Merline Dsouza, Junior Associate

In the UAE, a country which continues to be a strategic hub with a rapidly growing economy, writing cheques is one of the common forms of payment; whether you’re buying a car, paying rent or any form of purchases and individual transactions, cheques are commonly used as a form of security.

The below outlines important factors that one should familiarize themselves with prior to using a cheque as a form of payment.

If a cheque is Dishonored/Bounced:

When a cheque is dishonored, the drawee bank immediately issues a ‘Cheque Return Memo’ to the payee mentioning the reason for non-payment such as insufficient funds, the incorrect date mentioned on the cheque, signature mismatch, mismatch of the amount and figures, etc. Bearer of the cheque can resubmit the cheque within six months of the date on it if he believes it will be honored the second time. However, if the drawer fails to make a payment, then the beneficiary has the right to prosecute the former.

  1. Criminal Legal Action

The payee may sue the defaulter/drawer for the dishonor of cheque.

To file a criminal case for a dishonored cheque, the beneficiary must initiate the process by formally registering a complaint with the police of the respective emirate against the drawer. In Dubai, the beneficiary can avail the service of the Dubai Police mobile application in lodging such complaints without stepping foot in a station.

Accordingly, the police shall communicate with the Drawee Bank to verify the signature of the drawer of the cheque. If the drawer settles the matter by paying the amount of the bounced cheque, no further legal proceedings will be taken. Otherwise, the Police will register a criminal complaint against the drawer. Since issuance of a bad cheque is a criminal offense in the UAE, upon registering the criminal complaint, a travel ban on the drawer will be issued automatically. This will ban the drawer/accused from leaving UAE or he will be detained on arrival if he enters the UAE. The said travel restriction can be removed only upon settlement of the amount of bounced cheque, or a sentence has been served.

If the matter remains unresolved, the police will refer the complaint to the public prosecution. Upon receiving both parties’ contentions, if the public prosecutor finds the existence of a criminal basis, he shall transfer the case to the criminal court.

The criminal court, based on the evidence submitted by the parties, will issue its judgment. The judgment will either entail a fine which is assessed by the court at its sole discretion (based on the conclusion reached and the value of the cheque dishonored) usually ranging between AED 1,000 to AED 30,000 or more or imprisonment between one year to three years.

However, in the Emirate of Dubai, Law no. 1 of 2017 called ‘Criminal Order Law’, enables the Dubai Public Prosecution, without the need for the case to be transferred to the Criminal Courts, to issue a criminal judgment which will be in the form of fines but conclusive in the subject matter of the case. This covers dishonored cheques for a value not exceeding AED 200,000. As per this, the offenders of bounced cheques shall be punishable with the following fines:

Bounced cheque(s) amount                                                   Fine Amount

Below AED50,000                                                                  AED2,000

Between AED50,000  – AED100,000                                     AED5,000

Between AED100,000 – AED200,000                                    AED10,000

Dishonored cheques worth AED 200,000 (or less) are not punishable by imprisonment in the Emirate of Dubai.

  1. Civil Legal Action

Since the criminal courts and the civil courts function independently, fines imposed by the public prosecution/criminal court are payable to the UAE government and not as compensation to the complainant/ bearer of the bounced cheque nor coverage for the bounced cheque value.  The bearer of the bounced cheque/ the claimant must present his case to the civil court to claim his right to the disputed amount. Based on the evidence and facts presented by the parties, the civil court shall issue a judgment obliging the defaulter/drawer of the bounced cheque to pay an amount equivalent to the value of the cheque with interest, if any.

Period of Limitation:

As per Article (20) of the UAE Criminal Procedures Law Federal Law No. (35) of the year 1992, the bearer of the bounced cheque can file a criminal case within five (5) years from the date of receiving the cheque.

Article (638/1) of the UAE Commercial Transactions Law Federal Law No. (18) of 1993 provides for two (2) years from expiry of the presentment period to file a civil case against the signatory of the bounced cheque.

Conclusion:

Although it’s one of UAE’s most common financial offenses, it’s a cognizable offense. In other words, if charged, it’s punishable with imprisonment or a fine. The aggrieved party can file a criminal as well as a civil complaint against the signatory of the cheque. Since the law of the land obliges cheque drawers to honor their cheques, writing cheques are generally trusted and accepted for almost all kinds of transactions in the UAE.