Cheque Bounce is a condition in which a bank refuses to exchange the issued cheque to the receiver due to insufficient funds in their bank account to fulfil the payment. It is the type of dishonour of a cheque.
Governing laws:
Banking Offences and Punishment Act, 2064 (Amended on 2082)
AMENDMENT/ CHANGES IN CHEQUE BOUNCE CASES
- Police only Complaint System Introduced
Before the amendment, aggrieved parties could directly file cases in court, but now complaints must first go through a police investigation. Negotiable Instrument Act, 2034, which previously governed cheque dishonour penalties, has now been repealed to avoid overlapping jurisdiction. Now, the Banking Offences and Punishmnet Act will serve as the sole applicable law for such offences.
- Reduced Limitation Period:
The Timeframe within which a case can be filed has been drastically shortened. The new law mandates that:
- A police complaint must be filed within one year of the cheque bounce.
- Once complaint filed in police, a court case must be initiated within 6 months from the police complaint.
- Mandatory 45-Days Notice to Issuer
Before initiating any legal proceedings, the cheque holder must provide 45 days written notice to the issuer after the cheque bounces. This notice serves as a final opportunity for the issuer to deposit the required funds into the account. Banks and Financial institutions are required to inform the issuer through any appropriate medium and keep a record of this communication, allowing 45 days to settle the amount.
- New penalty Structure:
Penalties have been restructured to be proportional to the amount in dispute. The issuer must pay the principal amount, legal interest and an additional 5% penalty on the total due.
Imprisonment Terms:
- Up to NPR 1.5 Million: Up to 1 month
- NPR 1.5 Million to 5 Million: 1 to 3 Months
- NPR 5 Million to 10 Million: 3 Months to 1 Year
- NPR 10 Million to 100 Million: 1 to 2 years
- Above 100 Million: 2 to 4 years
- Provision for Reconciliation (Milapatra)
The new law formally includes the possibility of reconciliation or settlement between the parties. Under this framework:
- Parties can file a joint application for compromise before the investigation concludes (through the investigating officer and government attorney), or after the matter is sub judice (through the government attorney to the court).
- Upon Verification of full payment to the cheque holder, the matter can be amicably settled
- Once such a compromise is approved, the accused will not be subject to further prosecution or punishment under the Banking Offences and Punishment Act.
PROCEDURE
Step 1: If a cheque presented for payment cannot be honoured due to insufficient balance, the bank must issue a notice to the cheque drawer, granting up to 45 days to deposit the required amount.
Step 2: This notification must be recorded and issued through any appropriate means
Step 3: If the account remains unfunded beyond the notice period, the cheque must be marked accordingly with a written endorsement stating the dishonor/bounce was due to lack of sufficient funds and returned to the cheque holder within 3 days
Step 4: Filing a complaint to the Police
A police complaint must be filed within one year of the cheque bounce
Step 5: Police Investigation and Legal Proceedings
The Police conduct the required preliminary investigation along with the examination of the evidence. Thereafter, the government attorney must file the case in court within 6 months of filing the police complaint.
Step 6: Hearing and Decision from the CourtDisclaimer: This content is provided for general informational purposes only and does not constitute legal advice. For personalized assistance or legal interpretation, please contact Vimarsha Law Associates.