bounced cheques
Bounced cheque cases can be tricky Image Credit: For illustrative purpose only

Question: Four months ago, I gave someone a loan and in return he gave me a cheque equal to the value of the loan, knowing that this debtor is not the owner of the original cheque, it is only he who endorsed the cheque for me. Two weeks ago, on the due date of the cheque, I presented it to the bank, but it was returned due to insufficient funds. My question is, do I file a complaint with the police against the two men with the original cheque and the endorser? And if I did not obtain the full rights, would I file a lawsuit against both of them before the civil court? The endorser told me that the owner of the original cheque did not pay him the amount of the cheque and that is why he was unable to pay the loan amount.

Answer: The answer is yes to both questions. You can file a criminal and civil case against both of them. Both the drawer and the endorser will be responsible criminally and commercially in front of the last holder of the cheque.

From the criminal perception and as per the UAE Penal Law, the holder of the cheque has the right to file a criminal case against the drawer and the endorser if the cheque got bounced. This is in accordance with Article 401 of the Federal Law No. 3 of 1987 of UAE Penal Code which states that, “As amended Federal Law no. 34 dated 24/12/2005 shall be subject to a jail sentence or to a fine, whoever draws in bad faith a cheque without sufficient funds or who, after giving the cheque withdraws all or part of the funds, so that the remaining balance is insufficient to cover the amount of the cheque, or gives order to the drawee to stop payment, or if he deliberately writes or signs the cheque in such a manner as to make it non-payable; shall be sentenced to the same penalty whoever endorses to another or delivers to him a bearer draft knowing that it has no available sufficient funds in consideration thereof or that it is not drawable. The penal action shall be precluded in case of payment or its withdrawal subsequent to the perpetration of the crime but prior to the settlement of the case by a decisive judgment otherwise stay of execution shall be ordered.”

It is also the same from a commercial point of view in Federal Law No. (18) Of 1993 Issuing the Commercial Transactions Law, Article 609: “Unless otherwise provided, an endorser is liable for payment of the cheque. An endorser may ban re-endorsement of a cheque, in which case he shall not be liable for payment thereof to such persons who acquire it by a subsequent endorsement.”

Article 632 of the same law staates that, “The bearer of a cheque may have recourse against the drawer, endorsers and other obligors liable thereby if he presents it within the prescribed time limit but remained unpaid and this fact is established by protest. In lieu of the protest, failure to pay may be established by a statement from the drawee mentioning the date of presentment of the cheque, provided that such statement is dated and written on the cheque itself.”

Also, Article 599 of the law states that, “Whoever draws a cheque in person, or through a person receiving an order to draw it for his account, shall deposit sufficient consideration for its payment. Nevertheless, the drawer for the account of others is personally liable towards the endorsers and the bearer, to the exclusion of all others, to provide the required consideration for payment.The drawer alone must prove, in case of denial, that the drawee of the cheque had at the time of its drawing sufficient consideration for payment; if he fails to do so, he shall be liable to pay the cheque even when he protests on non-payment after the period prescribed by law.”