Supreme Court Orders Payment of Check Amount and Interest in Bounce Case

Kathmandu. The Supreme Court has ordered that the amount written on the check (principal amount) and its interest must be paid to the victim in a check bounce case. A joint bench of Justices Kumar Regmi and Balkrishna Dhakal issued the order, overturning the decision of the Patan High Court.< /p>

Shakuntala Khadka, a resident of Kathmandu Metropolitan City-32, had provided two checks (4 lakh and 5 lakh) to the defendant Sangeeta Thapa for the amount of 9 lakh rupees that Thapa had borrowed from Khadka at various times. These checks from Citizens Bank and Infrastructure Development Bank were returned with a 'return slip' due to insufficient funds in the account.< /p>

The Supreme Court, interpreting Section 107 (a) of the Negotiable Instruments Act, 2034, stated: 'Knowingly issuing a check when the drawer's account does not have sufficient funds and it being dishonored is itself an offense. In such a situation, the law ensures that the holder (the person receiving the check) can recover the amount written on the check and interest from the drawer (the person issuing the check).'< /p>

The Supreme Court ordered that Sangeeta Thapa should pay Shakuntala Khadka 9 lakh rupees and an annual interest of 10 percent on that amount.< /p>

Check as Proof of Loan

Regardless of the defendant's claims, the Supreme Court considered the signature and date on the check as primary evidence. The Supreme Court found the High Court's decision to acknowledge the check bounce but deny payment of the amount to be contradictory. The verdict stated that if a check bounce is proven, it is the victim's natural legal right to receive the amount of the check. The Supreme Court clarified that a situation where 'only a fine is imposed but the victim does not receive the money' could undermine the essence of justice.< /p>

Active Use of Negotiable Instruments Act, 2034

Often, check bounce cases are prosecuted under the Banking Offenses and Punishment Act, but this case was filed under the Negotiable Instruments Act. Section 107 (a) of this Act provides for both recovering the check amount and imposing a fine. This Supreme Court decision has simplified the path for the victim to receive the 'principal amount' (check amount).< /p>

Although check bouncing is considered a criminal offense, its ultimate objective is the financial compensation of the victim. Therefore, it has been stated that the victim should not be forced to fight another lengthy civil case to recover the money.< /p>

Previously, the Kathmandu District Court and the Patan High Court had ruled that the check was dishonored but only imposed a fine on Sangeeta Thapa, with the intention that the check amount and interest would not be paid to Khadka. The High Court had argued that a separate civil case (based on the promissory note) would be required to recover the check amount, thus ruling that Khadka's claim could not be sustained.< /p>