Cheque Bounce (Dishonor of Cheque): Laws and Remedies in Nepal

Understanding Cheque Bounce or Dishonor of a Cheque in Nepal

Cheque bounce or dishonor of a cheque occurs when a bank refuses to pay the drawn amount due to various reasons. This can lead to legal action by the payee against the drawer. Common reasons for cheque dishonor in Nepal include:

• Insufficient funds
• Signature mismatch
• Closed account
• Stop payment order by the account holder

When a cheque is dishonored, the payee (victim) has the right to initiate legal proceedings against the drawer to recover the specified amount.

Legal Framework for Cheque Bounce Cases in Nepal

In Nepal, cheque dishonor cases can be pursued under two key laws:

• Negotiable Instruments Act, 2034 BS
• Banking Offence and Punishment Act, 2064 BS

The victim can choose either law depending on the circumstances of the dishonor.

1. Legal Remedies under the Negotiable Instruments Act, 2034 BS

This law governs cases where the drawer knowingly issues a cheque without sufficient funds in their account. Key provisions include:

• The victim must file a case within 5 years of the cheque bounce.
• A claimant paper (firadpatra) must be submitted to the district court.
• The victim can recover the cheque amount along with an additional lawful interest (10% p.a.) until the judgment is executed.
• The court can impose imprisonment for up to 3 months, a fine of up to Rs. 3000, or both.

In practice, courts generally order the payment of the cheque amount with interest and a fine.

2. Legal Remedies under the Banking Offence and Punishment Act, 2064 BS

This act addresses cases where the drawer intentionally issues a cheque without sufficient balance. Key features include:

• The drawer may face a fine equal to the cheque amount and imprisonment for up to 3 months.
• The case is handled by the public prosecutor, and the victim incurs no procedural expenses.
• No interest or additional claims can be made, apart from the cheque amount itself.

Choosing the Right Legal Procedure

Deciding the appropriate legal remedy depends on the timing of the cheque dishonor:

• Cheque dishonored more than a year ago: The case must be filed under the Negotiable Instruments Act (5-year limitation).
• Cheque dishonored within the past year: The victim can choose either law, but note that the Banking Offence and Punishment Act does not allow claims for interest on the cheque amount.

Disclaimer

This article is for educational purposes only and should not be considered legal advice. FinLex Associates holds exclusive rights to this content.