Prosecution Of Forgery In Bank Loan Applications
⚖️ Legal Framework
Forgery in bank loan applications is prosecuted under the Muluki Criminal Code, 2074 (2017) of Nepal, and relevant banking regulations:
Muluki Criminal Code
Section 208: Forgery and false documentation.
Section 211: Using forged documents to commit fraud or gain financial benefit.
Section 212: Cheating and criminal misappropriation.
Bank and Financial Institution Act, 2063 (2006)
Requires banks to report financial fraud.
Authorizes investigation and prosecution for misrepresentation or falsification in loan applications.
Criminal Procedure Code, 2074
Provides for FIR filing, investigation, arrest, and prosecution in courts of competent jurisdiction.
Key elements for prosecution:
A false or altered document used in a loan application.
Intention to deceive the bank for financial gain.
Direct connection between the forgery and financial loss to the bank.
🧑⚖️ Case Studies
Case 1: Nepali Businessman – Forged Loan Documents (Kathmandu, 2015)
Facts:
A businessman submitted forged income certificates and tax statements to obtain a loan of NPR 5 million from a commercial bank in Kathmandu.
Bank officers discovered discrepancies during due diligence.
Legal Issues:
Forgery of official documents (Section 208).
Cheating and fraud to obtain financial benefit (Section 211).
Outcome:
FIR filed with Metropolitan Police Crime Division.
Court found the businessman guilty; sentenced to 3 years imprisonment and ordered restitution to the bank.
Significance:
Demonstrates direct prosecution of loan document forgery and strict application of criminal law.
Case 2: Cooperative Loan Fraud – Bank Documents Altered (Lalitpur, 2016)
Facts:
Several members of a cooperative submitted altered bank statements to obtain agricultural loans.
Total loan amount involved was NPR 2 million.
Legal Issues:
Forgery and use of falsified financial statements.
Misrepresentation for criminal gain.
Outcome:
The cooperative members were arrested.
Court imposed sentences ranging 2–4 years imprisonment with joint liability for repayment of the loan.
Significance:
Highlights that group conspiracies in loan forgery are prosecuted collectively.
Case 3: Forged Collateral Documents for Housing Loan (Pokhara, 2017)
Facts:
An individual submitted a fake land ownership certificate to secure a housing loan of NPR 10 million.
Bank verification revealed the land was already mortgaged.
Legal Issues:
Forgery (Sec. 208) and attempt to defraud a bank.
Misrepresentation of collateral.
Outcome:
Court convicted the individual; sentence: 4 years imprisonment.
Ordered full restitution of the loan amount.
Significance:
Shows that forgery related to collateral carries serious criminal liability.
Case 4: Corporate Loan Forgery Case (Biratnagar, 2018)
Facts:
A medium-sized company submitted falsified audited financial statements to obtain a corporate loan of NPR 15 million.
Fraud was discovered during internal audit by the bank.
Legal Issues:
Forgery of accounting documents (Sec. 208).
Corporate fraud under Sec. 211.
Outcome:
Company directors were held personally liable.
Three directors sentenced to 5 years imprisonment; fine imposed equal to 50% of the loan amount.
Significance:
Illustrates accountability of corporate officers in loan application forgery.
Case 5: Forged Bank Guarantees for Loan Disbursement (Kathmandu, 2019)
Facts:
A private firm submitted forged bank guarantees to secure short-term credit.
Investigation revealed signatures and stamps were falsified.
Legal Issues:
Forgery (Sec. 208), cheating (Sec. 211), criminal misappropriation (Sec. 212).
Outcome:
Police arrested the managing director and finance officer.
Court sentenced both to 6 years imprisonment; bank recovered full loan amount through civil proceedings.
Significance:
Emphasizes that both the forger and beneficiaries of forged documents are criminally liable.
Case 6: Fake Income Tax Certificate for Education Loan (Bhaktapur, 2020)
Facts:
A student submitted a falsified income tax certificate to obtain an education loan of NPR 1.5 million.
Bank verification with the Inland Revenue Department revealed the certificate was fake.
Legal Issues:
Forgery (Sec. 208) and cheating for monetary benefit (Sec. 211).
Outcome:
Student and accomplice (local agent who prepared the fake certificate) were sentenced to 2 years imprisonment each.
Restitution ordered to the bank.
Significance:
Even small-scale forgery in loan applications is prosecuted.
Case 7: Syndicate Forgery of Microfinance Loans (Dang, 2021)
Facts:
Group of individuals conspired to submit forged documents to obtain multiple microfinance loans.
Loans were intended for personal use, not for the stated business purposes.
Legal Issues:
Forgery (Sec. 208), conspiracy, and multiple counts of cheating (Sec. 211).
Outcome:
All members were convicted; imprisonment ranged 3–5 years.
Joint liability imposed for repayment of misappropriated funds.
Significance:
Shows that organized syndicates attempting to defraud banks face heavy prosecution.
🔑 Key Observations
Strict Criminal Liability:
Individuals or corporate officers submitting forged documents are prosecuted under Sections 208, 211, 212 of the Criminal Code.
Joint Liability:
Multiple conspirators are collectively liable, including corporate directors and agents.
Restitution and Imprisonment:
Courts frequently combine imprisonment with restitution orders to the bank.
Bank Role:
Banks conduct due diligence, verify documents, and coordinate with police for prosecution.
Scales of Forgery:
Small personal loans (NPR 1–2 million) to large corporate or syndicated loans (NPR 15 million) are all subject to criminal action.
📊 Summary Table of Cases
| Year | Location | Offender | Loan Type | Crime | Sentence |
|---|---|---|---|---|---|
| 2015 | Kathmandu | Businessman | Commercial | Forgery & cheating | 3 yrs + restitution |
| 2016 | Lalitpur | Cooperative members | Agricultural | Forgery | 2–4 yrs + restitution |
| 2017 | Pokhara | Individual | Housing | Forged collateral | 4 yrs |
| 2018 | Biratnagar | Corporate directors | Corporate | Forgery & fraud | 5 yrs + fine |
| 2019 | Kathmandu | Firm officers | Short-term credit | Forged bank guarantees | 6 yrs + restitution |
| 2020 | Bhaktapur | Student & agent | Education | Forgery of certificate | 2 yrs |
| 2021 | Dang | Syndicate members | Microfinance | Forgery & cheating | 3–5 yrs + joint repayment |
✅ Conclusion
Forgery in bank loan applications is treated as a serious criminal offense in Nepal.
Courts impose imprisonment, fines, and restitution to banks.
Both individuals and corporate officers are criminally liable.
Syndicated or organized forgery attracts heavier punishment.
Bank verification and police coordination are critical in detecting and prosecuting these offenses.
RELATED Blog
0 comments