Dubai: Bounced cheques in the UAE can be more than a financial irregularity – a returned cheque can be processed as a civil as well as a criminal case according to UAE laws and it is essential that residents are aware of their rights and responsibilities to ensure they do not find themselves in a difficult spot.
How do I protect myself?
A cheque which is returned or dishonoured can lead to a civil case, a criminal case or both. It is important to know why a cheque would be dishonoured, to ensure that you do not face any problems. These are some of the factors that can lead to a cheque being dishonoured:
- Insufficient funds in the bank account on the date of issuance of the cheque;
- An order to the bank to refrain from making the payment;
- Mismatching signatures or other technical errors;
- Closure of bank account before encashment of the cheque.
Maintain your funds
The first step is to ensure you always have sufficient funds. If you are issuing a cheque, you need to ensure that you have enough money in your account. It is especially important to keep track of due payments of any post-dated cheques you might have issued.
Take photocopies or pictures
Whenever you are signing a cheque, whether to a business partner, to your real estate agent or for any other purpose, keep a personal copy.
Track correspondence
Even if you sign cheques for your company, it is important to keep a record of every cheque as the signatory is liable in case a cheque is bounced to a large extent. Even though fund management might not be under your control, if cheques do bounce and your signature is on the cheque, the case will still go to a court. Only after it is proven that insufficient funds were due to mismanagement or fraud by senior management can an employee be relieved.
Closing an account
A statement from Emirates NBD provided the following advice on closing accounts:
"Emirates NBD customers wishing to close an account will need to visit the nearest bank branch to submit an account closure request. The account closure will be carried out within two working days.
"Prior to submitting the closure request, customers should ensure that any cheques they have issued have been recalled. As best practice, customers are encouraged to hand over any unused cheques and debit cards to bank staff to make sure these are destroyed. In case of any cheque issued from the account being presented for clearing after closure, the cheque will be returned citing account closed.
"Customers who have their salary being transferred to the account for availing a personal loan with the bank would need to keep their account open till the loan is repaid fully. If any direct debit or standing instructions have been set up on the account, customers should take care to make alternate arrangements before carrying out the closure."
What does the law say?
Article 401 of the UAE Federal Penal Code states that detention or a fine shall be imposed upon anyone who, in bad faith, gives a draft (cheque) without a sufficient and drawable balance or who, after giving a cheque, withdraws all or part of the balance, making the balance insufficient for settlement of the cheque, or if he orders a drawee not to cash a cheque or makes or signs the cheque in a manner that prevents it from being cashed.
The same penalty shall apply to any one who endorses a cheque in favor of another or gives him a bearer draft, knowing that there is no sufficient balance to honour the cheque or that it is not drawable.
In 2017, some relaxations were made in the emirate of Dubai for cheques worth less than Dh200,000. According to a legal order, people with bounced cheques worth less than Dh200,000 in Dubai could get cases closed by paying fines on their smartphones without having to go to police station. However, the person who received the cheque can still file a case with the court. If that does happen, you need to know the following.
What are the fines for bounced cheques?
- Bounced cheques worth Dh1 to Dh50,000: Dh2,000
- Bounced cheques worth Dh50,000 to Dh100,000: Dh5,000
- Bounced cheques worth Dh100,000 to Dh200,000: Dh10,000
What exactly happens after a cheque bounces?
When a cheque is dishonoured, the complainant (to whom the cheque was issued) files a police complaint.
The case is then forwarded to the public prosecution.
This may be dealt with a legal order and a fine at this stage or, if the cheque is more than Dh200,000 or the case needs more investigation, forwarded to the criminal court.
The criminal court may convict the issuer (based on evidence provided by the complainant) and give him/her two options - pay the money or go to jail.
However, in case of failure to get cheque amount despite conviction and imprisonment, the complainant should present his or her case to the civil court next, to claim the money, along with documents and evidence to prove it.
The civil court could then either demand the issuer to pay or face a jail term.
What if he/she already paid the fine?
In case the issuer of the bad cheque pays the fine, for cheques lower than or equal to Dh200,000, the complainant can go straight to a civil court to claim his dues.
Unable to pay after jail term
After a person has served the jail term, he or she is released. However, if the original complainant files the case again in the civil court for the second time, he or she will have to pay the unpaid amount then or go back to jail on conviction from said civil court. In case there is no pending or second case once the jail term is completed, the person is free to leave the country after collecting his ot her impounded passport.
