does CAG conduct the statutory audit itself?

The CAG-appointed chartered accountant gives the statutory opinion; CAG may direct, supplement/comment or cause test audit.

What is the Section 394 deadline?

The Government-caused annual report must be prepared within three months of the AGM before which the audit report and CAG comments were placed.

When must it be laid?

As soon as may be after preparation; the Act does not specify a fixed number of days for laying.

What if Central and State Governments are both members?

Central prepares and lays before Parliament; each State member lays a copy before its Legislature.

What if only State Governments are members?

Section 395 applies and every member State bears the reporting responsibility.

Does liquidation end reporting?

No. Sections 394 and 395 apply so far as may be to a Government company in liquidation.

Can a filing-defaulter claim Government-company exemptions?

The 2017 condition generally requires no default in Section 92 or 137 filings.

Does a policy direction protect directors automatically?

No. Directors must still comply with the Act, fiduciary duties, accounting and disclosure requirements.

Can the annual report omit CAG comments?

No. The legislative packet expressly includes the audit report and CAG comments/supplement.

Are listed Government companies exempt from SEBI law?

No. Listing adds SEBI and stock-exchange obligations.

Is the annual report under Section 394 identical to the company annual report?

Not necessarily. Section 394 requires a Government-caused report on working and affairs, accompanied by the audit material.

Who owns the three-month deadline?

The statutory duty is on Government, but the company and administrative Ministry should maintain a joint tracker.

Can CAG require extra information?

Yes, during supplementary audit CAG can require information or additional information in the directed form.

What is a test audit?

A separate CAG-ordered audit under Section 143(7), with Section 19A of the CAG DPC Act applying.

Does Government support remove going-concern uncertainty?

Not automatically. Support must be specific, credible, authorised and assessed under accounting standards.

What is the best compliance evidence?

A complete chain from ownership classification through CAG appointment, audit directions, final AGM packet, report preparation and legislative laying.

Final revision framework

The seven-link public accountability chain

1. CLASSIFY
Section 2(45), control and CPSE/SPSE labels

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2. APPOINT
CAG statutory auditor

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3. AUDIT
Accounts + CAG directions

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4. REVIEW
CAG supplement/comments

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5. AGM
Complete packet placed

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6. REPORT
Prepare within 3 months

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7. LAY
Parliament / Legislature

Public capital requires a traceable line from books of account to legislative scrutiny.

Source register

Primary and professional references

Source	URL	Use
Companies Act, 2013 - official consolidated text	https://www.indiacode.nic.in/bitstream/123456789/2114/5/A2013-18.pdf	Sections 2(45), 139, 143, 394, 395 and 450.
India Code - Companies Act landing page	https://www.indiacode.nic.in/handle/123456789/2114	Current Act structure and subordinate notifications.
CAG - Financial Attest Audit Introduction	https://cag.gov.in/mab/mumbai-i/en/page-mab-mumbai-i-financial-attest-audit-introduction	Statutory auditor role, CAG supplementary audit and 60-day review.
CAG - Appointment terms for Government-company auditors	https://care.cag.gov.in/policy/Terms2014.aspx	Management responsibilities, independence and CAG directions.
DPE - Guidelines on Corporate Governance for CPSEs	https://www.dpe.gov.in/publications/guidelines-corporate-governance-cpses-2010	Mandatory CPSE corporate-governance overlay.
DPE - MoU Guidelines for CPSE performance evaluation 2026-27 onwards	https://www.dpe.gov.in/static/uploads/2026/05/08d62928ec0537ded10d8e133c9eae29.pdf	Current CPSE performance-evaluation overlay.
MCA Government-company exemption notification - consolidated reference	https://ibclaw.in/exemption-to-government-companies-under-companies-act-2013-consolidation-of-all-notifications/	G.S.R. 463(E) and subsequent amendments; verify against Gazette/MCA source before reliance.
CAG oversight report examples	https://cag.gov.in/uploads/download_audit_report/2025/05-Chapter-2-English-067e25a56cfce42.89578590.pdf	Practical treatment of Sections 394/395 and delayed accounts/laying.

Update discipline: Before publication or professional reliance, recheck India Code, MCA Gazette notifications, CAG appointment directions, DPE instructions and any State-specific rules as at the relevant date.