A cheque may bounce if it has expired or if there is a problem with the date of issuing it, or if there is insufficient fund in the check issuer’s account to make the payment. Sometimes, the issuer may choose to stop the payment by contacting the bank. In that case, too, the cheque is considered dishonoured. There could be various other reasons for a bank to dishonour a cheque. Cheque bounce is regarded as one of the types of dishonour of a cheque. Simply put, Cheque bounce is a condition in which a bank refuses to exchange the issued cheque to the receiver due to reasons such as (not an exclusive list):
- Insufficient fund
- Overwriting on the cheque
- Mismatch or absence of signature/signatures
- Problem with the cheque’s date
- Account difference in numbers and words
- No company stamp on company cheque
- A mix of Nepali and English words
In Nepal, the following two Acts regulate the cheque bounce remedies and procedures in Nepal:
Negotiable Instruments Act, 2034 (1977) (First amended in 2039)
Banking Offence and Punishment Act, 2064 (2008) (no amendments till now)
Provisions for Cheque Bounce according to Negotiable Instruments Act, 2034
Section 53(10) of this Act states if a cheque is not drawn for payment within six months, the bank is not bound to give payment for the same. The complaint has to be filed within 5 years from the date of cause of action(2) and has to be filed in district court. The cheque must be bounced three times and the bounce letter must be attached to the FIR application.
Process of Cheque Bounce Remedies and Procedures in Nepal as per the Negotiable Instruments Act, 2034
- Step 1: Filing of First Information Report (FIR)
- Step 2: Counterclaim
- Step 3: Collection of evidence
- Step 4: Hearing and final decision
- Step 5: Appeal at High Court
Remedies available under the Act:
If a cheque is bounced, the amount mentioned in the cheque, as well as interest, shall be recovered and the holder shall be punished with imprisonment up to 3 months or a fine up to Rs.3,000 or both.
Provisions for Cheque Bounce under Banking Offence and Punishment Act, 2064
This Act defines cheque bounce as where the holder already has knowledge that the account does not have sufficient balance. The Act mentions a FIR must be lodged within 1 year from the date the offence occurs. This Act identifies cheque bounce as a state party offence.
Process of Cheque Bounce Remedies and Procedures in Nepal as Per Banking Offence and Punishment Act, 2064
- Step 1: Filing of First Information Report (FIR)
- Step 2: Police investigation
- Step 3: File of charge sheet(the charge sheet is filed by the public prosecutor in the concerned High Court).
- Step 4: Hearing for bail
- Step 5: Witness examination
- Step 6: Appeal at High Court
Depending on the basis of the claimed amount, the following are the provision:
Suit Amount Imprisonment
Up to 10 lakh Up to 1 yr
Above 10-50 lakh 1-2 yrs
Above 50 lakh-1 crores 2-3 yrs
1 crore or above 3-5 yrs
There are other situations as well offering own imprisonment and fine(2). In sum, we can see fine ranges minimum of Rs. 10,000 and a maximum of Rs. 10,00,000 and imprisonment minimum of 1 year and a maximum of 5 years.
For Answers and Questions
What is the remedy for cheque bounce?
[Negotiable Instruments Act, 2034] -> The penalty for the dishonour of a Cheque as per the Act is imprisonment for up to three months and a fine of up to three thousand rupees, or both. The affected party may recover the amount in question, along with the interest, from the drawer.
[Banking Offence and Punishment Act, 2064] ->There are other situations as well, offering own imprisonment and fine(2). In sum, we can see fine ranges minimum of Rs. 10,000 and a maximum of Rs. 10,00,000 and imprisonment minimum of 1 year and a maximum of 5 years.
Important Note: This, and any other articles on this website, should not be considered as an expert legal opinion. This has been drafted only for the purpose of a general understanding of the subject.