Often, unexpected events can astound an individual in an array of ways like a change in employment, personal emergency, etc., which may rapidly throw the individual off track. Consequently, in the long run, one may “default” in payment of credit card bills or loans. Bank settlements in today’s times can be monotonous as well as painstaking. The jocundity of swiping your credit card whilst forestalling the incapacity to repay the same or default in repayment of loan could lead to drastic and harsh scenarios such as the bank imposing travel bans or resorting to severe legal action including cheque bounce and civil cases filed for recovery. How does one sleep peacefully at night with the scare of such legal action hovering in his mind whilst staying perturbed about negotiating with banking sharks as well as obdurate debt recovery agents?
Matters that involve corporate defaulters or wilful absconders will face legal consequences that include prosecution, court claims and other legal remedies banks and/or their lawyers in Dubai or overseas may choose to initiate.
Further, Interpol red alert is also a consequence of such default. Additionally, there are also cases where individuals are unable to return to Dubai on account of domestic/family emergencies, untimely loss of employment being communicated while they are in their home country, or where an employee is undergoing medical treatment for a long time. The so-called “unintentional defaulters” desire to settle their claims with banks and wish to return to the United Arab Emirates (UAE) to secure their future and work in the country.
Naturally, every lender is suspicious and it is valid for loan specialists independent of whether it is an individual, an association, a foundation or a sovereign government. The Oxford Dictionary meaning of “default” signifies the inability to pay, act, not meet cash calls, and so forth.
Limited understanding of the UAE laws and regulations, lack of language or procedural knowledge, inexperience in negotiating skills, unreasonable and untimely pressures from collection agents, coupled with lack of security deter or prevent the unintentional defaulters from settling their matters in a timely manner. It is vital to be conversant with the local laws, understanding your legal rights, obtaining the proper set of settlement documents, knowledge of penalty and interest charges that can be imposed, the return of security documents, grasping the precise process besides ensuring fair negotiations as they are all very important in such process. A default is also overlooked by a bank as serious and grave offence which often compromises communication between the parties leading to a dead-lock, thereby preventing the defaulter from re-entering the UAE.
Dishonour of cheques and travel ban?
In most situations of default in loan and credit card payments, one simply hands over blank signed cheques as a guarantee to the banks and/or their agents for quick imbursement of loans or acquiring a credit card, which now is the trump card held against the debtor in a bank settlement by the bank. These cheques are used by the creditors as a weapon against the debtors by bounding the cheque and proceeding towards immediate criminal complaints followed by a travel ban.
In addition to criminal action, the banks may additionally evaluate and opt for other remedies such as civil claim or consider other steps that their counsels may deem expedient in the best interest of their client, the bank.
That said, it is imperative to understand that in line with a criminal order being Decision Number (1) of 2017 (Emirate of Dubai), Decision Number (119) of 2019 by the UAE Chief of Public Prosecution (for United Arab Emirates) as well as Decision Number (2) of 2018 (Emirate of Ras al Khaimah), cheques amounting up to AED 200,000 (UAE Dirhams two hundred thousand) can be subject to a jail term towards any cheque bounce or for small claims which is upon the discretion of the Prosecutor to forward the matter to the courts of UAE or not. Banks can, however, present these claims before the authorities, wherein the defaulters will be subject to a fine (without undergoing any court order or prosecution).
The events which may constitute a default in loan agreement includes, but is not limited to:
- Evasion of judicial judgement;
- Bankruptcy or insolvency proceedings against the borrower;
- Significantly opposing change;
- Breach of warranties, covenants and representations;
- Force majeure.
What are Bounced Cheques in the UAE?
A bounced cheque is also known as a dishonoured cheque or a returned cheque presented by the beneficiary, in whose name the cheque was drawn due to the following reasons:
- Due to insufficient funds in the account of the drawer on the date of issuance of the cheque;
- Bank receives an order from the issuer to refrain the payment;
- A technical error such as faulty signatures not matching the previous records of the bank;
- Closure of bank account before encashment of the cheque.
As suggested by the Commercial Transaction law under Article 617, the cheque should be presented on or after the date written on the cheque, not before. Also, it must be en-cashed within six months from the date mentioned on the cheque (Article 618). Dubai Criminal Lawyers will highlight the liabilities you can incur if you submit a cheque with insufficient balance or submit a cheque knowingly that it will be dishonoured.
Liability from Bounced Cheques
The cheque is an instrument contingent to the accessibility of funds, through the drawee’s (referred to as the recipient of the cheque) acknowledgement to pay the cheque issued by the drawer (one who issues the cheque). Accordingly, Article 632 of the Commercial Transaction Law entitles the drawee to have civil or criminal recourse against the drawer, should there be a default in releasing the money. In lieu of the foregoing, inability to pay might be set up by a statement from the drawee bank. The drawer can only refrain the drawee to withdraw the cash through cheque from to the date mentioned in the cheque.
In the event, where the drawee holds a dishonoured cheque, the failure to pay due to any reasons will be supported by the bank through a bank statement; the drawee can seek three days of extension in order to contact the drawer for possible payment. If the drawee fails to contact the drawer within the prescribed period, he may seek legal recourse, either through civil court or criminal court. Through this article, we will guide our readers the procedure to initiate criminal proceedings against the drawer and the consequences of the same on the drawer.
At the point when an account holder defaults, the creditor will have the privilege to record a criminal complaint about the dishonoured cheque alongside a civil case for recuperation. In spite of the fact that, as referred, this methodology provides the creditors with a sense of security in recovering their outstanding amount. It further has the extra result of taking into consideration disciplinary measures against non-payment. It simultaneously puts extra weight on UAE’s criminal legislature and its authorities because of the number of cheque bounce cases that have been filed.
- Police Complaint
A beneficiary or drawee of the cheque has to lodge a police complaint before the nearest police station of the concerned Emirate. Upon receiving the complaint and relevant documents, the police authority will contract the drawer and will order his presence. Wherein, the drawer can settle the matter by paying the amount or can seek further time to settle by submitting his passport. Considering a criminal charge, an arrest warrant will be automatically issued against the drawer, which can be released post the settlement of the matter or after serving the imprisonment.
- The complaint before Public Prosecutor
On the off chance that the parties fail to resolve the cheque bounce case at the police station, the police at that point transfer the case to the protestation for further investigations. After that, the public prosecutor upon receiving both party contentions make his report.
In view of the proof displayed in the court, the decision could be a safeguard either by paying the estimation of the cheque or by keeping the passport of the defaulter or a guarantor. In the event, if the bail is denied the accused will be kept in custody until final order.
- Criminal Court
The criminal court will post receiving the report of the public prosecutor will dig deep into the case facts and arguments and upon the basis of evidence submitted by the parties will pass its judgment. The judgment will either entail fine ranging from AED 1,000 until AED 30,000 and punishment by way of imprisonment varying from one year to three years (Article 401 of UAE Penal Code)
In order to address the seriousness of the punishments in small claim amount, the government has made laws to address small claims, such as one day court and has amended the conditions in which certain bounce cheque attracts punishment by detention. In reference to one-day court, the laws have been sanctioned which give that petty offence) ought to be managed practically and a decision must be issued within 24 hours. These courts have been built up in the Emirates of Abu Dhabi, Dubai and Ras Al Khaimah and seem to have been effective in altogether reducing the heap on the Criminal Courts which will have the effect of enabling those increasingly serious offences to move along. Also, the Emirate of Dubai has presented another law concerning “Criminal Orders”. This law enables the Dubai Public Prosecution to issue criminal requests to sentence wrongdoers of certain “simple violations” to just fines. Objections might be recorded to challenge such requests within seven days. Through such request the matter will be transferred to the criminal court. The cheque below AED 200,000 will be categorized under simple offence with a penalty of around AED 5,000 – AED 10,000.
General Clauses in Loan Agreement
Certain clauses that are generally integrated within a loan agreement include:
- Waiver: This is where the lender agrees to waive the breach or the event which gives rise to the occurrence of a default;
- Forbearance: This is where the banks concur not to announce an occasion of default to practice any cures;
Negotiate through an expert…
It is in difficult situations like these wherein banking experts specializing in bank negotiation and loan settlements come in the picture. Yes in a land of expats there are multiple changes in one’s living standards and financial situations which at times leads to default in loan, but does not make someone a wilful defaulter.
Specialized lawyers in bank settlements will examine the situation along with the facts post which shall represent you before the disturbing debt recovery agents and the respective loan recovery bank associates. Having a specialized lawyer in UAE shall give the debtor a consolidated chance to have a flexible payment plan or a concession on your interest amount at times along with the principle and shall provide you the cushion to plan your finances.
A bank settlement expert helps to mentally secure the debtors for the outstanding amount, who are now post their involvement looking forward to a logical loan settlement rather than chasing a defaulter. The services provided by the banking lawyers shall include drafting and responding to legal notices, corresponding via telephone, email and letters with the creditors and banks, as well as attending settlement meeting on behalf of the creditor.
One of the principle reasons cheques are generally trusted and utilized in the UAE is the way that such cheques are criminally ensured with potential confinement (or a fine). This constrains cheque drawers to endeavour to respect their cheques upon their development. Since dishonoured cheques worth AED 200,000 (or less) are not punishable by imprisonment in the Emirate of Dubai. To keep up this power as advised by Criminal Lawyers in Dubai to ask business partners to submit cheque with an amount higher than AED 200,000 to keep up the potential detainment sentences justified to bounced cheques.