Nepal Rastra Bank Issues Procedural Manual on Cheque Dishonour Cases

Kathmandu, July 11 – In a significant move to streamline the legal and procedural response to cheque dishonour cases, Nepal Rastra Bank (NRB), in coordination with key judicial and legal institutions, has published a comprehensive manual titled "Procedure for Handling Cheque Dishonour Offenses, 2081." This manual aims to provide uniformity, clarity, and legal grounding for handling cases related to bounced cheques, especially in the context of financial fraud, non-payment, and banking malpractice.

Purpose and Background

The manual has been jointly endorsed by NRB and other financial regulators to address long-standing inconsistencies in handling cheque-related disputes. It is a direct follow-up to the recommendations made during the Financial Sector Reform Program and a judicial interpretation issued under case number 075-WO-0417. The Supreme Court’s ruling has played a pivotal role in establishing the legal benchmarks referenced throughout the manual.

Key Definitions and Legal Interpretation

The manual precisely defines terms such as "cheque issuer cheque dishonour" , and "offense". It clarifies that a cheque dishonour becomes legally actionable only if the dishonour occurs due to insufficient funds or account closure, and not in cases like stop payments or signature mismatch, unless these are proven to be fraudulent.

To initiate legal proceedings under the new framework, certain preconditions must be met:

• A cheque must be issued in settlement of a financial obligation.

• The cheque must be presented within the validity period and get dishonoured.

• The payee must issue a formal legal notice to the drawer, providing an opportunity to settle the dues.

Procedural Clarity for Prosecution

The manual lays out a step-by-step process for filing a case:

1. Initial Legal Notice: After dishonour, the payee must send a written demand for payment.

2. Waiting Period: If the drawer does not comply within 15 days, the case can proceed.

3. Filing at District Court: The appropriate case must be filed within three months of the dishonour date.

4. Document Checklist: The complainant must submit a copy of the dishonoured cheque, bank memo, and proof of legal notice.

Notably, the responsibility to prove intent or fraud lies with the complainant. If the cheque was issued as a loan guarantee or security, and not as actual payment, the manual clarifies that criminal proceedings may not apply unless deception is clearly established.

Clarifications for Financial Institutions and Lawyers

The manual explicitly mentions that financial institutions cannot act as legal complainants on behalf of clients. Only the aggrieved payee or rightful recipient can initiate legal proceedings.

Furthermore, in case of multiple cheques dishonoured from the same person, the complainant must file individual cases with separate documentary evidence for each incident.

Special Considerations

There are specific directives for state attorneys, judges, and investigating officers on how to interpret cheque dishonour intent, particularly when:

• The cheque was issued with a backdated obligation.

• There are contradictory claims regarding the loan or payment.

• Dishonour occurred for technical banking reasons unrelated to fund sufficiency.

The manual also outlines cases where cheque dishonour may not lead to criminal liability, such as:

• Account closures due to death of the account holder.

• Legal suspension of payment due to court orders or force majeure conditions.

By introducing this manual, NRB and related institutions have created a structured framework that balances financial accountability with fair legal process. The manual is expected to reduce unnecessary litigation, discourage misuse of cheques as tools of financial threat, and enhance trust in Nepal’s financial system.