Cheque Bounce Cases

Practice Areas

Bounced Cheques in the UAE

Cheque Bounce Cases

Essential information and support

Bank cheques are frequently and commonly used for financial transactions in the UAE, the major reason why bounced cheques are a regularly occurring phenomenon. Bounced cheque issues arise in a variety of commercial dealings including but not limited to bank loans, property rents, transactions between companies, and transactions between individuals.
Here is a guide to bounced cheque cases in the UAE, and how to get help if you get involved on either side of a case.

The basics of a bounced cheque

A bounced cheque, also known as dishonoured cheque or bad cheque, is a cheque that gets rejected for different reasons:

Implications of bounced cheque

A bounced cheque is a criminal offence in the UAE, in accordance with Article 401 of the Penal Law, which states: “A punishment of confinement shall be inflicted on any person who, in bad faith draws a cheque without no existing or drawable provision, or who, after issuing the cheque, withdraws all or part of the fund so that the balance becomes insufficient to settle the amount of the cheque, who orders the drawee not to pay cheque, or deliberately makes or signs the cheque in such a manner as to prevent it from being paid.”

Any person who endorses or delivers to another person a cheque payable to the bearer, while being aware that there are no existing funds covering its value, or that it cannot be drawn, is also liable to the same punishment as the issuer.

Issuing a cheque when one has insufficient funds is a violation with legal implications – civil and criminal. The beneficiary of the cheque can file two separate cases if it bounces: a criminal case to impose penalties, and a civil case to seek the amount of the cheque along with any compensation and precautionary measures.

The Cheque

Amended law on bounced cheques

In September 2020, the UAE Cabinet amended certain provisions of Federal Law No. 18 of 1993, The Commercial Transactions Law, especially those related to bounced cheques.

These amendments create new mechanisms to ensure the collection of payments associated with bounced cheques. For instance, banks will be obliged to make partial payment to the beneficiary of a cheque when it is presented for payment, as long as an account balance is available to partly satisfy the beneficiary’s claim. The beneficiary can then take the bounced cheque and present it to court to realise the remaining amount. This will reduce the time for the beneficiary to claim his rights, as the bounced cheque will be viewed as an executive
document that can be enforced and executed directly by a judge in the UAE’s Civil Courts.

These amendments create new mechanisms to ensure the collection of payments associated with bounced cheques. For instance, banks will be obliged to make partial payment to the beneficiary of a cheque when it is presented for payment, as long as an account balance is available to partly satisfy the beneficiary’s claim. The beneficiary can then take the bounced cheque and present it to court to realise the remaining amount. This will reduce the time for the beneficiary to claim his rights, as the bounced cheque will be viewed as an executive document that can be enforced and executed directly by a judge in the UAE’s Civil Courts.

These amendments will come into effect in January 2022.

Impact of amended law

The amendments to the Commercial Transactions Law aims to strengthen the value of a cheque as a reliable tool in commercial transactions, which will reflect positively on the local economy, society and legislative system. It is also aligned with the UAE’s goal to create a fair judiciary and build a safer society.

New penalties for bounced cheques

The amendments also introduce several penalties for writing bad cheques. One of the articles states: “Any person who endorses or issues a cheque in favour of another, knowing that there is no sufficient balance, or it is not withdrawable, shall be fined a minimum of 10 per cent of the cheque amount, and not less than Dhs. 1,000. The penalty should be doubled if the person repeats the act.”

The same article also prescribes imprisonment between 6 months to 24 months and a minimum fine of 10 percent of the cheque amount not less than Dhs. 5,000 if the person does any one of these:
Punishment for the forgery of cheques will be imprisonment for a minimum of 12 months and a fine ranging between Dhs. 20,000 and Dhs. 100,000.
The court will also have the power to publish the judgement of the offender online, or in English and Arabic newspapers, along with his full name, residence and occupation – at a cost borne by the offender.

Initiating a bounced cheque case

The UAE’s Ministry of Interior currently allows individuals to file a case for a bounced cheque at one of its Happiness Centres, or through the MOI UAE app. Submissions must include copies of passport and Emirates ID card, a stamped letter describing why the bank cannot honour the cheque, and a copy of the original cheque.

Professional assistance for bounced cheques

The most viable way to resolve a bounced cheque issue is for both parties to settle it amicably and quickly. However, the beneficiary has no legal obligation to resolve the matter with the issuer through direct contact, and may initiate a bounced cheque case with associated legal implications and damages.
As a veteran law firm with many collective years of legal practice, we offer professional services in cases associated with bounced cheques in the UAE. If you are based outside the UAE, you may issue us a Power of Attorney that is notarised in the country where you are currently residing, and attested by the Ministry of Foreign Affairs and International Cooperation in the UAE.
Working on your behalf, we will approach the bank, the court and all other concerned authorities to present documentary evidence and arrive at an early resolution.

Get professional help: Contact our teams for a consultation.

Over 15+
Years of Experience

Scroll to Top