Govt. revises law on cheque bounce offenses

KATHMANDU, MAY 10: The government has amended the Banking Offences and Punishment Act, 2064 (2008 A.D.), introducing key changes to the legal framework surrounding cheque bounce cases, including procedures for investigation and the imposition of penalties. The revised provisions came into effect on Wednesday (May 7).

With the new amendment, only the police are now authorized to investigate cheque bounce cases and initiate legal proceedings. Previously, individuals could directly file such cases in court.

In addition, the amendment repeals Section 107(a) of the Exchange Rights Act, 2034 (1977 A.D.), which contained separate provisions for penalizing issuers of dishonored cheques due to insufficient funds. By doing so, the government has eliminated the dual legal framework and consolidated the process under a single, streamlined law.

Complaints Must Be Filed Within One Year

Under the revised provisions, complaints related to cheques dishonored more than one year ago are no longer valid for legal action. Previously, the limitation period under the Exchange Rights Act was five years. Now, complaints must be lodged with the police within one year of the cheque being dishonored, and a formal case must be filed in court within six months of the complaint’s registration.

45-Day Notice Required Before Legal Action

If a cheque is issued without sufficient funds in the account, the payee is required to give the issuer a 45-day notice to settle the payment before initiating legal action. This requirement has been newly introduced through the amendment.

Additionally, if a cheque is dishonored due to insufficient balance, the concerned bank must issue a 45-day notice to the account holder, requiring them to deposit the specified amount. As per Section 3(c)(3) of the amended Act:

"If a cheque is returned under sub-section (2), and the holder seeks formal verification of dishonor, the concerned bank, financial institution, or cooperative bank must notify the account holder—by any means—providing a 45-day window from the date the cheque was submitted to deposit the required funds. This notice must be recorded and documented."

Penalties Based on the Amount Involved

When dishonor is confirmed, the cheque issuer must reimburse the payee the total amount indicated on the cheque.e cheque. along with interest accrued from the date of issuance to the date of repayment, in accordance with prevailing law. A fine equivalent to 5% of the total due amount (principal plus interest) will also be imposed.

This represents a reduction from the previous fine of 100%. Now, if the total payable amount is repaid, only a 5% penalty will apply. However, imprisonment terms are scaled based on the size of the default:

• Up to NPR 1.5 million: Up to 1 month of imprisonment

• NPR 1.5 million – NPR 5 million: 1 to 3 months

• NPR 5 million – NPR 10 million: 3 months to 1 year

• NPR 10 million – NPR 100 million: 1 to 2 years

• Above NPR 100 million: 2 to 4 years

Provision for Settlement (Milapatra)

The amended Act now formally incorporates the provision for milapatra (settlement agreements), which was previously available only under the Criminal Procedure Code. This mechanism is now embedded directly into the core legislation.

However, the amended law does not require verification of the source of the funds mentioned in the chequ