In the UAE, the cheque bounce is a common problem that people face either at the professional front or personal life. The cheque bounce cases come under Criminal Law. Bounced cheque cases may arise in a wide range of commercial transactions, for example, bank loans, business transactions, real estate, fees payment, etc.
There are some wide-spread misunderstanding pertaining to criminal cases against Cheque Bounce. Some believe that all cheque bounce cases in UAE end up in jail term or a hefty fine, whereas some believe that bounced cheque cases can be closed by simply paying the fine. We will try to answer all your concern related to bounced cheques through this blog.
According to the Legal Order Law no. 1 of 2017, the bounced cheque cases less than Dh 200,000 does not require to be referred to judges. The accused party is required to pay the fine of maximum Dh 10,000 depending on the cheque value. However, paying the penalty does not guarantee relief to the accused. The plaintiff can file a civil lawsuit against the person who issued the cheque.
According to Gulf News, Dubai courts settled 30,618 bounced cheques cases between Nov 2017 to Dec 2018. The same report also shares the experience of Judge Al Hakam (Dubai Courts). According to Judge Al Hakam, prior to the above law, 90% of the cases he witnessed each day were cheque bounce cases.
What happens when a cheque bounces in the UAE?
Let’s go step by step.
- A cheque is issued to a beneficiary by an issuer. If the issuer does not have enough funds in the account, then that cheque becomes a dishonored cheque. It is sent back to the beneficiary’s bank.
- The beneficiary files a formal police complaint about the bounced cheque.
- Police summons the issuer and give him/her the chance to repay the debt to the beneficiary.
- If a compromise is reached, then the Police close the complaint.
- If the parties fail to reach a compromise, then a formal complained is registered by the Police. The case is then transferred to the court.
- Court sets the date of the hearing and summons both the parties.
- According to articles 401 and 402 of the federal penal code the issuer who dishonors the cheque faces a jail term from 1 month to 3 years and/or a fine.
Fines for bounced cheques are
- Cheque amount worth Dh 1 to 50,000: Dh 2,000
- Cheque amount worth Dh 50,000 to Dh 100,000: Dh 5,000
- Cheque amount worth Dh 100,000 to Dh 200,000: Dh 10,000
- The accused has three options:
- Accused settles the case by paying the amount mentioned in the cheque.
- The accused obtains the waiver or settles the amount of the cheque with the beneficiary.
- In case the accused fails to settle the amount on the cheque. The court announces a jail term to the cheque issuer.
- The court can also revoke the issuer’s chequebook and ban the person from obtaining the new chequebooks.
- Paying the fine is not the end of the case. The plaintiff can file the Civil lawsuit against the issuer. If the Civil court rules in favor of the plaintiff, the accused could be asked to:
- Pay full value of the cheque
- Pay 12% interest, starting from the issue date
- Pay all the legal charges incurred by the plaintiff
- Travel ban
- Assets can be frozen until the final judgment.