The new amendment to Federal Law No. 18 of UAE’s Commercial Transactions Law, 1993, regarding the decriminalization of bounced cheques and the partial payment of cheques, took effect from January 2, 2022, as per the directive of the UAE Central Bank. These changes align with the practice in countries such as France and the USA. Being a criminal offense before the amendment, the modifications have been enacted to make it a civil offense where people can discuss and settle the case amicably.
Cheques returned due to insufficient funds ha been decriminalized to a large extent, and criminal liability will only accrue in cases where the cheque has been issued for an illegal purpose, bounced as a result of being delivered in bad faith, or as a result of fraud or forgery, or has been deliberately written or signed in a way that makes them untenable. It may also accrue criminal liability if proven that:
1. The drawer had ordered the bank not to cash the cheque before the due date;
2. The drawer had closed the account or withdrawn the available balance before the due date.
Moreover, the previous beneficiaries of bounced cheques must notify a police station regarding the situation, providing details of the drawer, drawee, the cheque, and the bank where it was to be cashed. Before visiting a police station, the complainant should first ascertain in which area of the city the cheque was first submitted for clearing, as it is the police station in the corresponding area where the cheque was first submitted that shall have jurisdiction over the complaint.
Once the complaint is accepted, after review of the original cheque along with the return memo and other relevant documents, the cheque issuer, or the counterparty, in this case, will be notified by the police to come to the station for questioning. Once the police record the statements of all parties involved, they will prepare their report, and the complaint will be transferred to the Public Prosecution. The Public Prosecution has exclusive jurisdiction to initiate and prosecute criminal proceedings under AED 200,000/- by issuing a fine only. For cheque amounts over AED 200,000/-, the Public Prosecution will have to transfer the case to the criminal court for their review. If the amount is less than AED 200,000/-, then the case would be transferred to a civil court that could force him to pay the amount mentioned in the cheque along with a fine. At this point, the courts would determine whether or not an element of bad faith existed.
On the contrary, the new amendment enables the beneficiary to directly approach the court’s execution judge, after obtaining a certificate from the bank, to order payment of the full or partial payment of the cheque’s value or even enforce the right to seize the drawer’s assets, in an accelerated and easy procedure that preserves the rights of all parties involved. To that extent, partial payment of cheques has also been made mandatory, with the bank required to pay the drawee the partial amount if the amount in the account is less than the value mentioned in the cheque unless the drawee rejects such payment. In such cases, the bank shall follow the protocols for partial payment of Cheque value, as stipulated in the new amendment law.
As part of the changes, administrative penalties for issuing cheques without funds will also be toughened, including withdrawal of checkbooks from the transgressor, denying them the right to receive new checkbooks for a maximum of five years, and suspending their professional or commercial activity.
This move to amend the Commercial Transactions Law that decriminalizes bounced cheque cases are expected to come as a huge relief to hundreds of businesses that earlier had to pay hefty fines at risk of imprisonment without trial in the UAE.