Laws related to Cheque Dishonor in Nepal/ Debt Collection Lawyers in Nepal/ Cheque Bounce Laws in Nepal/ Banking & Finance Lawyers in Nepal/Legal Remedies of Cheque Bounce in Nepal/Recovery of Payment laws in Nepal
A cheque is said to be bounced when a bank refuses to make payment in return for the cheque due to insufficient funds, overwriting in the cheque, mismatch of signature, expired cheque, etc. It is also considered a dishonor of cheques in Nepal
. Or it is called Cheque bouncing is regarded as a condition in which the receiver will not be able to exchange the issued cheque due to various reasons such as insufficient funds, overwriting in the cheque, or mismatch of signature, among others. As per the law, cheque bouncing is regarded as one of the causes of dishonoring the cheque.
In the context of Nepal, remedies against cheque bounces have been addressed through two distinct laws i.e.
a) Negotiable Instrument Act, 2034 (1977)
b) Banking Offence and Punishment Act, 2064 B.S. ( 2008)
1. Negotiable Instruments Act, 2034 :
According to the Act, a cheque bounce is when a person deliberately transfers a cheque by drawing it to some who does not bear a deposit in the bank or bears an insufficient deposit. Following the commission of such act, the amount mentioned in the cheque, as well as interest on it, shall be recovered from the drawer to the holder and he/she shall be punished with imprisonment of up to three months or a fine of up to three thousand rupees or both. This Act identifies cheque bounce as an individual party offense wherein the aggrieved must file a complaint in the concerned District Court within five years from the date of cause of action to file such complaint.
Process and remedies of Cheque dishonoring:
Section 108 of the Negotiable Instrument Act, 1977, mentions that a complaint shall be filed within five years from the date of the cause of action to file such a complaint. The process for filing the case at the concerned district court is listed below:
Step 1: Filing of a statement of claim (phiradpatra) by the party
Step 2: Reply by another party on the statement of claim, which is regarded as pratyuttarpatra.
Step 3: Collection of evidence and examination of witnesses
Step 4: Hearing and final decision by the district court
Step 5: Filing an appeal at a high court, if any of the parties is not satisfied with the decision rendered by the district court.
Remedies of Cheque Dishonor according to Negotiable Instrument Act 1977:
Section 107 (A) of the Negotiable Instrument Act, 1977, provides the following remedy to the affected party.
a) Recovery of the amount mentioned in the Cheque with interest
b) Imprisonment not exceeding three months or fine up to Rs. 3000 or both
2. Banking Offence and Punishment Act, 2064 B.S.
The Act prohibits anyone from drawing a cheque to knowingly make payment from an account where he/she has 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 the principal amount along with a fine depending on the amount of transaction involved and imprisonment of up to 3 months. The Act mentions FIR must be lodged within 1 year from the date the offense occurs. This Act identifies cheque bounce as a state party offense.
Procedure to file a case :
Section 17(1) of the Banking Offence and Punishment Act, 2064, mentions a complaint shall be filed within one year from the date of cause of action to file such a complaint. The process for filing the case in the concerned high court is listed below:
Step 1: Submission of the first information report (FIR) at the concerned police station
Step 2: Police will carry out an investigation, which they will submit to a government attorney.
Step 3: Filing of a charge sheet at the high court by the government attorney
Step 4: Hearing for bail at the high court: It is the first hearing in that particular case
Step 5: Examination of witnesses
Step 6: Hearing when the high court will render its decision
Step 7: Filing an appeal at the Supreme Court, if any of the parties is not satisfied with the decision rendered by the high court
The Banking Offence and Punishment Act, 2008, provides the following remedy to the affected party:
a) Recovery of the amount mentioned in the cheque with interest
b) Imprisonment not exceeding three months
c) Fine of the amount mentioned in the cheque
Legal Option depends upon the Aggrieved party ;
Regarding the protection of the rights of the aggrieved, pursuing the case under the Negotiable Instruments Act allows the aggrieved to recover the interest on the drawn amount while the Banking Offence and Punishment Act, 2064 do not provide the same. Further, when initiating the case as a state party offense, the court preliminary focuses on fining the defendant and upon the obtaining of a fine, a separate process commences for recovering the amount involved in the amount irrespective of the fine.
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