Question: I took out a bank loan and gave them a cheque as a guarantee. Now though, I am not able to pay the loan and the bank is threatening to file a case against me. What are the potential cases they could file and what would be the expected outcome?
Answer: If the bank tries to cash the cheque and there are insufficient funds, they may file a case against you for a bounced cheque, under article 401 of the UAE Criminal Procedures Law, which states that "detention or a fine shall be imposed upon anyone who, in bad faith, gives a 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". Also, the bank may request that the court imposes provisional attachment on your property, per article 252 of the above law. If a judge grants this provisional attachment, it may be imposed without you knowing about it, under article 259 of the same law. In addition, the bank has the right to file for a travel ban on you and make a commercial claim of the cheque value in addition to interest at 12 per cent from the date of the cheque, plus court charges and attorney fees.
UPDATE:
In 2020, the United Arab Emirates issued Federal Decree Number 14 of 2020 (Issued on 27 Sep 2020) which amended and added new articles to the UAE Commercial Transaction Law No. 18 of 1993 and the UAE Penal Code. The new changes have come into force from January 2022 onwards and one of the most significant changes introduced is the limited scope of criminalization for returned cheques on account of insufficient funds.
Narrowed Criminality: The new amendments bring in narrowed criminality in matters concerning cheques. The provision related to criminal sanctions for insufficiency of funds in the UAE Penal Code has been deleted, effectively meaning that there will be no criminal liability if the cheque has bounced because of insufficiency of funds. According to the new changes, only specified actions will invite criminal action, including but not limited to the following:
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