criminal law

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April 11, 2016

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Since a cheque is meant to replace money, people must have trust in it. Previously, the UAE penal law levied punishment against anyone who had insufficient funds in the bank accounts at the time of issuance of the cheque. Such a crime was known as the bounced cheque crime.

A cheque is required to contain certain particulars. These include: 1- the word cheque must be stated clearly in it, 2- states a specific amount, 3- has drawee's name, 4- has the beneficiary's name, 5- states the place of payment, 6- states the cheque's date, 7- has the drawer's name, 8- the drawer's signature.

However, if the place of payment was not mentioned on the cheque, then the place indicated beside the drawee's name is considered as the place of payment or else the place of payment shall be at the drawee's head office.

Additionally, the payment of the cheque should not be conditional. Whereas, if the payment of the cheque was related to some conditions, and those conditions were not fulfilled, the cheque will remain due on its date. However, a cheque cannot be paid before the date mentioned in it, as it becomes due only on such date. In case the cheque did not bear a date, then it means that the drawer has delegated the beneficiary to write the date he finds suitable.

New Update:

In 2020, the United Arab Emirates issued the 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:

  • Intentionally falsifying cheques
  • Instances of fraud: This covers circumstances wherein the issuer instructs the respective bank, not the pay the cheque amount
  • Providing counterfeit cheques
  • Withdrawing the account balance before the date of the cheque encashment to prevent the cheque from being cleared.

Reference: Federal Decree Number 14 of 2020 amending the UAE Commercial Transaction Law no. 18 of 1993.

Issue Date: 27 Sep 2020

Follow this link to read our latest article on this topic: "What are the New Changes in Bounce Cheques in the UAE Effective 2022?"

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