Overview:
A cheque, as per Federal Law Number 18 of 1993, is an order from the drawer to a bank, indicating a specific sum to be paid to a third person, the beneficiary, or the bearer (Article 483).
A bounced cheque, also called a dishonored or returned cheque, results from various reasons, such as insufficient funds, payment restraint orders, or closed bank accounts.
Cheque Presentation and Encashment:
According to Article 617 of the Commercial Transaction Law, a cheque should be presented on or after its date and encashed within six months (Article 618).
Dubai Criminal Lawyers emphasize potential liabilities for submitting a cheque with insufficient funds or knowingly issuing a dishonored cheque.
Liability and Recourse:
The cheque relies on fund accessibility, with Article 632 granting the drawee recourse against the drawer for default. The drawee may seek legal recourse through civil or criminal courts if the drawer cannot be contacted.
Changes in Criminal Sanctions:
Bounced cheques due to insufficient funds no longer attract criminal sanctions following Federal Decree-Law No. 14 of 2020, amending the Commercial Transactions Law and the Penal Code.
The amended law introduces specific actions under Articles 641 bis (2), 641 bis (3), and 641 bis (4) of the Commercial Law that result in criminal sanctions.
Instances Leading to Criminal Sanctions:
These instances include:
- Issuer requesting the bank to refrain from paying before the due date.
- Closure or withdrawal of funds before issuing or presenting the cheque.
- Frozen accounts.
- Deliberate signing of cheques to prevent payment.
- Forgery, counterfeiting, or imputing the cheque to a third party with harmful intent.
- Knowing use of forged or counterfeit cheques.
- Wrongful use or benefit from a cheque drawn in the name of a third party associated with fraud.
- Acts related to forgeries, such as importing, acquiring, or selling equipment, tools, programs, information, or data.
Criminal Penalties:
Violations may lead to imprisonment ranging from 6 months to 2 years, along with fines.
Recovery of Funds:
In cases of insufficient funds causing bounced cheques, the bearer can request partial or full recovery through execution under Article 635 of the Commercial Law.
The court may issue an order against the issuer to pay the full or partial amount to the bearer.
Initiating Criminal Proceedings:
This video guides through the procedure of initiating criminal proceedings against a cheque drawer.
A criminal complaint can be filed by the creditor when an account holder defaults on the cheque payment.
Police Complaint:
The beneficiary or drawee needs to file a police complaint at the nearest police station.
The police contact the drawer, ordering their presence. The drawer can settle by paying or seek time, potentially facing an automatic arrest warrant.
Complaint Before Public Prosecutor:
If resolution fails at the police station, the case transfers to the public prosecutor for further investigation.
The public prosecutor prepares a report based on comments from both parties, and decisions may involve safeguard payments or retaining the passport of the defaulter or a guarantor.
Criminal Court:
The criminal court, receiving the prosecutor's report, hears the matter, and judgments may include fines and/or imprisonment based on evidence submitted.
Recent Developments:
Laws address small claims with measures like one-day courts, aiming for effective management and faster decisions within 24 hours.
Dubai introduces "Penal Orders" for quick settlements in cases punishable with fines or imprisonment. Objections can be filed within seven days.
Commercial Transactions Law Update:
Federal Decree-Law No. 50/2022 amends the Commercial Transactions Law.
Key provisions include cheque issuance only with available funds, personal liability for the drawer, and the cheque bearing a notice of unavailability or insufficiency serving as a writ of execution.
Originally published 15 Nov 2023
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
