There is a provision in Co. Act 2013 for Disqualification of Auditor in Section 141(3)(d)
where it is mentioned that a person or his relative or his partner is Indebted to the company / subsidiary / holding / subsidiary of such holding company / associate company for more than Rs. 500000 then he is disqualified.
There is one practical case study for above mentioned section is as follow
Mr. A is a Chartered Accountant who have made purchase of Rs. 600000 from company ABC Ltd. by A/c Payee cheque/ Demand Draft as on date 31st July, 2016.
On 2nd August, 2016 Mr. A is appointed as an Auditor in AGM of ABC Ltd. for F.Y. 2016-17.
But after appointment Company deposited cheque / demand draft as on date 18th August, 2016 given by Mr. A which get dishonoured on 20th August, 2016.
Whether Mr. A affected by disqualification under this section or not???
Technically, day cheque bounces he becomes indebted immediately to pay 6,00,000 and he will get disqualified. taking it further to belittle reasonable, i will say if cheque has bounced because of lack of funds he will get disqualified and if it is because of some other problem, then he should not, like signature or something wrong on banks end.