significant decisions from the supreme court in the banking sector

10 leading Supreme Court Decisions on Nepal’s Banking Sector/Analysis

The principles established by a court’s decision are known as precedent. The legal concept established by the court in respect to hearing and determining cases is known as precedent. Unless reversed by a court of law, rule, or decision, precedent-setting ideas become required and binding. There can be no decision issued against the precedent, and if one is made, it will be invalid on the basis of the precedent. There have been examples of banking-related offences in Nepal at various times.

The following cases have been established as precedents:

  • Raghunath Agrawal vs. Nepal Bank’s Board of Directors

The Supreme Court’s judgement in the case of Raghunath Agrawal vs. Nepal Bank Limited’s Board of Directors has established a precedent. A full bench of Chief Justices Dhanendra Bahadur Singh, Surendra Prasad Singh, and Mahesh Ram Bhakt Mathe determined the case.

Ananda Bhakta Rajbhandari, the then-manager of Nepal Bank Limited, Panchlal Maharjan of Lalitpur District, and Panchlal Maharjan of Lalitpur Municipality ward no. 7 were the petitioner-opponents in this case. Raghunath Agrawal, a resident of Kathmandu District at the time of the writ petition, was the Opposition-writ petitioner.

 Established Precedent

  • On the 23rd of December 2044, an order was issued in this matter. Due to his inability to repay the debt, the house and property to which he had pledged a deed were auctioned, and the allegation that the sale was handled by an unauthorized agent does not appear to be credible. 
  • If the applicant has indeed agreed to repay the loan by signing a loan deed, the bank must be considered to have the right to collect the sum in principle. It cannot be said that auctioning the house and land pledged to Nepal Bank Limited on the basis of the agreement reached by the bank in accordance with the existing legal provisions on how to collect the amount is impossible based on the loan deed pledged to Nepal Bank Limited, in addition to the house and land that must be taken in principle.
  • The Commercial Banks Act and Nepal Bank Rules 2031 make no reference of the bank maintaining the five fictitious values of the property to be auctioned. The provision of Rule 68 (6) of the Zonal District Court Rules 2034 might be applied to the practice of the court enforcing customary law.

(N.K.P. 2044, Decision No. 3224, No. 10)

Rastriya Banijya Bank, Janakpur Branch vs. Jhawarmal Goenka

The Supreme Court’s ruling in Jhawarmal Goenka’s case against Rastriya Banijya Bank’s Janakpur branch set the precedent. On March 9, 2008, a full bench of Judge Hiranyeman Pradhan and Justice Rudra Bahadur Singh decided the case. This case established the following precedent:

  • Even after an auction, a bank can file a complaint to reclaim pledged property on a loan it deposited.
  • As per Rule 6 of the Rastriya Banijya Bank (Delegation of Power) Rules, 022, the General Manager may delegate his authority to subordinates.
  • The loan’s principal interest should be paid until the loan repayment proof is received.

(Decision No. 3386 NKP 2045 No. 3)

Dal Bahadur Budhamagar vs. Nepal Bank Ltd. Central Office Kathmandu

The Supreme Court’s decision in the case of Dal Bahadur Budhamagar, age 56, of Baglung then Rural Municipality, Ward No. 3 Anark v. Nepal Bank Ltd. Central Office Kathmandu has set a precedent. A joint bench of Judge Trilok Pratap Rana and Justice Kedarnath Upadhyaya rendered the decision. On 2048.6.20, an order was issued in the writ petition No. 945 of 2046.

Established Precedent

  • In terms of security, the guarantor’s legal provision under Muluki Ain states that if the guarantor’s provision is not followed, the law related to guarantee under Muluki Ain does not apply.
  • Penalties, imprisonment, extortion, and the acquisition of property through lawful means.
  • Because the principal amount of interest on the securities provided by the bank (then page no. 508) can be paid from the sale of the auction on the principal, the petitioner contends that the secured collateral should be sold first at auction from the debtor’s property rather than from the debtor’s property. If the debt is not recovered, the petitioner claims that the principal collected from the guarantor is inappropriate.
  • The rules specify how the court will conduct the auction. Because the auction was not conducted by the court, the provisions of the aforementioned rules would not apply to Nepal Bank Ltd.

(Decision No. 4361 NKP 2048 No. 9, 10)

Phulbari Ltd. vs. Nepal Rastra Bank

A joint bench of Justice Balram KC and Justice Tahir Ali Ansari ruled on the case of Chairman of the Board of Directors Piyush Bahadur Amatya on behalf of The Fulbari Ltd. and also on behalf of himself and his shareholders vs. Nepal Rastra Bank, Board of Directors, Central Office, Baluwatar. The case under writ no.2919 of 2060 was decided on 2064.1.21.

Established Principle

The court may issue an order under the extraordinary powers granted to it in the following cases: 

  1. Violation of natural justice principles
  2. Abuse of authority or substantive ultra-virus
  3. Procedural or ultra-procedural errors
  4. Legal errors
  5. Failure to perform a duty 
  6. Bad faith or abuse of power in the sense of using a power in a way that is not anticipated by the enabling statute
  • If the subsequent act does not provide in clear terms, all jobs completed under the previous act will be validated, and the subsequent act will be activated under the credit information center, invoking the right granted by Section 22 of the Nepal Rastra Bank Act 2012. As the issued instructions and circulars have automatically continued, the directive and circular to blacklist give validity and consistency to all job proceedings under the old act. Because Article 112 of the 2058 Act granted the validity and continuity of all work and proceedings under the old Act, the Credit Information Center’s act to blacklist the applicant appears to be legal.
  • The applicant can obtain a loan if he or she meets the legal requirements by providing credible and acceptable security to the bank and meets the conditions specified by the bank. If the bank believes, the applicant can obtain a loan up to the amount held by the security. No one has a fundamental or legal right to obtain a bank loan or to have a loan restructured.
  • It is the moral obligation of the bank to reschedule and restructure the loan. Furthermore, as the country’s central bank, Nepal Rastra Bank, exercising its powers under the Nepal Rastra Bank Act, 2058 subject to the instructions issued from time to time, it is a matter to be considered, as a debtor, with the instructions of the Nepal Rastra Bank and Its Guidelines, to check whether the applicant has paid the principal interest and other fees of the loan as per the repayment schedule. The bank’s only service to any debtor is rescheduling and restructuring. A person who has no fundamental right, legal right, or no right may not file an application under Section 88 (2) regarding non-rescheduling and restructuring.
  • When applying common law or making a law, there can be no reduction or discrimination in the enjoyment of property rights based on gender. Discrimination based on Rational Classification, on the other hand, cannot be considered discrimination. 
  • Based on the facts and evidence, the Supreme Court established a precedent by interpreting the intent, purpose, and provisions of the relevant law. Lower courts must follow the Supreme Court’s interpretation of such a law and set aside the precedent in cases involving the same subject matter and facts.
  • The reliability of Clarity is lost if the same number of benches continue to differ from an equal ratio of benches, i.e. coordinating benches jurisdiction. As a result, for the uniformity of the interpretation of the law and the dependability of clarity, a decision of a Coordinating Bench sent from a larger number of Sessions with its own viewpoint to be Ruling from the Session of the Larger Bench including the reason for not being able to agree with the previous Ruling without overturning the Decision of the other Coordinating Bench itself, the Coordinating Bench shall not be liable to follow the precedents.
  • The interpretation of the law by the country’s highest court is applied in the same legal dispute between two parties. Otherwise, society will devolve into chaos, similar to judicial chaos, if the legal interpretation is not followed. In some cases, a decision made without regard for the legal system involved in the dispute has deceived or misled the parties. To prevent this, the country’s highest court has been given constitutional authority to interpret the law. The Supreme Court’s interpretation of the constitution and the law is used as a guide in subsequent cases.
  • The claimant’s rights, the irreparable loss to the other party if the order is not issued, and the balance of accessibility for both parties should all be considered when issuing an interim order. The Interim Order should prohibit such acts if they have the potential to cause irreparable loss and injury to the other party. A court must issue an interim order if someone is harmed as a result of an illegal, unauthorized, or arbitrary act, decision, or order. However, if the petitioner’s right is not established without regard, issuing an interim order after hearing a one-sided statement may have a significant impact on the public.
  • When issuing interim or restraining orders, the appellate court should consider the subject matter, valid principles of justice, legal principles of banking business, legal relationship between debtors and banks, and legal provisions, particularly on different types of banking transactions between banks and debtors.
  • Because the petitioner has defaulted on the loan amount to be repaid to the bank in accordance with the law and stamp, there is no error in the opponents’ acts to blacklist the petitioner using legal right, and the petitioner’s fundamental or legal right will not be infringed by blacklisting the defaulter in accordance with law

(Decision No. 3085 NKP 2044 no. 5)

  1. Anandabhakta Rajbhandari v. Ballabh Shamsher J.B.R.

The case of Ballabh Shamsher JBR v. Anandabhakta Rajbhandari, decided by the full bench of then-Judge Surendra Prasad Singh, then-Judge Mahesh Ram Bhakt Mathe, and then-Judge Prachanda Raj Anil, has also established a precedent. In this case, General Manager Anandabhakta Rajbhandari of Kathmandu District kAthmandu Metropolitan City, ward no.26, Durgeshman Singh of Yatkha had filed a case against Ballabh Shamsher JBR of Chakupat, Laxmi Sadan, Ward No. 1, Lalitpur. On 2044.5.11.5, the order in this case was issued.

Established Precedent

If a person appointed for a specified term is removed from the post for any reason or is not reinstated after completing the full term, the person’s reinstatement is deemed to be terminated.

  • The operator’s reinstatement cannot be considered if the post of director becomes vacant due to the operator’s death before the specified period.
  • According to section 5 of the Commercial Banks Act, 2031 BS, the board of directors appears to have the authority to appoint the director for the remaining position with the approval of the next general meeting. It appears to be in accordance with the applicable law.
  1. Gajendra Man Pati v.  Maheshwar Man Shakya 

The case of Gajendra Man Pati v. Maheshwar Man Shakya, decided by the full bench of then-Judge Dhanendra Bahadur Singh, has also become a precedent. Appellant / Plaintiff: Gajendra Manpati, Branch Manager of Nepal Bank Ltd., Kalimati, Kathmandu District


Opposition / Defendant: against Maheshwar Man Shakya, a resident of Lagantol in a Kathmandu Nagar Panchayat Ward No. 21

Division Bench

Former judge Hariharlal Rajbhandari

Former Judge Dhanendra Bahadur Singh

Case: Transaction

Appeal no. 672 of Year 2049

Established Precedent:

  • According to the provisions of Article 47 and (a) of the Commercial Banks Act, 2031, it cannot be said that the defendant will not pay the principal interest claimed on the basis of the method prescribed by the Nepal Rastra Bank. 

(NKP 2042 No. 5 Decision No. 2367)

  1. Indu Shrestha vs. Rastriya Banijya Bank

In the case filed by Indu Shrestha, a resident of Biratnagar Municipality, Ward no.14, against Sanghadas Shrestha, branch manager of Rastriya Banijya Bank Rani Branch, a joint bench of then Judge Babbar Prasad Singh and Justice Hiranyeshwar Man Pradhan issued an order.

Established Precedent:

  • It does not appear to be against the law for the institution or person collecting the loan to try to recover it from any securities it or he owns.

(Decision No. 3658 NKP 2045 No. 11)

  1. Keshav Kisi v. International Leasing and Finance Company Limited

On 2057.8.22.5, a full bench of then-Judge Hari Prasad Sharma and then-Judge Harish Chandra Prasad Upadhya decided the case filed by Keshav Kisi, a resident of Bhaktapur District Bhaktapur Municipality Ward No. 6, against the International Leasing and Finance Company Limited, Baneshwor, Ward No. 10, Kathmandu.

Established Precedent:

  • Because the debtor Nagendra Khadka did not repay the loan on time as per the loan agreement and despite repeated correspondence regarding loan repayment, no action was taken to repay the loan. Because no action has been taken, The Opposition Company set a price of 21,49,187 for the auction of the mortgaged house and land on 2055/4/10. The company appears to have auctioned off the valuation at the same price due to the claimed reason of no one participating in the auction. As a result, it does not appear that the writ petitioner was involved in the process of pricing less than the valuation performed by the company itself when making the loan.
  • The valuation is estimated to be less than half of the petitioner’s valuation. The petitioners were not even notified when their property was undervalued, or that no one was involved in the auction process, despite the fact that the auction was held for a very nominal sum. The actions of the Opposition International Leasing and Finance Company Limited, which rejected the petitioners’ disputed house and land in its own name by holding the auction itself, were clearly flawed and contravened the principle of natural justice. Thus, the action taken on the same date by auctioning the house and land on the same date with less valuation will be canceled up holding the decision of Hon’ble Judge Shri Govind Bahadur.
  • (N.K.P. 2058 No. 3.4, Decision No. 6986)

Purushottam Madwari vs. Anandabhakta, then-General Manager of Nepal Bank Ltd. Head Office.

Full Bench

Former  Honarable Chief Justice Bhagwati Prasad Singh

Former  Honarable Judge Nayan Bahadur Khatri

Former Honarable Judge Min Bahadur Thapa

Appeal No. 54 of Year 2024

Applicant Purushottam Madwari against General Manager of Opposition Nepal Bank Ltd. Head Office, Anandabhakta  

Case: Transactions

Established Precedent:

  • If someone suffers a loss as a result of someone else’s negligence, the negligent party will be compensated in full. Because it is not justifiable for the plaintiff to claim that he will be unable to deposit his money due to the bank’s negligence without even receiving the certificate, the plaintiff will receive a total of Rs. The decision of the zonal court is regarded as reasonable. The division bench of dismissed the plaintiff’s claim.

(Decision No. 404 N.K.P. 2025)

Nepal Leather Industries Pvt. Ltd. V.  Nepal Indoswez Bank Limited

This case was ruled by a joint session of the then Judge Laxman Prasad Sharma, the then Judge Krishna Jung Rayamajhi under Writ No. 2588 of the year 2049.

On 2052. 11.2.4. The petitoner was Samuhin Ansari, Director of Nepal Leather Industries Pvt. headquartered in Kathmandu district Kathmandu Metropolitan City, Ward No. 13 Tahachal Himalayan Heights and the opposition was Nepal Indoswez Bank Limited, Durbar Marg, Kathmandu.

(Decision No. 6109 NKP 2052 no.11)

Joint Bench

Former  Honarable Judge Laxman Prasad Sharma

Former  Honarable Judge Krishna Jung Rayamajhi

Writ No. 2588 of the year 2049

Decison Date: 2052.11.2.4

Subject: Mandamus

Petitioner Samuhin Ansari, Director of Nepal Leather Industries Pvt. headquartered in Kathmandu district Kathmandu Meteropolitan City, Ward No. 13 Tahachal Himalayan Heights against the Defendant Nepal Indoswez Bank Limited, Durbar Marg, Kathmandu.

Established Precedent:

  • Article 48 of the Commercial Banks Act of 2031 states that “no matter what is written in the prevailing Nepali law, the relationship between the bank and the customers, as well as the bank’s account book and account details, will not be disclosed to anyone except the person concerned.” In such a case, the court should not order the bank to make a copy of the documents requested by the petitioner in the writ petition available to anyone other than the bank account holders.

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