United Arab Emirates: Are You Criminally Liable For Bounced Cheque?

Last Updated: 19 February 2019
Article by Hassan Elhais

Just as threatening the title of this article may seem, the consequences of a returned cheque or a bounced cheque can be similar in UAE. Unlike other countries, UAE imposes strict criminal charges against those who offer cheques with insufficient balance. A cheque is defined under Federal Law Number 18 of 1993 concerning the Commercial Transactions Law (the Commercial Law) as an order issued by an individual to a bank on a specific date for payment of a specified amount to another individual (Article 483).

On the other hand, a bounced cheque is also known as a dishonoured cheque or a returned cheque presented by the beneficiary, in whose name the cheque was drawn due to the following reasons:

  • Due to insufficient funds in the account of the drawer on the date of issuance of the cheque;
  • Bank receives an order from the issuer to refrain the payment;
  • A technical error such as faulty signatures not matching the previous records of the bank;
  • Closure of bank account before encashment of the cheque.

As suggested by the Commercial Transaction law under Article 617, the cheque should be presented on or after the date written on the cheque, not before. Also, it must be en-cashed within six months from the date mentioned on the cheque (Article 618). Dubai Criminal Lawyers will highlight the liabilities you can incur if you submit a cheque with insufficient balance or submit a cheque knowingly that it will be dishonoured.

Liability

The cheque is an instrument contingent to the accessibility of funds, through the drawee's (referred to as the recipient of the cheque) acknowledgement to pay the cheque issued by the drawer (one who issues the cheque). Accordingly, Article 632 of the Commercial Transaction Law entitles the drawee to have civil or criminal recourse against the drawer, should there be a default in releasing the money. In lieu of the foregoing, inability to pay might be set up by a statement from the drawee bank. The drawer can only refrain the drawee to withdraw the cash through cheque from to the date mentioned in the cheque.

In the event, where the drawee holds a dishonoured cheque, the failure to pay due to any reasons will be supported by the bank through a bank statement; the drawee can seek three days of extension in order to contact the drawer for possible payment. If the drawee fails to contact the drawer within the prescribed period, he may seek legal recourse, either through civil court or criminal court. Through this article, we will guide our readers the procedure to initiate criminal proceedings against the drawer and the consequences of the same on the drawer.

At the point when an account holder defaults, the creditor will have the privilege to record a criminal complaint about the dishonoured cheque alongside a civil case for recuperation. In spite of the fact that, as referred, this methodology provides the creditors with a sense of security in recovering their outstanding amount. It further has the extra result of taking into consideration disciplinary measures against non-payment. It simultaneously puts extra weight on UAE's criminal legislature and its authorities because of the number of cheque bounce cases that have been filed.

  1. Police Complaint
    A beneficiary or drawee of the cheque has to lodge a police complaint before the nearest police station of the concerned Emirate. Upon receiving the complaint and relevant documents, the police authority will contract the drawer and will order his presence. Wherein, the drawer can settle the matter by paying the amount or can seek further time to settle by submitting his passport. Considering a criminal charge, an arrest warrant will be automatically issued against the drawer, which can be released post the settlement of the matter or after serving the imprisonment.
  2. The complaint before Public Prosecutor
    On the off chance that the parties fail to resolve the cheque bounce case at the police station, the police at that point transfer the case to the protestation for further investigations. After that, the public prosecutor upon receiving both party contentions make his report.

    In view of the proof displayed in the court, the decision could be a safeguard either by paying the estimation of the cheque or by keeping the passport of the defaulter or a guarantor. In the event, if the bail is denied the accused will be kept in custody until final order.
  3. Criminal Court
    The criminal court will post receiving the report of the public prosecutor will dig deep into the case facts and arguments and upon the basis of evidence submitted by the parties will pass its judgment. The judgment will either entail fine ranging from AED 1,000 until AED 30,000 and punishment by way of imprisonment varying from one year to three years (Article 401 of UAE Penal Code)

Recent Developments

In order to address the seriousness of the punishments in small claim amount, the government has made laws to address small claims, such as one day court and has amended the conditions in which certain bounce cheque attracts punishment by detention. In reference to one-day court, the laws have been sanctioned which give that petty offence) ought to be managed practically and a decision must be issued within 24 hours. These courts have been built up in the Emirates of Abu Dhabi, Dubai and Ras Al Khaimah and seem to have been effective in altogether reducing the heap on the Criminal Courts which will have the effect of enabling those increasingly serious offences to move along. Also, the Emirate of Dubai has presented another law concerning "Criminal Orders". This law enables the Dubai Public Prosecution to issue criminal requests to sentence wrongdoers of certain "simple violations" to just fines. Objections might be recorded to challenge such requests within seven days. Through such request the matter will be transferred to the criminal court. The cheque below AED 200,000 will be categorized under simple offence with a penalty of around AED 5,000 – AED 10,000.

Conclusion

One of the principle reasons cheques are generally trusted and utilized in the UAE is the way that such cheques are criminally ensured with potential confinement (or a fine). This constrains cheque drawers to endeavour to respect their cheques upon their development. Since dishonoured cheques worth AED 200,000 (or less) are not punishable by imprisonment in the Emirate of Dubai. To keep up this power as advised by Criminal Lawyers in Dubai to ask business partners to submit cheque with an amount higher than AED 200,000 to keep up the potential detainment sentences justified to bounced cheques.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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