What to do when a Cheque Bounces?

Cheque transactions remain a common feature of commerce in Nepal between businesses, individuals, contractors and clients. When a cheque fails to clear because the drawer's account lacks sufficient funds, Nepali law treats it as a criminal offence, not a civil dispute.

The governing legislation is the Banking Offence and Punishment Act, 2064 (2008). It was substantially amended in Baisakh 2082 (May 2025), and the changes are significant for anyone dealing with a bounced cheque today. Many articles online still describe two separate legal routes: one criminal under the Banking Offence Act, and one civil under the Negotiable Instruments Act. That two-route framework no longer exists. The Second Amendment to the Banking Offence Act repealed Section 107A of the Negotiable Instruments Act which underpinned the civil remedy and consolidated all cheque bounce proceedings under a single criminal framework.

This article describes the law as it stands after that amendment.

Does a Mismatched Signature Count as a Cheque Bounce?

A cheque can fail to clear for a range of reasons beyond insufficient funds: a mismatch in the drawer's signature, an overwriting on the document, a stop-payment instruction, or a cheque presented after its validity period. Each of these is a form of cheque dishonour. Not all of them are cheque bounce.

The 2082 amendment introduced a statutory definition for the first time. Under Section 2(l) of the Banking Offence Act, cheque bounce (चेक अनादर) refers specifically to the situation where a bank, financial institution, or cooperative bank certifies that it cannot make payment to the cheque holder because the drawer's account holds insufficient funds at the time of presentation.

The definition is narrow by design. It targets the deliberate or reckless issuance of a cheque against an account that cannot cover it and not signature anomalies, not clerical errors. This distinction matters because the bank's formal certification of a bounce (as opposed to other forms of dishonour) is what initiates the entire legal process. A cheque returned for a reason other than insufficient funds does not trigger the Banking Offence Act's cheque bounce provisions in the same way.

Why You Can’t File a Case Immediately: The Bank’s 45-Day Rule

Before the 2082 amendment, a bank would issue a dishonour notice immediately when a cheque could not be honoured, and that notice set the legal clock running. The new Section 3A changed this entirely.

Now, banks cannot immediately certify a cheque as bounced. Instead, when a cheque lacks sufficient funds, the bank must formally notify the drawer and give them up to 45 days to deposit the missing cash. This 45-day window is mandatory.

If the account is still empty after the 45 days wrap up, the bank marks the cheque. They then have exactly three days to hand you a formal, written certification confirming the bounce. You cannot bypass this waiting period, and your legal case cannot start without that written certification in your hands.

For the cheque holder, this means the process is slower than it was before the amendment. The 45-day window cannot be bypassed, and legal action cannot begin without the bank's written certification. For the drawer, the same window is an opportunity to settle the amount before a criminal complaint enters the picture. Whether that opportunity is used or ignored shapes how the matter proceeds.

Filing the Case: A Step-by-Step Process

Once the certified cheque is in hand, the holder has one year from the date of certification to file an FIR at the relevant police station. This is a non-negotiable deadline. Missing it blocks any criminal complaint under the Act and there is no extension or alternative route after the repeal of Negotiable Instruments Act.

The FIR initiates a defined sequence of proceedings. The police carry out an investigation and submit their findings to a Government Attorney. The attorney then files a charge sheet before the District Court. From that point, the case proceeds through bail hearings, examination of evidence and witnesses, and eventually a judgment. Either party may appeal an unsatisfactory decision to the High Court, and the Supreme Court sits as the final appellate forum.

The 2082 amendment set a target of six months for District Courts to dispose of cheque bounce cases. This was a direct response to the years-long delays that characterised these cases under the old framework. Whether courts consistently meet this target depends on their workload and the complexity of individual cases, but it reflects a legislative intent to treat cheque bounce as a matter requiring timely resolution.

Because the Banking Offence Act classifies cheque bounce as an offence against the state, the Government Attorney handles prosecution. The aggrieved party is the one who files a complaint and a key witness, not the party who runs the case. The complainant's primary responsibility is to ensure the FIR is filed within the one-year window and that the certified cheque is preserved in its original form as evidence.

Blacklisting: At any point in the process, the holder can separately request the bank to blacklist the cheque drawer. The bank then initiates its own process, resulting in all of the drawer's existing accounts being blocked and new account applications being refused. This is an administrative consequence that runs independently of the criminal proceedings and does not require waiting for a court outcome.

Can you settle out of court: The 2082 amendment formally recognised out-of-court settlement as an available option even after a case has been filed. Both parties can apply for mediation through the investigating officer or the Government Attorney, provided the cheque amount has been paid in full to the holder. If a compromise is reached and formally recorded (Milapatra), the criminal proceedings can be closed before going to trial. This is a practical option in cases where the drawer is willing to pay but the parties need a structured process to reach that point.

What Happens to the Drawer?

The penalty structure under the amended law operates on two tracks simultaneously: financial recovery for the holder, and criminal punishment for the drawer.

Financial liability under Section 15(1A):

A person found liable for a certified cheque bounce must:

• Repay the full cheque amount to the holder
• Pay statutory interest from the date the cheque was issued to the date of actual repayment
• Bear a penalty equal to 5% of the dishonoured amount

These three obligations apply together. Neither the interest nor the 5% penalty is discretionary — both attach automatically to a finding of liability. Under the old framework, recovering interest was only possible through the Negotiable Instruments Act civil route. That route is gone. Under the current law, interest recovery is built into the Banking Offence Act itself, which means the holder no longer needs a separate civil proceeding to recover it.

Graded imprisonment:

Imprisonment is scaled to the value of the dishonoured cheque:

This graduated structure replaces the old uniform ceiling of three months that applied under the previous framework. The change reflects a deliberate policy decision: a bounced cheque for NPR 1 crore carries different consequences than one for NPR 50,000, and the punishment now acknowledges that difference. The fine equal to the cheque amount and the recovery of principal also remain in addition to imprisonment.

What to do from now on?

If a business partner or client hands you a cheque that gets rejected for insufficient funds, your immediate priority is tracking the calendar.

You cannot bypass the bank’s 45-day waiting period, but you also cannot afford to let that window make you complacent. Once those 45 days end, ensure that your bank hands you the written certification of the bounce within three days.

That specific piece of paper is the foundation of your entire case. From the exact date stamped on that certification, you have one year to get your paperwork to the police station. If you let that year slip, then your criminal claim disappears.