Dubai courts have enacted legal modifications that decriminalize issuing Cheques without adequate cash (bounced Cheques). Following Federal Law No. 14 of 2020, updated in October 2020, Cheque beneficiaries or bearers are not required to file criminal or civil charges for non-payment of the Cheques. Alternatively, they can go straight to the court’s execution judge and request an order directing payment of the entire Cheque or any remaining balance.
If they have enough money in their account, Cheques bearers have the right to receive partial payments from banks unless they object.
What remains illegal as a result of the revision to the civil transaction law?
Certain acts, according to the UAE Central Bank’s clarification, include:
- Money is issued and subsequently withdrawn from an account.
Intentionally drafting or signing a check-in in such a way that it cannot be cashed, or ii. Without a valid reason, requesting that the bank refuses to Ancash the check is a criminal offense.
The Central Bank has published advice to banks and other financial institutions to emphasize the risks of issuing a check without sufficient funds and refusing to honor a partial payment of a check.
The legislation has penalties for forgery.
Those who falsify or counterfeit a check face serious legal consequences. Cheque forgery is punishable by a minimum of one year in prison and a fine of Dh20, 000 to Dh100,000, depending on the amount of money involved.
Issuing a check with the purpose to defraud
Despite the UAE’s legalizing of bounced checks, certain cases will continue to be prosecuted to achieve the decriminalization objectives and their replacement by civil actions. Cheque criminalization and fraud are now characterized as cases in which the bank is asked to refuse to pay a Cheque before its due date without a sufficient reason. The Cheques have been misplaced or the bearer has been declared bankrupt under the new legislation.
You’ll still be breaking the law if you shut your account or withdraw the entire amount before writing a check or submitting it to the bank for cash. It’s possible that the account has been closed, or that the Cheques have been signed-in such a way that it can’t be reversed.
For managing check payments, banks have a few options:
Under the altered legislation, banks now have fewer options for regulating check payments. In general, if sufficient funds are available, the bank (the drawer) is required to pay the face amount of the check upon presentation.
Although the law allows the bank to deny payment if it receives resistance, the modification has narrowed the conditions in which this is permitted. As a result, it is only used in the event of cheque loss or bearer bankruptcy, ensuring that the Cheques fulfill their original role as a payment instrument.
Strong civil options have been developed to recover the value of the check-in in a straightforward manner, including:
Assuring that the bank will honor the Cheques in part;
Making insufficient-funds check taken from the drawer’s bank account is an executive instrument that can be enforced instantly by the execution court without the need for lengthy legal proceedings.
It implies that there is no need to file a police report or a complaint with the police and prosecution, which would then be dealt with by the courts. The Cheques can be used as an executive bond to expedite judicial proceedings so that a bank can exercise its rights and retrieve the Cheque’s value more quickly. In this case, a judicial judgment is not required.
Penalties for non-compliance
The withdrawal of the guilty person’s current checkbook, the ban of the convicted person from getting a new checkbook for a maximum of five years, and the freezing of the legal person’s professional or commercial activity are among the sanctions that have been imposed. New provisions for legal people include the imposition of a fine, license suspension for six months, and license cancellation or dissolution of the legal entity for repeated violations (excluding banks and financial organizations).
Requirements for presenting a check: The statute establishes a deadline for delivering a payment check, which must be completed within six months. This period is derived from the date given on the check. The bearer’s right to the Cheque value is not lost if he fails to produce the Cheque within the time limit for submission.
This date has no legal force in the eyes of the beneficiary or the bank, and its expiration does not prevent the beneficiary or the bank from collecting the cheque’s value from the drawer bank because the Cheques retain their status as a payment instrument. However, the regulator emphasizes that if the check expires, the beneficiary’s remedies against the drawer are restricted.
Assume the drawer guarantees the fund’s availability for the next six months, and the bearer does not present the Cheques to the bank to collect its value and remove the money through a non-drawer-related act. The bearer’s right to sue the drawer for the amount of the check is forfeited in this scenario.
Payment of a portion of a check
Partially paying or settling a portion of the cheque’s amount relieves the drawer and any endorsers or guarantors of liability (if any). The consideration for payment at the drawer’s bank does not have to be equal to the value of the check under UAE law.
If the drawer’s financial status is not favorable or it is in his or her best advantage to save as much money as possible. The bearer of the Cheques may take partial payment and postpone the remainder if it is in the bearer’s best interests.