Jurisdiction of bounced cheque cases has changed

Q: My father who is in business for the past several years had received cheques from customers which bounced. My father is doing business in Kanpur where he has a bank account. The customers whose cheques bounced are located in different cities of India, both in the East and South. My father has been advised to file complaints in respect of bouncing of cheques. Would he have to file criminal complaints in different courts in India where his customers are residing? This would be virtually impossible.
- C.R. Aggarwal, Dubai
A: In the past, the Supreme Court had held that complaints for cheque bouncing should be filed in courts where the bank branch of the cheque issuer is located. This caused a lot of hardship to victims of cheque bouncing as they had to file suits in different courts all over India. Hence, the government has now amended the Negotiable Instruments Act under which criminal complaints for cheque bouncing should be filed in a court under whose jurisdiction the bank branch of the payee is located.
This amendment has been made with effect from June 15, 2015. Therefore, the victim of cheque bouncing will now have to file the criminal complaint only in the court under whose jurisdiction he falls and he will not be required to file cases in courts all over India where the defaulting parties are located. Your father is fortunate that the law has been amended and he will be required to file all cases only in the court in Kanpur, though the customers may be from different parts of India.
Q: My son who did his schooling in Bahrain has now completed his chartered accountancy course. He proposes to go back to India and start his practice. Can he become a whole-time director in a company after obtaining certificate of practice? Would he be able to take teaching assignments in colleges? I also want to know whether he can charge his professional fees based on a percentage of income of his clients.
- S.K. Reddy, Manama
A: Generally, a chartered accountant who holds a certificate of practice is not allowed to become a whole-time director of a company. However, the Counsel of the Institute of Chartered Accountants of India has issued guidelines for corporate form of practice whereby a chartered accountant may accept appointment as a managing director based on certain conditions. A chartered accountant in practice is permitted to take up teaching in a college, university or educational institution. However, the time devoted for such activity cannot exceed 25 hours a week.
Professional fees cannot be based on percentage of profits or income. However, some exceptions have been made for chartered accountants who act as receivers or liquidators of companies or who are appointed auditors of co-operative societies. Valuers appointed under direct tax laws or those who are involved in debt recovery services or fund raising services are permitted to charge fees based on a percentage of the value of property, debt recovered or funds raised respectively.
Q: Mutual funds have been investing large amounts in certain companies, especially in the housing sector. This has substantially increased the risks for unit holders. Are any steps being taken to protect the interest of investors?
- P.K. Dhingra, Sharjah
A: Early this year, the Securities & Exchange Board of India (Sebi) had announced a reduction in the limit which a debt-based mutual fund can invest in a single entity. It has now been stipulated that such a mutual fund cannot invest more than 10 per cent of the net asset value of any scheme in a single company. Earlier, the limit was 15 per cent with a provision to extend it by another five per cent with the approval of the trustees of the fund. Further, Sebi has reduced the exposure limit of a scheme in a single sector to 25 per cent of the fund's net asset value, which was earlier 30 per cent.
As far as the housing sector is concerned, the Sebi has taken a more conservative position since the real estate sector is exposed to several risks. A mutual fund can invest only upto five per cent of its net asset value in housing finance companies. Earlier, the debt exposure was 10 per cent. Group level limits for debt schemes have been reduced to 20 per cent. Therefore, the Sebi is taking serious note of investors' grievances and ensuring that the risks are minimised.
Q: As courts in India are burdened with litigation, especially in respect of tax-related issues, have any steps been taken to reduce the backlog of cases awaiting adjudication?
- R.K. Chatterjee, Dubai
A: The backlog of cases can be reduced only if additional courts are set up and more judges appointed. In tax-related cases, it is also necessary to increase the number of benches of the Income-tax Appellate Tribunal and appoint more appellate commissioners. This has not been done so far, though the government is serious about addressing the problem. However, to reduce the appeals filed by the tax department, certain changes have been made recently. The threshold limit for filing appeals by the department against orders of the appellate commissioner has been increased to Rs1 million from Rs400,000.
Therefore, if the tax effect is of Rs1 million or more, the department will appeal to the Tribunal. Likewise, an appeal will be filed in the High Court against the order of the Tribunal only if the tax effect is Rs2 million or more. Appeals to the Supreme Court will be filed only if the tax effect exceeds Rs2.5 million. The expression 'tax effect' has been defined in a circular issued by the Central Board of Direct Taxes to mean the difference between the tax on the assessed income and the tax that would be charged if the taxable income was reduced by the income relating to the disputed issue.
The writer is a practising lawyer specialising in tax and exchange management laws of India. Views expressed are his own and do not reflect the newspaper's policies.