Are You Criminally Liable for Bounced Cheque?

Overview

A cheque is defined under Federal Law Number 18 of 1993 concerning the Commercial Transactions Law (the Commercial Law) order issued by the drawer to a bank to pay, on the date indicated therein as being the date of issue, a specific sum of money to the order of a third person, being the beneficiary, or the bearer thereof. (Article 483).

Overview

On the other hand, a bounced cheque is also known as a dishonoured cheque or a returned cheque presented by the beneficiary, in whose name the cheque was drawn due for many reasons. These could include insufficient funds in the account of the drawer on the date of issuance of the cheque, receipt of the order from the issuer to refrain from the payment, and closure of the bank account before encashment of the cheque, amongst others.

As suggested by the Commercial Transaction law under Article 617, the cheque should be presented on or after the date written on the cheque, not before. It must also be encashed within six months from the date mentioned on the cheque (Article 618). Dubai Criminal Lawyers will highlight the liabilities you can incur if you submit a cheque with insufficient balance or submit a cheque knowingly that it will be dishonoured.

Liability

The cheque is an instrument contingent on the accessibility of funds, through the bank’s acknowledgement to pay the cheque issued by the drawer.

Accordingly, Article 632 of the Commercial Transaction Law entitles the drawee to have recourse against the drawer, should there be a default in releasing the money. In lieu of the foregoing, the inability to pay might be evidenced by a statement issued by the drawee bank.

If the drawee fails to contact the drawer within the prescribed period, he may seek legal recourse, either through civil court or criminal court. 

However, it is important to note that bounced cheques due to insufficiency of funds will no longer attract criminal sanctions. This is on account of the introduction of Federal Decree-Law No. 14 of 2020 which amended and modified the Commercial Transactions Law and the erstwhile Penal Code. 

However, while insufficiency of funds does not lead to criminal liabilities anymore, the amended law now prescribes specific actions which will result in criminal sanctions. These have been explained below.

Articles 641 bis (2), 641 bis (3) and 641 bis (4) of the Commercial Law set out the instances which could result in criminal sanctions. These actions include the following:

1. Where the issuer of the cheque, before the due date, requests the bank to abstain from paying the cheque.

2. Where the account has been closed or all funds have been withdrawn either before issuing the cheque or before presenting it to the bank for payment.

3. Where the accounts have been frozen.

4. Where cheques have been signed in a way to prevent their payment deliberately.

5. Where a cheque has been forged or faked or has been imputed to a third party by altering the details in the cheque, with the intent of causing harm. There are certain exceptions to this rule.

6. Where the person knowingly uses a forged or counterfeit cheque or accepts the amounts paid by such a cheque.

7. Where the cheque is drawn in the name of a third party and the person is wrongfully using or benefitting from such a cheque or whose use is associated with the fraud.

8. Related acts while committing forgeries, such as importing, acquiring or selling equipment, tools, programs, information or data. 

Any commission of the above actions may result in penalties of imprisonment ranging between 6 months to 2 years and fines.

It is important to note that in cases of insufficiency of funds leading to the bouncing of cheques, the bearer has the right to request for partial or full recovery of funds through an execution under Article 635 of the Commercial Law. The court may then issue an order against the issuer of the cheque to make payment of the full cheque or part thereof, to the bearer.

Criminal Proceedings

Through this article, we will guide our readers through the procedure to initiate criminal proceedings against the drawer and the consequences of the same on the drawer. At the point when an account holder defaults, the creditor will have the privilege to record a criminal complaint about the dishonoured cheque only on the grounds set out above.

Police Complaint:

A beneficiary or drawee of the cheque has to lodge a police complaint before the nearest police station of the concerned Emirate.

Upon receiving the complaint and relevant documents, the police authority will contact the drawer and will order his presence. Wherein, the drawer can settle the matter by paying the amount or can seek further time to settle by submitting his passport. Considering a criminal charge, an arrest warrant will be automatically issued against the drawer, which can be released post the settlement of the matter or after serving imprisonment.

The Complaint Before Public Prosecutor:

On the off chance that the parties fail to resolve the cheque bounce case at the police station, the police at that point transfer the case to the prosecution for further investigations. After that, the public prosecutor upon receiving comments from both parties will prepare his report. In view of the proof displayed in the court, the decision could be a safeguard either by paying the estimation of the cheque or by keeping the passport of the defaulter or a guarantor. In the event, that the bail is denied the accused will be kept in custody until the final order.

Criminal Court:

The criminal court will, after receiving the report of the public prosecutor, hear the matter and upon the basis of evidence submitted by the parties will pass its judgment. The judgment will either entail a fine and/or punishment by way of imprisonment.

Recent Developments:

In order to address the seriousness of the punishments in small claims amounts, the government has made laws to address small claims, such as one-day courts.

In reference to one-day courts, laws have been issued in the concerned Emirates providing for effective management of petty offenses with a decision to be issued within 24 hours. These courts have been established in the Emirates of Abu Dhabi, Dubai and Ras Al Khaimah and seem to have been effective in reducing the backlog of the Criminal Courts.

The Emirate of Dubai has also issued another law relating to "Penal Orders". This law aims to ensure a quick settlement of penal cases, which are punishable with a fine only or with imprisonment or fine only. Under this law, the public prosecution is entitled to issue a penal order against whoever committed the crime, by imposing the fine prescribed by the law, without exceeding half its maximum limit in addition to supplementary penalties. Objections might be filed to challenge such an order within seven days.

The Commercial Transactions Law has been updated to Federal Decree-Law No. 50/2022 on the Promulgation of the Commercial Transactions Law. Article 630 of the aforesaid law provides that

1. A cheque may not be issued unless the drawer has with the drawee, at the time of drawing the cheque, funds which he can dispose of by cheque pursuant to an express or implicit agreement.

2. 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 shall be personally liable towards the endorsers and the bearer, excluding others, to provide the required consideration for payment.

3. The drawer alone shall 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 for non-payment after the period prescribed by law.

Moreover, Article 667 of the aforesaid law provides that the cheque whereto a notice of unavailability or insufficiency of funds is affixed by the drawee shall constitute a writ of execution, and its bearer may request its full or partial compulsory execution. Furthermore, the provisions, procedures and rules set out in the Civil Procedure Law shall govern the execution thereof and the challenge thereto.

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