Classifieds powered by Gulf News

The homoeopathic approach to cheque bouncing

Framework supporting UAE nationals does not amount to de-criminalising the bouncing of cheques

Gulf News

The spectacular water, fire and live show, with explosions of colour shooting out from the world’s tallest tower, synchronised with choreographed performance by the Prague Philharmonic Orchestra, set the New Year mood for the millions who witnessed the breathtaking New Year eve celebrations in Dubai. And the next morning, when newspapers announced that bounced cheques would no longer be a reason for their issuers to go to jail, it appeared to be the ultimate New Year gift.

But just as the pyrotechnics cannot keep the magic holding for long, the euphoria soon gave way to a sense of realism as clarification came along to the effect that what got conveyed wasn’t actually what was intended. So, it turned out to be too good to be true, literally.

As it had been known earlier, the so-called de-criminalisation would only be applicable to cheques issued by UAE nationals as part of a programme to help alleviate their economic hardships. Although the expatriates would have been delighted to be extended such support, they have no reason to complain as the UAE government is only doing what their own governments back home do to support their fellow citizens.

In fact, the framework being used to support the UAE nationals under the Nationals Defaulted Debt Settlement Fund does not amount to de-criminalising the bouncing of cheques, it rather removes the condition that makes the cheque bounce and once the reason for treating it as a criminal offence is addressed, it no longer invites punitive action. It is like the system followed in homoeopathy medicine where the treatment is for the symptoms. If there are no symptoms left, that means there is no disease to remedy.

Selective de-criminalisation would in any case be bad in law as one cannot have the same offence committed by two people treated differently. For, a crime is a crime and the criminality of the act does not depend on who is committing it.

Taking such a position would be a nightmare from a legislative point of view. That is where the system followed by the Higher Committee responsible for implementing the scheme makes perfect sense. The cases are not settled by the intended beneficiary renouncing the claim, but by settling the debts according to a payment schedule. The Fund steps in only to make that possible. This ensures that there is no watering down of the provision for treating bounced cheque as a criminal offence.

There is, however, scope for a comprehensive look at the way cases of bounced cheques are approached. Criminal prosecution for bounced cheques has its origin in the old trading practices in which merchants had recourse only to holding cheques from the counter party as a guarantee against default. But with the passage of time, and sophistication in the system, there are many ways of ensuring this guarantee, but cheques continue to be used and abused.

It is a common practice for companies to secure cheques from contractors and their associates as a performance bond tied to the fulfillment of certain conditions in a contract. But in many cases, such security cheques are exploited to bring pressure on the other party to extract undue advantages even when parts of the job may have been done, but the full amount would still be called into question.

The key issue here is the intention behind the act, but the current system is lacking in investigating this aspect and often the offender is straightaway sent to jail without the merit of the case gone into.

There is a strong case for at least some of the disputes to be referred to civil courts for examining the commercial issues and treat only such cases where there is intention to commit fraud as criminal.

Legal opinion favours that if there is bad faith established, the case may be sent back to the criminal court, otherwise it be decided on the merit of commercial considerations.

Dubai has already created a mechanism for treating real estate related defaults differently. The trending approaches indicate a more flexible stand overall, which sounds very positive for the days ahead.

— The writer is a UAE-based journalist