Bounced cheques in the UAE – All you need to know
A bank cheque is one of the most common methods for financial transactions around the world. A bounced cheque, or a dishonoured or bad cheque, is a type of cheque that cannot be processed because the account holder has not had sufficient funds available for use.
A cheque bounce used to be considered a criminal offence as per UAE law that could result in a jail term for the payee. But from 2nd January 2022, barring a few noted exceptions, most cases have been decriminalised. However, a bounced cheque in the UAE is still considered an act worthy of a financial penalty, and the guilty party can be liable for civil claims. Here is everything you must know about bounced cheque and its implications.
WHAT IS A BOUNCED CHEQUE?
Cheques are widely used for business and individual transactions in the UAE. In fact, they are the most acceptable mode of rent payment in Dubai. While their acceptability is never an issue, they come with an inherent risk.
When the cheque you issued gets bounced/ returned or dishonoured, it can lead to civil and/or legal proceedings against you. Now the question is, when does a cheque bounce or become a bad cheque in the UAE?
Four factors cause a cheque to be returned:
- Non-availability of funds equal to or more than the cheque amount on the date of issue.
- Technical errors like mismatched signatures, no or wrong date, over-written or scribbled text.
- Closure of the bank account before the issued cheque(s) is encashed.
- Instruction to the bank to withhold payment against the cheque.
BOUNCED CHEQUE IN THE UAE: THE CHANGES TO THE LAW
Major amendments were made to the Federal Law No. 18 of 1993 promulgating Commercial Transactions. With the Federal Decree-Law No. 14 of 2020, these changes were made to fasten the process whilst ensuring justice is served. A balance is created to ensure more efficient use of police resources and support a sustainable economy.
DECRIMINALISATION
There’s one major change in punishment for a bounced cheque in the UAE. In most cases, jail time will not be considered. However, strict financial penalties are still enforced.
There can be a criminal case if:
- The drawer asks the bank not to cash the cheque before the date
- The drawer shuts the account or withdraws the available balance before the due date
- The cheque is signed inaccurately, deliberately
- The drawer intentionally writes or signs the cheque wrongly
ROLE OF COURTS
As per the new law, banks are obliged to make a partial payment to the cheque holder if the full amount is not present in the account. The account still holds the right to refusal. This contrasts with the earlier law where the account holder had to direct the bank to make this partial payment.
Earlier, you had to report a bounced cheque in the UAE to the police. However, as per the new law, one can approach the court’s execution judge directly for an order of full payment (or remaining). The new process is relatively easier to execute and respects the rights of all involved parties.
In such cases, the courts can order the seizing of assets in the drawer’s name.
THE PENALTIES FOR A BOUNCED CHEQUE
As per the latest amendment, the penalty for a bounced cheque in the UAE depends on the amount due. Let’s take a look at the cheque bounce fine in the UAE.
CHEQUE AMOUNT | FINE AMOUNT |
---|---|
CHEQUE AMOUNT Less Than AED 50,000 | FINE AMOUNT AED 2,000 |
CHEQUE AMOUNT AED 50,000 – AED 100,000 | FINE AMOUNT AED 5,000 |
CHEQUE AMOUNT AED 100,000 – AED 200,000 | FINE AMOUNT AED 10,000 |
JAIL TERM
A jail term of at least 12 months and a minimum fine of AED 20k (not exceeding AED 100k) would be imposed if an individual forges or counterfeits a cheque. Similarly, attributing a cheque to a third party by altering any detail falls under the same punishment category.
FAQS ABOUT BOUNCED CHEQUES IN UAE
WHAT HAPPENS WHEN A CHEQUE BOUNCES IN THE UAE?
A payee who receives a bad cheque in the UAE has the right to approach legal remedies against the drawer. They can now directly seek intervention from the court’s execution judge. The old process of filing police compliant has been changed to speed up the process. With most cases now decriminalised, the involvement of police was also made redundant.
WHAT SHOULD THE DRAWER DO?
Ideally, the best way to deal with the situation is to pay the cheque amount as soon as possible before the matter is taken to court. However, it may be possible that you don’t have the funds or financial ability to pay the amount. In such matters, it is best to prepare a proof of your innocence and evidence of your inability to pay. The court will allow you to prove you did not deliver a bad cheque with ill intentions.
Seeking legal help at this stage is advised to ensure you know all the options available.
WHAT IS THE PUNISHEMENT FOR CHEQUE BOUNCE IN UAE?
If you fail to present sufficient evidence, the court can order you to settle the amount within 15 days. Failing to do so could lead to blocking of bank account(s), attaching any immovable or movable property in the UAE.
HOW TO FILE A CASE OF BOUNCED CHEQUE IN DUBAI?
One must fill out a Cheque Execution Regulations Form with all relevant documents. Forms are available at the official website of Dubai Courts. You have to submit certain documents with the application. This would include getting a certificate of bounced cheque from the bank. Any documents not in Arabic must be translated and certified before submission.
The cut-off date for filing a complaint is 6-months from when the cheque bounced in the UAE.
You will have to pay 5% of the bounced cheque amount and AED 150 as the application fee once the application is fit for execution.
HOW TO FILE A CASE OF BOUNCED CHEQUE IN THE UAE’S OTHER EMIRATES
You can apply via the Ministry of Interior website or the Happiness Centre. The criteria remain the same.
WHAT HAPPENS IF A CHEQUE I ISSUED IN GOOD FAITH IS DISHONOURED?
A dishonoured cheque still makes you prone to legal proceedings. However, you can pay the amount back or give proof of innocence and request a reasonable time to honour your payment.
DOES THE BOUNCED CHEQUE ISSUE END IF I PAY THE FINE AMOUNT?
No, the fine only acts as a deterrent to keep people from issuing cheques they cannot honour. It is an additional financial burden on you. You still need to pay the original cheque amount to the payee or face further legal consequences unless the payee decides to waive the amount.
WHAT IF I DON’T HAVE THE MONEY TO PAY THE AMOUNT?
In this case, there are a couple of options you can consider. As soon as you realise you have insufficient balance, it is best to take the other party into confidence and work out a plan to pay the amount in reasonable instalments.
The other way is to use the new insolvency law in the UAE and work off your debts with the help of legal arbitration.
WHAT IF I HAVE PAID THE AMOUNT, BUT THE PAYEE REFUSES TO END LEGAL PROCEEDINGS AGAINST ME?
In this instance, you can avoid further criminal and civil cases for a bounced cheque in the UAE by approaching the police or the public prosecution with proper documentary evidence of said payment. This will end the legal proceedings against you.
There you have it, a complete guide to the legal implications, the fines applicable, and the cheque bounce case filing procedure in Dubai and other emirates. As per the new bounced cheque law in UAE, the whole process of complaint and redressal has been made more efficient.
There are small things you need to be mindful of to avoid a cheque bounce case. For example, when closing your bank account in Dubai or any other emirate, ensure all issued cheques are paid off or cancelled.
There are a host of Islamic Banks in Dubai for individuals looking for Sharia-compliant banking services. You can check out our guide to opening a bank account in Dubai to better picture how banks function.
Even when cancelling accounts before leaving the UAE, you must clear off all your debts, including un-cashed cheques, to avoid being blacklisted.
Most importantly, keep track of all the changes in the law. The new rules for cheque bounce in UAE came into effect in 2022, but have you caught up with the latest amendments to the UAE family law? If you haven’t, make sure you do to have a clearer idea of the personal rights granted to you.