KATHMANDU, May 19: The government has empowered police with full authority to investigate and prosecute cheque bounce cases. Under the new law the government implemented last week, police must take cheque bounce cases to court within six months of registering a complaint. The law gives the police full authority to investigate and prosecute these offenses. Accordingly, they must complete their investigation and file the case in court within the six-month deadline.
The government has amended the Banking Offenses and Punishment Act, 2064 (2008), introducing a new provision that defines punishments for cheque bounce offenses based on the amount of financial loss. Under the revised law, courts will impose up to one month of imprisonment for losses up to Rs 1.5 million. For losses between Rs 1.5 million and Rs 5 million, the punishment will range from one to three months. If the amount involved is between Rs 5 million and Rs 10 million, offenders will face imprisonment from three months to one year. In cases where the loss ranges from Rs 10 million to Rs 100 million, the law mandates one to two years of jail time, while losses exceeding Rs 100 million will result in imprisonment ranging from two to four years.
The government published this new provision in the Nepal Gazette on May 7. It grants the police exclusive authority to investigate and file cases related to cheque bounce offenses. With this change, police offices are expected to witness a surge in the number of plaintiffs and defendants involved in banking disputes. The earlier provision that allowed individuals to file such cases directly in court no longer applies. Through this amendment, the government has repealed Section 107(a) of the Negotiable Instruments Act, 2034 (1977), effectively shifting the process from the courts to police jurisdiction.
Section 3(c) of the Banking Offenses and Punishment Act, 2064 (2008) prohibits individuals from knowingly issuing a cheque without having sufficient funds in their account. However, the Act did not explicitly use the term "cheque dishonor." In Section 15, the Act outlined penalties, stating that if anyone commits an offense under Section 3, they must repay the loss, pay a corresponding fine, and serve up to three months in prison. Similarly, if they violate Section 11, they must repay the loss and pay a fine accordingly.
The government has now amended Section 15 to revise the punishment provisions. Lawmakers inserted a new sub-section (1)(a) after sub-section (1), which states that if authorities prove a cheque dishonor under sub-section (5) of Section 3(a), the account holder who issued the cheque must compensate the bearer for the full loss amount. The law also requires the issuer to pay a fine equal to 5 percent of the loss and serve a prison sentence as prescribed.
The recent amendment that repealed Section 107(a) of the Negotiable Instruments Act has invalidated cheques older than one year from the date of dishonor for legal action. Previously, under the Negotiable Instruments Act, 2034 (1977), the law allowed a statute of limitations of five years for dishonored cheques. Now, since the law requires parties to file cases exclusively under the Banking Offenses and Punishment Act, complainants must register a police complaint within one year of the cheque's dishonor. The police must then file the case in the concerned district court within six months of registering the complaint.
Section 17 of the amended Act makes this clear: "Notwithstanding anything written in sub-section (1), in cases of offenses under Section 3(a), the complainant must file a complaint within one year from the date of verification of the dishonor and must ensure that the case reaches the concerned district court within six months of filing the complaint."
Moreover, if a cheque bounces due to insufficient funds, the issuing bank must now notify the account holder and give them 45 days to deposit the required amount. According to Section 3(a)(3) of the Act, if the bearer wishes to verify the dishonor as per sub-section (2), the bank, financial institution, or cooperative bank must notify the account holder—through any available means—within 45 days from the date of presentation, and must allow them time to deposit the specified amount. The bank must also keep a record of having issued the notice.
If the account holder still does not deposit the required amount, the bank must certify the cheque dishonor within three days and return the cheque to the bearer (the person entitled to receive the payment). Nepal Rastra Bank will issue guidelines on cheque dishonor procedures.
The amended law reduces the fine for cheque bounce offenses and sets imprisonment terms based on the amount of loss. Previously, the fine equaled 100 percent of the loss, but now the law lowers it to 5 percent, provided the loss is fully repaid. The amendment also allows both parties to settle the matter through mutual agreement if they choose.