New cheque bounce law comes into effect with stricter time limits and penalties

KATHMANDU: The government has enforced a revised law on cheque bounce offences, bringing significant changes to the legal process, timeline, and penalties.

The new provisions came into effect following the publication of the Act to Amend the Banking Offences and Punishments Act, 2008 in the Nepal Gazette on May 7.

With this amendment, the timeline for taking legal action in cheque bounce cases has been considerably shortened. Previously, individuals could file a case within five years of a cheque being dishonoured, as per the Bill of Exchange Act, 1977.

However, the updated law now allows complaints to be filed only within one year from the date the cheque is proven to have bounced. Once a complaint is registered, a case must be filed at the concerned district court within six months.

The revised Act outlines a defined process for proving that a cheque has been dishonoured. If a cheque is returned due to insufficient funds, the bank or financial institution must provide the account holder with a maximum of 45 days to deposit the required amount.

The cheque holder must be notified by any available means, and the bank must keep a record of this communication. If the account holder fails to deposit the funds within the stipulated period, and payment is still not possible, the bank must officially confirm the dishonour and return the cheque to the holder within three days.

The amended law has also introduced a detailed framework of punishments based on the value of the bounced cheque. Depending on the amount, the account holder may face imprisonment ranging from one month to four years. The convicted individual is also required to repay the cheque amount, interest calculated from the date of issue, and a fine equivalent to five percent of the amount.

In a significant move toward flexibility, the new provisions also allow for a court settlement even after a case has been filed. If the cheque amount is paid during the legal process, the matter may be resolved through mutual settlement.

Additionally, the amendment has repealed Section 107 of the Negotiable Instruments Act, 1977, consolidating cheque-related offences under the updated Banking Offences and Punishments Act, 2008. Authorities believe the changes will help improve financial accountability and reduce the misuse of cheques in financial transactions.