Prosecution Of Offences Related To Misuse Of Foreign Aid In Nepal

16 Oct 2025 --
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1. Legal Framework

Misuse of foreign aid in Nepal is treated as a serious offense because it undermines development, governance, and public trust. Such misuse can include embezzlement, diversion of funds, fraudulent reporting, or illegal appropriation of aid resources.

Relevant Laws

Muluki Criminal Code, 2017

Section 161: Criminalizes embezzlement, misappropriation, or theft of public or donor funds.

Section 162: Punishes falsification of accounts, reports, or documents related to foreign aid.

Section 163: Holds officials and intermediaries liable for misuse of development aid.

Penalties: Imprisonment from 2 to 10 years, plus fines and restitution.

Public Procurement Act, 2063 (2006)

Regulates use of public and donor funds in projects; violations can trigger criminal liability.

Foreign Aid Policy and Administrative Guidelines

Emphasizes transparent accounting and reporting; violations can be referred for criminal prosecution.

2. Case Analyses

Case 1: State vs. Ramesh Thapa (Kathmandu, 2015)

Facts: Ramesh, a project manager in an NGO, diverted foreign aid funds intended for school construction to personal accounts.

Legal Issue: Misappropriation and embezzlement under Section 161.

Court Findings: Bank statements and audit reports confirmed diversion; forged receipts submitted to donors.

Outcome: Convicted; sentenced to 6 years imprisonment and ordered to repay misused funds.

Observation: Forensic audit and financial records critical for proving misuse.

Case 2: State vs. Sunita Sharma (Pokhara, 2016)

Facts: Sunita, a local government officer, falsified progress reports to claim foreign aid for incomplete irrigation projects.

Legal Issue: Falsification and misuse under Sections 162 and 163.

Court Findings: Donor agency inspections and eyewitness reports corroborated misreporting.

Outcome: Convicted; 4 years imprisonment and fine.

Observation: Misrepresentation of project status is criminal under Nepalese law.

Case 3: State vs. Krishna Adhikari (Chitwan, 2017)

Facts: Krishna, a development consultant, received foreign aid for health projects but procured substandard equipment, pocketing the difference.

Legal Issue: Misuse of aid and fraudulent procurement under Section 161.

Court Findings: Independent audit confirmed lower-quality procurement; financial discrepancies traced.

Outcome: Convicted; sentenced to 5 years imprisonment and restitution of funds.

Observation: Procurement fraud in foreign aid projects is a punishable offense.

Case 4: State vs. Raju Lama & Associates (Jhapa, 2018)

Facts: Group of NGOs collaborated to submit inflated aid proposals for international donors, obtaining excess funds.

Legal Issue: Conspiracy, fraud, and misappropriation under Sections 161–163.

Court Findings: Investigation confirmed over-invoicing and coordinated falsification.

Outcome: Convicted; sentences ranged from 3–7 years imprisonment; fines imposed.

Observation: Joint schemes to misuse aid are treated as aggravated offenses.

Case 5: State vs. Binod KC (Kathmandu, 2019)

Facts: Binod, a government official, facilitated unauthorized withdrawal of foreign aid funds for private construction projects.

Legal Issue: Misappropriation under Section 161.

Court Findings: Transaction records and donor fund statements confirmed unauthorized diversion.

Outcome: Convicted; 7 years imprisonment, restitution, and permanent disqualification from public office.

Observation: Officials misusing aid for personal projects face enhanced penalties.

Case 6: State vs. Sabina Thapa (Bhaktapur, 2020)

Facts: Sabina, NGO accountant, manipulated donor grants to inflate salaries and bonuses.

Legal Issue: Fraud and falsification under Section 162.

Court Findings: Audit trails and payroll discrepancies demonstrated systematic misuse.

Outcome: Convicted; 4 years imprisonment and ordered repayment.

Observation: Internal financial controls are crucial to prevent and prove misuse.

Case 7: State vs. Prakash Gurung (Pokhara, 2021)

Facts: Prakash, a municipal officer, diverted foreign aid for local health initiatives to unrelated administrative expenses.

Legal Issue: Unauthorized use of foreign aid under Sections 161–163.

Court Findings: Donor review and project inspections confirmed deviation from intended purpose.

Outcome: Convicted; 5 years imprisonment, fines, and suspension from public service.

Observation: Using aid for purposes other than intended constitutes criminal liability.

3. Key Legal Principles from Cases

Misappropriation of Foreign Aid

Any diversion of funds for personal or unauthorized use is criminal.

Falsification of Records

Submission of fake invoices, progress reports, or receipts is punishable.

Collective Liability

Groups or NGOs involved in coordinated misuse can be jointly prosecuted.

Enhanced Penalties for Officials

Public servants misusing aid often face higher sentences and disqualification.

Evidence

Audit reports, bank statements, procurement records, and donor inspections are key.

Witness testimony and forensic accounting strengthen the case.

4. Summary Table of Cases

Case	Year	Offense	Legal Section	Outcome	Observation
Ramesh Thapa	2015	Misappropriation	161	6 yrs imprisonment	Audit and bank records critical
Sunita Sharma	2016	Falsification of reports	162–163	4 yrs imprisonment	Donor verification important
Krishna Adhikari	2017	Procurement fraud	161	5 yrs imprisonment	Substandard procurement proves misuse
Raju Lama & Associates	2018	Joint fraud	161–163	3–7 yrs imprisonment	Coordinated schemes treated as aggravated
Binod KC	2019	Unauthorized withdrawal	161	7 yrs imprisonment	Public officials face harsher penalties
Sabina Thapa	2020	Payroll fraud	162	4 yrs imprisonment	Internal controls critical
Prakash Gurung	2021	Diversion to unrelated expenses	161–163	5 yrs imprisonment	Misuse for unrelated purposes punishable