Cheque bounce is one of UAE’s most common offences. Federal Law no. (3) of 1987 on the Issuance of the Penal Code describes that “Detention or a fine shall be imposed upon anyone who, in bad faith, gives a cheque without a sufficient and drawable balance or who, after giving a cheque, withdraws all or part of the balance, making the balance insufficient for settlement of the cheque, or if he orders a drawee not to cash a cheque or makes or signs the cheque in a manner that prevents it from being cashed.”
The aggrieved party can report a criminal complaint and register a civil case for recovery of the amount against the signatory of the cheque. When a cheque is dishonoured, the drawee bank issues a Cheque Return Memo to the payee mentioning the reason for the non-payment and reason can be insufficient funds, incorrect date, instructions by the account holder, non-matching signature, editing in cheque...etc.
The bearer of the cheque can resubmit the cheque to the bank within six months of the date on it. However, if the drawer fails to make a payment, then the beneficiary has the right to register a criminal complaint against the signatory of the cheque in the jurisdiction of the police station where the cheque is dishonoured. A complaint can be registered by the person himself or via a power of attorney to a lawyer.
After the report, the police shall communicate with the drawee bank to verify the signature of the drawer of the cheque. After that, the police will register a criminal complaint against the signatory. After the registration of the criminal complaint, a travel ban on the charged person will be issued. It’s a cognizable offence punishable with imprisonment or a fine. The police will refer the complaint to the public prosecution, and the public prosecutor has the right to grant bail either by paying the value of the bounced cheque or demand the passport of the defaulter or another guarantor.
If bail is denied, the public prosecutor may order the detention of the defaulter until the court hears and decides on the case. After submission of both parties’ contentions and investigation, if the public prosecution finds the sufficient support for a criminal case, he shall transfer the case to the criminal court and the court will pronounce the verdict based on the evidence submitted by the parties and examination of witnesses if required. Punishment can be a fine between 1,000 and 30,000 or/and Imprisonment from1 month to 3 years.
However, in the Emirate of Dubai, the Public Prosecution can issue a criminal judgment which will be in the manner of fines only without transferring the case to the criminal court and that judgment can’t be appealed. This covers dishonoured cheques for a value not exceeding AED 200,000. The dishonouring of cheques shall be punishable with the following fines:
Bounced cheque value:
Fines imposed by the public prosecution or court are payable to the UAE government and not as compensation to the complainant. Article (20) of the UAE Criminal Procedures Law allows the limitation of the five years in misdemeanours and bounce cheque cases come under a misdemeanour.
Civil Legal Action: Criminal case orders of fines is not a remedy to the victim, the claimant must submit his case to the civil court to claim or recover the amount. Based on the evidence and facts presented by the parties, the civil court shall issue a judgment obliging the defaulter of the bounced cheque to pay an amount equivalent to the value of the cheque with interest and legal charges.
The UAE Commercial Transactions Law provides two years from the expiry of the presentment period to file a civil case. The civil case shall be filed against the company if the cheque is issued by managerial capacity. But the manger will have criminal liability. The court may order to stop all criminal and civil proceedings against an individual defender under new Insolvency law (The UAE Insolvency Law No. 9 of 2019) and against a corporate entity under Federal Law by Decree No. (9) of 2016 on Bankruptcy.
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