Bank cheques are frequently and commonly used for financial transactions in the UAE, the
major reason why bounced cheques are a regularly occurring phenomenon. Bounced cheque
issues arise in a variety of commercial dealings including but not limited to bank loans,
property rents, transactions between companies, and transactions between individuals.
Here is a guide to bounced cheque cases in the UAE, and how to get help if you get involved on either side of a case.
A bounced cheque, also known as dishonoured cheque or bad cheque, is a cheque that gets
rejected for different reasons:
A bounced cheque is a criminal offence in the UAE, in accordance with Article 401 of the Penal Law, which states: “A punishment of confinement shall be inflicted on any person who, in bad faith draws a cheque without no existing or drawable provision, or who, after issuing the cheque, withdraws all or part of the fund so that the balance becomes insufficient to settle the amount of the cheque, who orders the drawee not to pay cheque, or deliberately makes or signs the cheque in such a manner as to prevent it from being paid.”
In September 2020, the UAE Cabinet amended certain provisions of Federal Law No. 18 of
1993, The Commercial Transactions Law, especially those related to bounced cheques.
These amendments create new mechanisms to ensure the collection of payments associated with bounced cheques. For instance, banks will be obliged to make partial payment to the beneficiary of a cheque when it is presented for payment, as long as an account balance is available to partly satisfy the beneficiary’s claim. The beneficiary can then take the bounced cheque and present it to court to realise the remaining amount. This will reduce the time for the beneficiary to claim his rights, as the bounced cheque will be viewed as an executive
document that can be enforced and executed directly by a judge in the UAE’s Civil Courts.
The amendments to the Commercial Transactions Law aims to strengthen the value of a cheque as a reliable tool in commercial transactions, which will reflect positively on the local economy, society and legislative system. It is also aligned with the UAE’s goal to create a fair judiciary and build a safer society.
The same article also prescribes imprisonment between 6 months to 24 months and a minimum fine of 10 percent of the cheque amount not less than Dhs. 5,000 if the person does any one of these:
Punishment for the forgery of cheques will be imprisonment for a minimum of 12 months
and a fine ranging between Dhs. 20,000 and Dhs. 100,000.
The court will also have the power to publish the judgement of the offender online, or in
English and Arabic newspapers, along with his full name, residence and occupation – at a cost borne by the offender.
The UAE’s Ministry of Interior currently allows individuals to file a case for a bounced
cheque at one of its Happiness Centres, or through the MOI UAE app. Submissions must
include copies of passport and Emirates ID card, a stamped letter describing why the bank
cannot honour the cheque, and a copy of the original cheque.
The most viable way to resolve a bounced cheque issue is for both parties to settle it amicably and quickly. However, the beneficiary has no legal obligation to resolve the matter with the issuer through direct contact, and may initiate a bounced cheque case with associated legal implications and damages.
As a veteran law firm with many collective years of legal practice, we offer professional services in cases associated with bounced cheques in the UAE. If you are based outside the UAE, you may issue us a Power of Attorney that is notarised in the country where you are
currently residing, and attested by the Ministry of Foreign Affairs and International Cooperation in the UAE.
Working on your behalf, we will approach the bank, the court and all other concerned
authorities to present documentary evidence and arrive at an early resolution.