Cheque dishonouring law in Nepal: Everything you need to know about

Cheque dishonouring law in Nepal: Everything you need to know about

Cheque bouncing is becoming increasingly popular in Nepal. Cheque bouncing is described as a situation in which the receiver is unable to exchange the issued cheque due to a variety of factors including insufficient funds, overwriting in the cheque, and signature mismatch, to name a few. Cheque bouncing is one of the reasons for a cheque being dishonored, according to the statute.

Here’s what you need to know about Nepalese laws about check bouncing and/or dishonoring.

The following two laws govern this matter in Nepal:

  1. Negotiable Instruments Act, 1977
  2. Banking Offence and Punishment Act, 2008

Provisions in the Negotiable Instruments Act

Conditions of cheque dishonouring

The following actions are considered dishonouring of a check under the Negotiable Instruments Act of 1977:

  1. Overwritten check
  2. If no signature is attached or if the signature does not fit the bank’s specimen signature
  3. If the name of the drawee (the person who accepts and cashes the check) is missing or unclear,
  4. If the amounts written in terms and figures do not match; if the account number is not listed or is not clearly stated;
  5. If the drawer (the person who writes and issues the cheque) asks the bank to put a hold on the payment on the cheque, the bank will.
  6. If the drawer has closed the account before delivering the cheque and a court has ordered the bank to stop the payment
  7. If there are insufficient funds in the account to cover the payment specified in the check,
  8. If the bank receives details about the drawer’s death, insanity, or insolvency,
  9. If the drawer does not sign the check to show the alteration, it is considered invalid.
  10. If the date isn’t specified or the check is past its expiration date,
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Filing a case against cheque dishonouring

A complaint must be lodged within five years from the date of the cause of action, according to Section 108 of the Negotiable Instrument Act of 1977. The following is the procedure for filing a lawsuit in the relevant district court:

Step 1: The party files a statement of argument (phiradpatra).

Step 2: The other party’s response to the statement of argument, known as pratyuttarpatra.

Step 3: Gathering evidence and questioning witnesses

Step 4: The district court holds a hearing and makes a final decision.

Step 5: If either of the parties is dissatisfied with the district court’s ruling, they can file an appeal with the Supreme Court.

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Remedies

Section 107A of Negotiable Instrument Act, 1977, provides the following remedy to the affected party.

  1. Recovery of the amount mentioned in the cheque with interest
  2. Imprisonment not exceeding three months or fine up to Rs 3,000 or both

Provisions in the Banking Offence and Punishment Act

Definition

Drawing a cheque knowingly to make a payment from an account where the drawer has an obvious awareness that the account does not have sufficient balance to cover the value of the cheque drawn is considered an act of dishonouring the cheque, according to Section 3(c) of the Banking Offence and Punishment Act, 2008.

Procedure to file a case

A complaint must be lodged within one year of the date of the cause of action, according to Section 7(1) of the Banking Offence and Punishment Act of 2064. The following is the procedure for filing a case in the relevant high court:

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Step 1: File a first information report (FIR) with the appropriate police station.

Step 2: Police will conduct an investigation and report to the government attorney.

Step 3: The government attorney files a charge sheet in the high court.

Step 4: Bail hearing in the high court: It’s the first time the argument has been heard.

Step 5: Witness interrogation

Step 6: The high court will hold a hearing to announce its verdict.

Step 7: If either of the parties is dissatisfied with the high court’s ruling, they can file an appeal with the Supreme Court.

Remedies

The Banking Offence and Punishment Act, 2008, provides the following remedy to the affected party:

  1. Recovery of the amount mentioned in the cheque with interest
  2. Imprisonment not exceeding three months
  3. Fine of the amount mentioned in the cheque