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A returned cheque can invite both civil and criminal liabilities on an individual pursuant to the UAE laws. Therefore, it is very important, that UAE residents are well aware of the responsibilities in financial transactions including the potential risks.
Federal Decree-Law No. (14) of 2020 Amending Certain Provisions of the Federal Law No. (18) of 1993 ‘Concerning the Commercial Transaction Law’ (‘New decree’), states that:
- Acceptance does not apply to cheques. Any wording of acceptance written on a cheque shall be null and void.
- The drawee of a cheque may initial the cheque for approval. Such approval shall confirm the availability of sufficient fund with drawee to pay the value of the cheque as on the date of initialing. The signature of drawee on the face of the cheque shall constitute an approval.
- The drawee may not reject the approval of the cheque if the drawer or bearer asks it to do so should the drawee have sufficient fund to partially or wholly pay the value of the cheque.
- The drawee shall freeze with it and under its liability the required fund to pay the value of approved cheque, or the remaining amount of a partially paid approved cheque, for the benefit of the bearer until the expiry date of submitting the cheque for payment.
Further pursuant to Article 617(3):
The drawee shall report the details of the account holder to the Central Bank, in accordance with the rules and regulations issued by the Central Bank, in any of the following cases:
- Where no sufficient, existing and usable fund for the payment of the value of cheque is available at the date of its maturity,
- Where the drawer, after issuing the cheque, withdraw all the fund for payment so it is not possible to pay its value, or
- Where the drawee partially pay the value of the cheque in accordance with (2) of this Article.
The amended provisions thus impose criminal penalty on the following offences:
- Cheque falsification;
- Cheque forgery;
- Ordering the Bank not to pay the cheque amount; and
- Withdrawing the account balance prior the date of the cheque to prevent encashment.
Under the new provisions if a cheque is submitted for clearing and post the same if the drawee withdraws the account balance to prevent the encashment of the cheque it would invite penalty. The new decree is proposed to be in effect from January 2022 onwards and imposes a criminal penalty of 10% of the cheque value for bounced cheque matters on the issuer of the cheque and subject to a minimum penalty charge amount of Aed 5000 and a maximum penalty charge amount of no more than twice the cheque value.