Here’s everything you need to know about 2021 Revised Cheque bounce law in UAE

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Here's everything you need to know about 2021 Revised Cheque bounce law in UAE 1

The new cheque bounce law in UAE has amended certain provisions of Federal Law No. 18 of 1993, the Commercial Transactions Law related to bounced cheques, in a Decree expected to come into force in 2022. Here are the key amendments put forth in effect:

  1. Revised penalties with imprisonment between six months to two years
  2. Penalty upto 10% of cheque amount
  3. Public Shaming
  4. Cheque book suspension upto 5 years

The revised cheque bounce law comes as a relief to creditors. In the UAE, some market commentators hold the view that laws criminally penalising issuance of dishonored cheques are necessary, whereas others believe that the criminal penalty should be removed. The recent legalisation amendments recognise both sides of the argument, and specify criminal offences for specific bounced cheque events, while also redefining what constitutes a criminal offence.

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What are the criminal offences of a bounced cheque in the UAE as per new amendments to cheque bounce law?

The amended provisions outline the offences that constitute a criminal penalty as the following events:

  • Cheque falsification;
  • Forgery of cheques;
  • Fraudulent use of cheques by ordering the Bank not to pay the cheque amount; and,
  • Withdrawing the account balance prior the date of the cheque to prevent encashment.

In an effort to improve the mechanics of collection of payments through cheques, banks are now obliged to make partial payment of the cheque amount to the beneficiaries when a cheque is presented for payment and an account balance is available to partly (but not fully) satisfy the beneficiary’s claim.

Prior the introduction of the new decree, article 401 was scrutinized by the court in a broader scope, especially the term “ issuance of cheque in bad faith”. It thereby provided that if any person would be issuing a cheque, which will get bounced, then such a drawer of the cheque will be regarded as the accused and will be charged with a criminal liability. As a result, the criminal court was vested with the power to exercise discretion in order to decide about the criminal liability as a list of acts that would amount to bad faith were absent in the old law.

Now post the issuance of the decree, new provisions have been added to the previous law, namely article 641(1), (2), and (3). These provisions provide for the list of acts that will be regarded as the act of issuance of bounced cheque in bad faith and shall be inviting criminal liability. Article 641(1), as mentioned above provides that the act amounting to bad faith will be if the court is given order by the drawer that it shall not clear the cheque presented by the beneficiary. Next, 641(2) provides two conditions for the same that if the drawer commits an act such as withdrawing of all money before the clearance of the cheque or if he closes the account before such clearance, then he will be acting in bad faith.

Yet another act amounting to bad faith under the same article is that despite knowing that his bank account is dormant, the drawer still issues a cheque.

Article 641(3) gives that the drawer will be criminally charged, if he will be signing the cheque in such a way that the beneficiary cannot encash the same. The decree has thus certainly revealed the intention to pass criminal charges only for the acts mentioned in the above three articles as the articles are characterized as fraudulent in nature. As a result it is regarded as justifiable to punish people undertaking such an act.

In addition to this, article 635 has been introduced and article 617 has been amended that provides for a beneficiary of the cheque to have a vested power to select an alternative method through which he can claim the amount without actually going to the court for the same.

New Provisions in UAE cheque bounce law

  1. Under Article 617, the beneficiary is now vested with a power to ask the bank for partial payment of the cheque, with respect to the bank balance of the drawer.
  2. The financial institutions will have to face criminal charges, if they do not accept the request of the partial payment of the cheque which is made by the beneficiary. They have no say in the same.
  3. The dishonoured cheque can now be treated as a civil executive deed as mentioned under federal civil procedure code no, 11 of 1992, if a certificate is obtained by the beneficiary by the bank that there is no sufficient fund available in the drawer’s bank. In other words, the beneficiary can now directly file a civil execution case against the drawer, whose assets will be seized in order to obtain the value of the cheque.

The amendments aim to ease enforcement options. A bounced cheque is now viewed as an executive document that could be enforced and executed directly by a judge in the UAE court. As a result, the Civil court can demand the issuer of a bounced cheque to pay a sum equal to the value of the cheque or its outstanding balance. If the convicted person fails to pay, his assets may be subject to enforcement to satisfy the balance and the convicted person must serve another jail term for failing to comply with the civil court decision.

Revised penalties for cheques as per revised cheque bounce law

The amendments to the law have introduced several penalties to narrow the scope of 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 Dh1,000. The penalty should be doubled if the person repeats the act.’

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The same article prescribes imprisonment between six months to two years and fine for a minimum of 10 per cent of the cheque amount and not less than Dh5,000 if the person orders the drawee [the bank] before the date of encashment, not to encash the cheque or withdraws its entire balance before the cheque is presented to the bank or deliberately writes a cheque in a way that prevents it from being encashed.

Cheques as Alternative currency

In accordance with the new provisions of bounched cheque law, the cheques will be a strong instrument like an alternative currency as it will enhance the trust between parties in commercial transactions because both parties will believe that they can realise the amount of the cheque.

Punishment for the forgery of cheques will be imprisonment for a minimum of one year and fine between Dh20,000 and Dh100,000.

Public Ridiculing

Article 642 of the law provides for a strong and new punishment as the court will have the power to publish the judgement of the convicted person in two daily local newspapers [an English and an Arabic paper] or online, including the name of the convicted person, his residence and occupation. Additionally, the convicted person should pay the cost of publishing.

Other penalties applying to a bounced cheque offence

According to the Decree, the convicted person will have their cheque book withdrawn and will be prevented from obtaining new cheque books for a maximum of 5 years. The person could also face a suspension in relation to their ability to conduct professional or commercial activities.

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Legal persons (except banks and financial institutions) can potentially face fines, suspension of commercial licenses for 6 months, cancellation of licenses or liquidation in case of repeated offences.

How are joint bank account holders affected by bounced cheques?

The amended provisions directly address this question. In the case of death or legal incapacity of one of the joint account holders, the remaining holder shall notify the bank no later than 10 days from the date of death or incapacity. The bank shall immediately suspend withdrawal from the joint account up to the limits of the share of the demised or legally incapacitated person in the account balance as of the date of death or designation of a successor.

Extradition Requests from the UAE

The requests for extradition are issued by a requesting country to another country (generally referred to as Requested Country) for returning an accused who has flown to Requested country post committing a crime in the Requesting Country.

The request for extradition revolves around three parties that is the Requesting country, the criminal or the accused or the Requested Country. The Criminal Lawyers of Dubai will herein explain the procedure for extradition requests and the impact of such requests during the global pandemic.

The requests for extradition are generally governed by the Criminal Laws of both the countries that Requesting and the Requested country along with the treaty for governing extradition signed between both the countries. The present article refers to the extradition requests submitted within UAE.

The Federal number 39 of 2006 regarding Mutual Judicial Co-operation in Criminal Matters was issued by the government of UAE to govern all sorts of extradition requests submitted before the government of UAE.

In addition, the government of UAE has sanctioned numerous bilateral treaties with neighboring countries in order to pave way with extradition requests received and submitted in such countries for instance, China, Egypt, Pakistan, India, United Kingdom, Iran, France and Australia.

Similarly, the government has signed Riyadh Convention regarding Judicial Cooperation between all Arab Countries such as Bahrain, Iran, Tunisia, Lebanon, Libya, Jordan, Algeria, Jordan, Saudi Arabia, Oman and Morocco.

In accordance with Article 7 of the Federal Extradition Law, the accused extradition request can only be accepted in following conditions:

  1. The crime committed by the accused is punishable in Requesting country for a minimum imprisonment of one year or more
  2. The crime committed by the accused shall also be considered as a crime in Requested Country with a similar punishment
  3. The punishment for the accused is pending for six months or more.

Additionally, the request for such extradition can be challenged before several authorities including Interpol authorities of UAE, the relevant public prosecution governing international cases, the Court of Appeal, The Court of Cassation and the Ministry of Interior or Justice.

As witnessed by Lawyers of Dubai ,the extradition requests can be from countries who have signed bilateral treaties with UAE and countries who has not signed any bilateral treaties with the country.

In situation where the country has signed the bilateral treaty, the requesting country shall abide by the procedures of such requests as defined in the treaty and shall submit the extradition requests accordingly.

Whereas, there are several countries who has not signed any extradition requests with UAE, in such circumstances, the criminal judgment issued by the Requesting Country shall be utilized to file an extradition request along with the provisions of Federal Extradition Law of UAE.

The Litigation Lawyers of Dubai has assisted innumerable clients and legally represented them before the relevant authorities in cases of extradition and have successfully rejected such requests from other countries for extraditing residents of Dubai. The country has a very specific and elaborated procedural rules to deal with extradition requests from all over the world

A significant shift is anticipated in the treatment of cheques in the UAE. Further, the Decree is expected to come into force in 2022 and the business community should plan accordingly. We will monitor developments closely and keep you updated.

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