The United Arab Emirates (UAE), being a major business hub, acknowledges the prevalence of frequent transactions done through the issuing of cheques. Therefore, the UAE Government considers a bounced cheque to be a serious offence, whereby, it provides for both civil and criminal proceedings against the offender.
Article 483 of the Federal Law number 18 of 1992 (Commercial Transactions Law), defines the cheque as, an order issued by the drawer (a person who signs the cheque) upon the drawee (the bank from which the cheque can be drawn) to pay the amount as specified in the cheque, on the date indicated therein (date of issuance), to the order of a third person (being the payee). The cheque should be complete and duly signed by the issuer to act as an authority on the bank for the disbursal of the money as specified in the cheque.
Article 596 of the Commercial Transaction Law, states the particulars of the cheque to be as an unconditional order to pay a specific amount of money, the place of the payment, the bank’s name which is obligated to pay, the name of the person receiving such funds, the date and place of issuing the cheque and most importantly a proper signature of the person issuing the cheque. However, the cheque without a valid date or place of the payment shall not be considered as invalid, in this ace, the date of issue shall be the date when the cheque is presented for payment and the place indicated next to the bank’s name shall be considered as the place of payment; and where nothing is indicated then it shall be at the bank’s head office.
A cheque is considered to be a bounced cheque or dishonoured cheque when the presentation of the cheque by the payee to the drawee bank has been rejected for the reasons as mentioned below:
The payee (bearer) of the cheque, is entitled to take action against the drawer, endorsers or any other parties found guilty of non-payment of the money specified in the cheque when it’s presented within the time limit, as per Article 632 of the Commercial Transaction Law. As per Article 617 of the Commercial Transactions Law, the cheque can only be presented for payment on the date of issue stated in the cheque and as per Article 618 of Commercial Transactions Law, the cheque can be presented for payment within the time limit of six months from the date as mentioned in the cheque to be the date of issue. Article 638 of the Commercial Transactions Law provides for the limitation period of the recourse initiated by the payee against the defaulters as any time within two years from the expiry of the time limit set for presenting the cheque to withdraw the money.
When a cheque is bounced, the payee may request the bank to state as to show the evidence of the failure of the payment and the bank is obligated to comply with such request, however it may request the payee to grant a grace period of three working days following the presentment of the cheque to contact the drawer. The bearer of the bounced cheque must first complain about the policy of the respective Emirate against the drawer. On receiving such a complainant, the police contact the drawer to notify about the complaint lodged against him/her. At this point, the drawer has the option to settle the issue by paying the amount stated in the bounced cheque without the need for any further legal proceedings. However, the drawer is allowed to request for a grant of a specific period to resolve the issue and it can be granted on deposit of the drawer’s passport at the police station as a means of security. Cheque bounce is a criminal offence a travel ban or arrest warrant could be imposed until the matter is resolved. If the parties fail to settle the issue of the bounced cheque at the police station, then the police shall transfer this case to the public prosecution for further investigation proceedings and the judge upon reviewing if the evidence submitted in the court meets the two essential crime elements being, the first being, the material element (actus reus), like for instance failing to provide the sufficient funds and the second being the mental element (men’s rea), proving the malicious intention to cause damage to the complainant and upon hearing the opponents, the court as per Article 401 of the UAE Federal Law number 3 of 1987 (the Penal Code), can grant either a sanction of fine or imprisonment.
A criminal court only deals with matters where the cheque has been issued in a bad faith and therefore, if it’s a matter of the civil claim, it can transfer the same to the civil court. A civil suit also can be initiated by the payee against the defaulter to claim his right to the disputed amount. The civil court can be any competent judiciary apart from the courts. Upon reviewing all the evidence and facts as presented by the parties, the civil court can order the defaulter to pay a sum equal either to the value of the cheque or the outstanding balance, on failure to meet such orders by the defaulter, he can be sentenced to jail. It is pertinent to note that in the year 2017, a special law has been introduced which is the Dubai Law number 1 of 2017 (Criminal Order Law), whereby, the public prosecutor is permitted to issue a penalty instead of referring it to court if the amount mentioned in the bounced cheque doesn’t exceed UAE Dirhams two hundred thousand (200,000), as it will be categorized as a simple offence.
As per the Criminal Order, the fines shall be as following:
Any amount exceeding UAE Dirhams two hundred thousand shall be referred to the public prosecution. However, paying the fines alone will not exempt the defaulter from paying the amount due to the payee of the bounced cheque, thereby, the payee of the bounced cheque can file a suit in the civil court to claim his dues.