What is a Cheque Bounce ?
Dishonor of a cheque occurs whereby a bank refuses to accept or pay the drawn amount to the payee due to various reasons such as: if the cheque is overwritten, if the signature is absent or the signature in the cheque does not match with the specimen signature kept by the bank, if the name of the payee is absent or not clearly written, if the fund in the bank account is insufficient to meet the payment of the cheque (cheque bounce)and so on.
A cheque bounce is one of the types of dishonor of a cheque that occurs when the payee cannot retain the stated amount in the cheque due to insufficient funds in the account of the drawer. In the context of Nepal, remedies against cheque bounces have been addressed through two distinct laws i.e. i)Negotiable Instruments Act, 2034 (1977)and ii) Banking Offence and Punishment Act, 2064 B.S. (2008).
1. Negotiable Instruments Act, 2034 B.S. (1977)
According to the Act, a cheque bounce is when a person deliberately transfers a cheque by drawing it to someone 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.
2. Banking Offence and Punishment Act, 2064 B.S. (2008)
The Act prohibits anyone from drawing a cheque to knowingly make payment from an account where he/she has an 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 a fine depending on the amount of transaction involved and imprisonment of up to 3 months.
This Act identifies cheque bounce as a state party offense whereby a First Information Report (FIR/Jaaheri) must be lodged at the nearby police station within one year from the date of knowledge of such offense. Following the registration of the FIR, a charge sheet (Abhiyogpatra) is then filed by the public prosecutor in the concerned high court and the state bears all procedural expenses incurred when proceeding with the case.
Which legal mode to opt?
As per the recent interpretation by the Supreme Court in the case of Nirmala Sodari v Nepal Government (NKP 2077), given that there are two different legal modes for remedies in the case of cheque bounce, selection of a particular procedure must be carried out considering the protection of rights of the aggrieved and the purpose of the cheque bounce.
Regarding the protection of 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 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 transaction. Contrarily, charges under the Negotiable Instruments Act directly recovers the amount irrespective of the fine. Similarly, as to the purpose of the cheque bounce, if the offense was committed with the intent of affecting the national banking system, it must be considered a state party. Despite this interpretation, there has been no amendment in the existing laws lately. Nonetheless, taking into account all these facts, the most appropriate legal vehicle must be chosen.
Disclaimer: This article is not a legal opinion and it is advised that you consult a lawyer for specific legal advice. This note is for general understanding only. Kindly note that the copyright for this article vests on Vidhi Legal Concern