Cheque Bounce or Dishonor of a Cheque occurs when a bank refuses to accept or pay the drawn amount of the cheque due to various reasons like:

  • Insufficient funds
  • Signature does not match
  • Account is closed
  • Stop Payment of cheque made by the account holder 

These are some of the common grounds for the cheque bounce (dishonor of a cheque) in Nepal. When the bank refuses to accept cheques and pay the drawn amount to the payee, the victim payee can initiate the case against the drawer for the recovery of the amount mentioned in the cheque. 

In the context of Nepal, the victim can initiate a case against the drawer based on two different laws (Negotiable Instruments Act, 2034 BS and Banking Offence and Punishment Act, 2064 BS). It is of the choice of the victim to opt for remedy procedure based on any one of the mentioned laws.

1. Negotiable Instruments Act, 2034 BS

  • Dishonor of cheque occurs when the person deliberately issues a cheque who does not bear such sufficient deposits in the bank.
  • If such cheque is presented in the bank within 6 months from the date of issue and the bank rejects the payment based on the ground that the account does not have sufficient funds on it, the payee can initiate a case in the concerned district court.
  • The payee can initiate a case within 5 years from the date of such dishonor of cheque by filing a claimant paper (firadpatra) in the concerned district court.
  • The payee can recover the amount mentioned in the cheque as well as additional lawful interest (10% p.a) on that amount till the date of execution of the judgment.
  • The court can order the drawer of the cheque with imprisonment not exceeding three months or a fine up to Rs. 3000 or both.
  • There is a provision of fine as well as imprisonment in the law. However, the practice shows that on normal aspects, the court orders the payment of the cheque amount along with interest and a fine of a certain amount to the drawer.
  1. Banking Offence and Punishment Act, 2064 BS
  • A cheque bounce occurs when a person draws a cheque knowingly to make a payment from an account where he has an apparent knowledge that the account does not have sufficient balance to cover the amount of the cheque drawn.
  • If a person commits such an offense, he/she shall be liable to pay a fine equal to the amount drawn on the cheque and shall also be subject to imprisonment of up to 3 months.
  • The Act has placed the cheque bounce offence as a state party offense and the victim party shall file a first information report (Jaheri) on the concerned police station within one year from the date of cheque bounce.
  • The case is represented by the public prosecutor and the charge sheet (abhiyogpatra) is filed by the public prosecutor in the concerned district court.
  • The victim party does not have to bear any of the procedural expenses incurred with the case. However, they are also not provided with the interest or any other amount as remedy besides the amount mentioned in the cheque.

Which Procedure to Opt For?

It is the choice of the victim party to determine which procedure they want to opt for while claiming for the remedy. If the cheque was bounced before a year or more, then the victim can only initiate the case as per the Negotiable Instruments Act as the limitation for initiating the case is 5 years as per this Act. If the cheque bounce occured within a year then the victim party may opt for remedy by any of these two laws. However, the victim shall be aware that there is no provision for providing interest to the amount mentioned in the cheque if the cas is initiated through Banking Offence and Punishment Act.

 

Disclaimer: This information is presented solely for educational purposes and should not be considered legal advice.

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