Bounced cheques in the UAE: All you need to know
A bounced cheque, once a serious criminal offence in the UAE punishable by jail time, is now primarily a civil matter with financial penalties. While cheques remain a standard payment method globally, issuing one without sufficient funds can lead to legal repercussions. While the threat of imprisonment has been removed for most cases, individuals who bounce cheques in the UAE can still face significant financial consequences and civil claims.
WHAT IS A BOUNCED CHEQUE?
Understanding the meaning of a bouncing cheque is crucial for anyone using cheques as a payment method.
Cheques are widely used for business and individual transactions in the UAE. They are the most acceptable mode of rent payment in Dubai. While their acceptability is never an issue, they have 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 equals or exceeds the cheque amount on the issue date.
- Technical errors like mismatched signatures, no or wrong date and over-written or scribbled text.
- Closure of the bank account before the issued cheque(s) is encashed.
- Instructing the bank to withhold payment against the cheque.
BOUNCED CHEQUE IN THE UAE: THE CHANGES TO THE LAW
UAE cheque bounce laws have undergone significant changes, transitioning from a criminal offence to primarily a civil matter with financial penalties.
Major amendments to Federal Law No. 18 of 1993 promulgating Commercial Transactions were made. With the Federal Decree-Law No. 14 of 2020, these changes were made to speed up 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 chequeholder 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, per the new law, one can approach the court’s execution judge directly for an order of full payment (or the remaining amount). 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.
WHAT HAPPENS WHEN A CHEQUE BOUNCES IN THE UAE
A payee who receives a bad cheque in the UAE can approach legal remedies against the drawer. They can now directly seek intervention from the court’s execution judge. The old process of filing a police complaint has been changed to speed up the process. With most cases now decriminalised, police involvement was also made redundant.
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
Other than a fine for cheque bounce in the UAE, there could be jail in certain circumstances. 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 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. If that’s the case, it is best to prepare 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.
WHAT IS THE PUNISHMENT FOR CHEQUE BOUNCE IN THE 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 the bank account(s), including 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.
A cheque’s validity in the UAE is 6 months, within which you can file a complaint. 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 BOUNCED CHEQUE CASE IN 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 the UAE, the whole process of complaint and redressal has been made more efficient.
Nevertheless, you must be mindful of small things, like avoiding 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 familiarise yourself with 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 new rules for cheque bounce in UAE 2024. The rule for cheque bounce in the UAE came into effect in 2022.
Another rule change you must be aware of is the amendments to the UAE family law. Make sure you do so to have a clearer idea of the personal rights granted to you.
