Cheque Bounce Remedy and Procedure in Nepal
02 June 2020
This article explains about the relevant provision and available remedies in case of cheque bounce/dishonor of cheque in Nepal.
Introduction
A cheque is said to be bounced when a bank refuses to make payment in return of the cheque due to insufficient fund, overwriting in the cheque, mismatch of signature, expired cheque, etc. It is also considered as a dishonor of cheque in Nepal. Cheque Bounce, its punishment, and Legal Procedure in Nepal are regulated by the Negotiable Instruments Act of 2034 and the Banking Offence and Punishment Act of 2064.
Relevant Laws
Negotiable Instruments Act, 2034 (1977)
The Negotiable Instruments Act of 2034 was promulgated in 2034 B.S. by Birendra Bikram Shah to make arrangements related to Negotiable Instruments, also known as the Bill of Exchange. It also made other arrangements to systemize banking transactions in Nepal.
Banking Offence and Punishment Act, 2064 (2008)
The Banking Offence and Punishment Act was promulgated to provide legal provisions for banking offenses and punishments. This Act was
also aimed at promoting trust in the banks and finances of Nepal, preventing and regulating banking issues such as cheque bounce, and providing remedies for the same.
Negotiable Instruments Act
The Negotiable Instruments Act and the Banking Offences and Punishment Act provide separate civil and criminal proceedings against cheque bounce in Nepal. The aggrieved party has the option to choose the remedies available under these laws.
The Negotiable Instruments Act provides for civil proceedings in relation to remedies against the dishonor of a cheque, as explained below:
Remedy under Negotiable Instruments Act
Negotiable Instruments Act and Banking Offenses and Punishment Act respectively provide separate civil and criminal proceedings against cheque bounce in Nepal. It is at the option of the aggrieved party to choose the remedies available under these laws.
Negotiable Instruments Act provides for civil proceedings in relation to remedy against dishonor of cheque as explained below:
If you intentionally issue a cheque to another person, but you don’t have sufficient funds in the bank or the funds you have specified aren’t enough as per the contract, then the condition is known as a Cheque Bounce. This is considered an offense according to the Negotiable Instruments Act. In practice, other conditions also exist for Cheque Bounce, such as false cheque dates, mismatches in signatures, as well as writing the payable amount with the wrong magnitude.
In the case of Cheque Bounce in Nepal, the person responsible for the bounce needs to provide the required amount along with additional interest. The Negotiable Instruments Act also states that the person responsible for the Cheque Bounce might be imprisoned for up to 3 months or might have to pay a fine of up to three thousand rupees, or both.
Case Proceeding under Negotiable Instruments Act
The legal process prescribed by the Negotiable Instruments
Act to address the issue of Cheque Bounce involves the following steps:
The aggrieved party must file a statement of claim in the District Court within five years of the Cheque Bounce. This statement must state the appropriate details of the Cheque Bounce incident and a claim for remedy.
The defendant or the accused must then provide a statement of defense. The defendant is the issuer of the bounced cheque.
After that, both parties present witnesses and evidence to substantiate their respective claims.
The judge of the District Court then considers all evidence or arguments presented by both parties. After that, a judgment is passed that determines the appropriate remedy, if any.
If any party is not satisfied with the final judgment, they have the right to appeal.
Banking Offence and Punishment Act
Banking Offence and Punishment Act provides for the criminal proceedings, where cheque bounce is a criminal offence and the state becomes the plaintiff.
Remedy under Banking Offence and Punishment Act
When knowingly issuing a cheque without sufficient funds in the bank account to cover it, the situation is referred to as cheque bounce under the Banking Offence and Punishment Act of 2064 B.S. Cheque bounce is prohibited by law in the present circumstances.
Cheque bounce in Nepal incurs both fines and imprisonment. The individual responsible for the cheque bounce must first pay the owed amount in full to the recipient of the cheque. Additionally, the individual may be fined proportionally to the cheque bounce amount. Furthermore, the individual can face imprisonment for up to three months and a fine of up to three thousand rupees.
Case Proceeding under Banking Offence and Punishment Act
The aggrieved party or victim must first register a FIR, also known as a First Information Report, at the relevant police office. According to the Banking Offence and Punishment Act, the time limitation for filing an FIR is one year from the occurrence of the cheque bounce.
The police office then starts gathering evidence related to the cheque bounce and prepares an investigation report. This report is submitted to the District Government Attorney Office, which continues the proceedings.
Upon receiving the investigation report, the Government Attorney files a charge sheet to the High Court. A recent Gazette has also stated that the District Court can have jurisdiction over cheque bounce cases.
Once the case is forwarded to the appropriate court, the accused has a bail hearing to determine whether they shall be granted bail or not.
After bail hearings are completed, the court examines witnesses if necessary, catalogs the evidence, and analyzes it
The appropriate judge of the District Court assigned to the case conducts a thorough examination of evidence and all related information. The court then reaches a decision, taking into account the aforementioned punishment for cheque bounce.
If any party involved in the case is dissatisfied with the court’s decision, they have the right to appeal to the High Court and the Supreme Court.
Punishment for Cheque Bounce
In general cases, the punishment for cheque bounce includes imprisonment for 3 months and a fine of Rs 3,000. However, other forms of punishment prescribed by the Banking Offence and Punishment Act are as follows:
- If the disputed amount is less than one million rupees, imprisonment can extend up to one year.
- If the disputed amount is more than one million rupees but less than five million rupees, imprisonment can range from one year to two years.
- If the disputed amount is more than five million rupees but less than ten million rupees, imprisonment can range from two years to three years.
- If the disputed amount is more than ten million rupees, imprisonment can range from three years to five years.
Conclusion
The Issues related to Cheque Bounce have significantly increased in Nepal. In fact, a serious increase in Cheque Bounce related cases caused some amendments to be made to Nepal’s National Law.
Hence, it is crucial to understand the full procedure of the situation which we have clearly stated above. Both the victim of the Cheque Bounce and the Issuer of the Cheque Bounce must be sufficiently aware of the consequences brought about by Cheque Bounce in Nepal.
Disclaimer: This article is for informational purposes only and shall not be construed as legal advice, advertisement, personal communication, solicitation or inducement of any sort from the firm or any of its members. The firm shall not be liable for consequences arising out of any action undertaken by any person relying on the information provided herein.
Contact Us Now
Related Professionals
SURENDRA TIWARI
MANAGING PARTNER
DEEPESH OJHA
FOUNDING PARTNER
aaa