Historically, UAE Federal Law imposed severe penalties, including imprisonment, for bounced cheques. However, recent amendments effective from October 3rd, 2022, have shifted the focus towards decriminalizing most cases. The new approach emphasizes civil remedies and financial penalties rather than criminal sanctions.
Under UAE law, a bounced cheque is defined as one issued by the drawer in favor of the beneficiary, where the drawee’s account lacks sufficient funds or the balance is inadequate to cover the cheque’s amount. There are other grounds for cheque bouncing, detailed below.
Article 630 of Federal Decree-Law No. 50 of 2022 specifies that a cheque must not be issued unless, at the time of issuance, the drawer has sufficient funds in the drawee’s account that can be accessed and used to honor the cheque, either by explicit or implicit agreement.
COMMON REASONS FOR CHEQUES BOUNCING
Cheques may bounce for several reasons, including:
- Insufficient funds in the bank account at the time the cheque is written or presented.
- Technical errors such as mismatched signatures, missing or incorrect dates, or unclear writing.
- Closure of the bank account before the cheque is presented for payment.
- Instructions to the bank to stop payment on the cheque.
LEGAL CONSEQUENCES OF ISSUING A BOUNCED CHEQUE
Under Federal Decree-Law No. 50 of 2022, which governs UAE Commercial Transactions Law, the legal consequences of issuing a bounced cheque are as follows:
- If it is shown that the bounced cheque resulted from the drawer’s lack of awareness of their account balance and their good faith is established, no penalty will be imposed. However, the drawer must pay the full value of the cheque or the remaining portion.
- Under UAE Commercial Transactions Law, the drawee must pay the cheque’s value, even partially, unlike previous laws that allowed withholding payment for insufficient funds.
- Misuse or fraudulent issuance of cheques, such as closing the account, withdrawing the entire balance, or freezing the account before the cheque is presented for cashing, can result in criminal charges.
- Writing or signing the cheque in a manner that intentionally prevents it from being cashed constitutes fraud and can lead to prosecution under the law.
CONCLUSION
Hence, you can still file a complaint for a bounced cheque with Dubai Police. Grounds include ccount closure, or stop-payment instructions. Despite recent shifts to civil remedies, you can pursue a complaint if the cheque remains unpaid after the formal notice’s grace period. Be sure to have all relevant documentation and evidence.
To check the status of a bounced cheque case in the UAE, you can use the app or website of the Dubai Police orDubai Judicial Department. You’ll need to enter the case number, year, type, and organization form.
For reporting bounced or unfunded cheques, visit the Dubai Government website.
If you find the process challenging, we’re here to help you. At Charter Legal, we understand the complexities of handling bounced cheques and the various legal avenues for recovering your funds. With recent legal changes, it’s crucial to choose the right path, whether criminal or civil. Our team combines some of the best lawyers in Dubai in civil and criminal proceedings. We are here to guide you through the process, ensuring your rights are protected and your cheques claims are pursued effectively. Contact us to discuss your requirement so we can help you achieving a prompt and favorable resolution.