The crime of forgery relating to cheques will be punished with imprisonment for no less than one year in addition to a penalty of no less than Dh20,000 and not exceeding Dh100,000. Image Credit: Agency

Dubai: Expat loan defaulters who fled following business failures or job losses are returning to the UAE to settle their disputes with banks and other aggrieved counter-parties.

According to banking sector estimates, between 2016-21, UAE borrowers defaulted more than Dh25 billon worth of loans.

Lawyer say the decriminalisation of cheque bounce cases has given an opportunity for many to return to the negotiating tables or civil courts to settle their outstandings in the UAE.

“In fact, we are seeing surge in people wanting to clear their names from criminal proceedings in the UAE relating to financial disputes,” said Bindu Suresh Chettur, Senior Associate Lawyer, Mohammed Salman Advocates and Legal Consultants.

“Most cases are relating to personal loans or credit card outstandings of salary earners,” said a banker. “Some small business owners too have shown interest in settling their dues. We are offering rescheduling and restructuring wherever possible.”

Changes in cheque rules

The decriminalisation of cheque default cases from the beginning of this year opened the door for converting such legacy criminal cases into civil cases. Lawyers said the willingness of both parties (defaulters and aggrieved parties) to negotiate and without having to go courts is driving the momentum in the settling of many financial disputes.

Criminal cases filed against defaulters prior to the amendments to the Commercial Transactions Law that came to effect on January 2, 2022 will continue to remain so until settled through legal channels or converted to civil cases under the provisions of the amended law.

“Under the amended law, new cheque bounce cases are no longer criminal offences except in specific circumstances,” said Hashik T.K, Partner of Universal Legal Associates.

Legacy cases

People with cheque bounce cases that were referred to the prosecution prior to the amendments are likely to face detention on arrival at any port of entry into the UAE prior to processing these cases and converting them to civil cases. In such cases, their records are in the emigration files.

Depending the nature of the case, the accused may be detained for a few hours to a couple of days. Once the case is presented before the judge, accused is issued a fine amounting to not more than 10 per cent of the outstanding amount and the case is decriminalised. The aggrieved party can the file a civil case to recover the outstanding.

“The judge, while interpreting the provisions of the amended law has the discretion to decide the nature of the case,” said Chettur.

Civil suit

Under civil suit, the judiciary has the discretion to restructure the repayment based on the repayment capacity of the offender. The judiciary can alsk impose a travel ban.

For filing civil cases, the aggrieved party shall deposit 6 per cent of the disputed amount - or a maximum of Dh40,000. If the accused is proved guilty, she/he will be responsible for the full legal costs.

“The need to deposit 6 per cent of the claim amount or Dh40,000 with the courts is a disincentive for banks and other aggrieved parties to pursue civil cases in every loan default cases, especially those relating to small amounts,” said a lawyer.

“For the accused the possibility of losing the case, the costs involved and a potential travel ban are incentives to go for a negotiated settlement.”

Bankers said there is growing tendency among defaulters and their lawyers to bargain for heavy discounts.

Under the amended provisions, fraud related to cheques are criminal cases, or when requesting the bank not to cash the cheque before the due date without a legal reason such as the cheque has been lost, or the bearer was declared bankrupt.

Criminalisation will remain in cases related to fraud and misuse of cheques involving closing the account, withdrawing the entire balance before issuing the cheque, or before presenting it to the bank for cashing.

Or if the account was frozen and intentionally writing or signing the cheque in a way that prevents its cashing.

The crime of forgery relating to cheques will be punished with imprisonment for no less than one year in addition to a penalty of no less than Dh20,000 and not exceeding Dh100,000.