Before certification, the bank gives the account holder an opportunity to deposit enough funds for payment.
If funds remain insufficient after the notice period, the bank certifies dishonour and returns the endorsed cheque.
A complaint concerning certified dishonour should be filed within one year from the date of certification.
The amended framework permits compromise after full payment, subject to the required investigation or court process.
Legal Elements
What constitutes cheque bounce?
Under Nepal's current banking-offence framework, cheque bounce is more than a cheque simply being returned. The legal process centres on a cheque issued from an account without enough money to honour it, followed by the prescribed bank notice and formal certification of dishonour.
A cheque is issued
The drawer signs and delivers a cheque directing a bank to pay the stated amount to its holder. For criminal liability, the drawer's knowledge and responsibility are considered from the surrounding evidence.
Payment is demanded
The holder presents the cheque through the banking system within its validity period and requests payment of the amount written on it.
Funds are insufficient
Payment cannot be made because the drawer's account has no balance or not enough balance. The bank returns the cheque and, if requested, begins the certification procedure.
The bank certifies dishonour
After notifying the account holder and allowing up to 45 days to fund the account, the bank formally certifies the dishonour if the cheque still cannot be paid.
A signature mismatch, incomplete cheque, alteration, stale date, closed account or stop-payment instruction may cause a cheque to be returned, but does not by itself establish certified dishonour for insufficient funds. The bank must record the actual return reason and, under the current procedure, also determine whether insufficient funds exist where another return reason is shown. Each case should therefore be checked against the original cheque and the bank's written certification.
Bank and Filing Path
A practical sequence after non-payment
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Present the cheque and record the return
Present the cheque within its banking validity and keep the original cheque, deposit record and return memo. The stated reason for return matters.
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Request formal certification
The holder may apply with the original cheque at a branch of the issuing bank. The bank records the request and notifies the account holder to fund the account.
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Allow the bank-notice period
The account holder receives up to 45 days to deposit the required amount. Payment during this period can resolve the immediate dishonour issue.
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Obtain the certified cheque
If sufficient funds are still unavailable, the bank certifies the dishonour and returns the cheque with its written endorsement, generally within three days.
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Prepare and lodge the complaint
The certified cheque, transaction evidence and identity or company records are organised for the police complaint and investigation. The one-year limitation date should be diarised from certification.
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Proceed, recover or settle
The matter may proceed through investigation and the relevant District Court, or be resolved through a legally documented compromise after the required payment is made.
Your Position
Advice should match which side of the cheque you are on
The same cheque can involve different questions for the holder, the account holder, an authorised company signatory and the business behind the underlying transaction.
Documents
What to preserve before seeking advice
Do not write on, alter or surrender the original cheque. A clear evidence file helps distinguish a recoverable payment claim from a disputed underlying transaction.
Bank file
- Original cheque and clear front-and-back copy
- Deposit slip and bank return memo
- Application requesting dishonour certification
- Certified cheque and bank certification letter
Transaction file
- Contract, loan paper, invoice or settlement terms
- Receipts, ledgers and relevant bank statements
- Messages, emails and payment acknowledgements
- Any notice already sent or received
Identity and authority file
- Citizenship or identity documents
- Company registration and authorised-signatory records
- Board authority where an organisation is involved
- Power of attorney if a representative will act
Resolution
Recovery, liability and compromise
A certified dishonour may expose the account holder to payment of the cheque amount, statutory interest, an amount-based penalty and graded imprisonment. The exact consequence depends on the cheque amount, the evidence and the court's determination.
Payment recovery
The claim should be built around the certified cheque and a coherent explanation of the transaction, amount due and payments already made.
Investigation and court proceedings
If payment is not resolved, the complaint proceeds through police investigation and prosecution before the relevant District Court under the current banking-offence regime.
Documented compromise
Parties may seek compromise during investigation or after filing. Full payment and the prescribed approval process are important for bringing the prosecution to an end.
This page provides a general overview of cheque dishonour in Nepal. The correct route and filing date depend on the original cheque, the bank's return reason and certification, the underlying transaction and the current law. Prompt individual advice is important because limitation periods are date-sensitive.