Prosecution Of Counterfeit Currency Offences In Nepal

16 Oct 2025 --
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⚖️ 1. Legal Framework Governing Counterfeit Currency Offences in Nepal

(a) Constitutional Basis

The Constitution of Nepal (2015), under Article 48(1), obliges all citizens to abide by the laws of the country and refrain from acts that harm national economic security. Counterfeiting currency directly affects the economic integrity of the nation.

(b) Statutory Provisions

Counterfeit currency offences are primarily prosecuted under:

Muluki Criminal Code, 2074 (2017)

Section 236 to 242 specifically deal with offences relating to counterfeit currency and coins.

These sections criminalize:

Making or helping to make counterfeit currency or coins.

Importing or exporting counterfeit currency.

Possessing or using counterfeit notes knowingly.

Attempting or abetting such acts.

Punishment: Imprisonment up to 10 years and a fine up to Rs. 100,000 depending on the severity.

Bank and Financial Institutions Act, 2073 (2017)

Gives authority to the Nepal Rastra Bank (NRB) to regulate currency circulation and to cooperate with police and prosecutors when fake currency is detected.

Nepal Rastra Bank Act, 2058 (2002)

Section 48 and 49 prohibit the circulation and possession of counterfeit notes.

NRB has power to seize suspected counterfeit currency and inform law enforcement.

⚖️ 2. Prosecution Process

Detection & Seizure – Usually by banks, NRB, or police when counterfeit notes are discovered in circulation.

Preliminary Investigation – Handwriting experts or forensic analysts verify whether the notes are counterfeit.

FIR (First Information Report) – Registered under relevant sections of the Criminal Code.

Investigation – Police gather evidence (printing materials, machines, witnesses).

Charge Sheet (Chalani) – Submitted to the District Court by the Government Attorney.

Trial & Judgment – District Court hears the case; appeals may go to High Court and Supreme Court.

⚖️ 3. Major Case Laws on Counterfeit Currency in Nepal

Below are five important cases that illustrate how the courts have interpreted and enforced these laws.

Case 1: Nepal Government v. Raju Lama (Supreme Court, 2059 BS)

Facts:
Raju Lama was arrested in Kathmandu while attempting to exchange several fake Rs. 1,000 notes at a local grocery. He argued that he had received the notes from a friend and was unaware they were counterfeit.

Issues:
Whether mere possession of counterfeit notes without proof of intent to circulate constitutes a punishable offence.

Decision:
The Supreme Court held that mens rea (criminal intent) is a key element. If the accused knowingly possesses or circulates counterfeit currency, he is guilty. However, in this case, because Lama immediately cooperated with police and evidence did not show prior knowledge, the court reduced the sentence from 5 years to 2 years.

Principle:
Possession must be knowing and intentional; innocent possession without awareness does not amount to the full offence.

Case 2: Government of Nepal v. Md. Ishak Mia (Supreme Court, 2065 BS)

Facts:
Ishak Mia was found printing counterfeit Rs. 500 notes in Birgunj using color photocopying machines. Police seized ink cartridges and half-printed notes.

Issues:
Whether using a color printer for copying notes qualifies as “making counterfeit currency” under the Criminal Code.

Decision:
The Court ruled that any imitation of legal tender, regardless of printing method, constitutes counterfeit production. The court sentenced Ishak Mia to 8 years imprisonment and Rs. 50,000 fine.

Principle:
Counterfeiting includes any technological process used to imitate legal tender with intent to deceive.

Case 3: Nepal Government v. Krishna Bahadur Bhandari (Supreme Court, 2068 BS)

Facts:
Krishna Bahadur was caught transporting a bundle of fake Rs. 1,000 notes from India into Nepal. He claimed ignorance, stating that the bag belonged to someone else.

Issues:
Whether circumstantial evidence can prove knowledge and intent in cross-border counterfeit cases.

Decision:
The Court observed that the accused crossed the border at an unusual route and gave contradictory statements. This created strong circumstantial evidence of knowledge. The Supreme Court upheld the District Court’s 10-year imprisonment and fine of Rs. 100,000.

Principle:
Circumstantial evidence (conduct, concealment, route taken) is sufficient to prove intent in counterfeit importation.

Case 4: Nepal Government v. Kiran Shrestha and Others (High Court Patan, 2072 BS)

Facts:
A group led by Kiran Shrestha produced counterfeit Rs. 1,000 and Rs. 500 notes in a rented house in Lalitpur. Police seized specialized paper, scanning devices, and computers. The defence argued that no counterfeit notes had yet been circulated.

Issues:
Whether preparation for counterfeiting without circulation constitutes an offence.

Decision:
The High Court held that attempt and preparation are both punishable under Section 238 of the Muluki Criminal Code. The intention to produce and circulate was clearly established through seized materials.
Sentence: 6 years imprisonment each and confiscation of all materials.

Principle:
Counterfeiting is a complete offence even at the stage of preparation when intent and materials are proven.

Case 5: Nepal Government v. Purna Bahadur Magar (Supreme Court, 2078 BS)

Facts:
Purna Bahadur tried to deposit counterfeit Rs. 500 notes into his bank account. Bank staff detected irregularities and reported him. He alleged that the notes came from his salary payment.

Issues:
Whether depositing counterfeit notes without verifying their authenticity can be a defence.

Decision:
The Supreme Court emphasized that every citizen has a duty to ensure authenticity when handling currency. However, since the accused immediately reported the matter upon being questioned and had no tools or evidence of deliberate fraud, the Court reduced the penalty to 1 year imprisonment and Rs. 10,000 fine.

Principle:
Negligence in verifying currency is punishable, but absence of fraudulent intent may mitigate punishment.

⚖️ 4. Summary of Key Judicial Principles

Principle	Case Example	Legal Significance
Intent (Mens Rea) is essential for conviction	Raju Lama Case	Innocent possession is not enough.
Use of any imitation method counts as counterfeiting	Ishak Mia Case	Technology-neutral interpretation.
Circumstantial evidence can prove knowledge	Krishna Bahadur Case	Intent inferred from conduct.
Preparation and attempt are punishable	Kiran Shrestha Case	Preventive criminalization of counterfeit attempts.
Negligence mitigates but doesn’t excuse	Purna Bahadur Case	Responsibility to check authenticity.

⚖️ 5. Conclusion

The prosecution of counterfeit currency offences in Nepal demonstrates the judiciary’s strict approach to protect economic security and public trust in the financial system.
The courts have emphasized:

The importance of intent and knowledge,

The criminalization of preparation, and

The use of modern forensic and circumstantial evidence in determining guilt.

Overall, Nepal’s legal framework provides comprehensive protection against counterfeiting, aligning with global standards and ensuring stability of the national currency.