November 27, 2015
Usually bad cheque cases result from leasing contracts, credit cards, contracting or real estate project deals or leasing contracts that are worth millions of Dirhams. The criminal courts are loaded with these kinds of cases every day. Though there are no updated figures on the number of cases registered on account of bounced cheque complaints, it has been evident that the number of such cases being registered is on a rise as compared to the previous years.
To control the rising crime, the UAE Bank Association has proposed the Ministry of Justice to form a specialized court system that can majorly focus on bounced cheques and financial cases in order to curb fraudulent activities with ease and to protect the interests and rights of banks, financial & lending institutions and other parties too.
Cheques form a tool that is issued usually in business dealings to settle one’s financial dues. The legislation introduced article 401 to protect businesses and economy whenever a bounced cheque issue arises. Because cheque is a tool that is used to fulfill one’s financial obligations rather than providing cash and when the receiver accepts the cheque a bond of trust is generated. A bounced cheque interrupts the business and the related dealings due to insufficient funds ultimately breaking the trust factor which is regarded as a criminal offense.
As per the article 401 of UAE Penal Code which reads: “Detention or a fine shall be imposed upon anyone who, in bad faith, gives a draft (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. The same penalty shall apply to any one who endorses a cheque in favor of another or gives him a bearer draft, knowing that there is no sufficient balance to honor the cheque or that it is not drawable.”
The issuer of a bounced cheque is liable to criminal prosecution and will be booked under fraud and breach of trust charges. Whenever a cheque bounces the issuer will be slapped with a fine of no less than Dh 500 and a jail sentence that is no less than 3 years. However in case of expatriates or foreigners there will be no deportation.
The penalty charges depends on the judge’s discretion and the judge announces a decision taking into consideration the circumstances under which the bad cheque was issued, the cheque value, the defendant’s financial condition and also the reason why the cheque bounced.
Usually the bad cheque issuers are individuals belonging to the various sectors of the society including businesspeople, investors, workers and other low-income employees.
According to researches and studies, people issue bad cheques due to lack of knowledge as they are unaware of the legal consequences resulting from issuing a bad cheque.
Steps to take when a debtor issues a bounced cheque in Dubai:
Also you can request an interim relief judge to issue an order that will prevent the issuer of the bounced cheque from fleeing the nation, provided you are in possession of sufficient evidences to convince the judge.
The Supreme Court has declared that issuing a bounced cheque will be considered as a criminal offense when the issuer issues the cheque with prior knowledge of insufficient funds to cover it. In these situations, the issuer cannot avoid the liability by claiming that the cheque was issued as a security instrument and that the beneficiary of the cheque was aware of the fact that there are insufficient funds. It will be liable for punishment under the offense of bad faith.
In certain circumstances, if the issuer of a bounced cheque is returned with the same without filing a penal suit it forms an ideal way of pressurizing the issuer to make an immediate financial settlement to the beneficiary. In normal situations, when the issuer is penalized there are certain restrictions like curbing the freedom of movement either with confinement during the investigation period or withholding the passport as a guarantee against the bounced cheque during the legal proceedings. But if the beneficiary decides to not penalize the issuer then he/ she is at a great advantage.
A special judicial committee was formed to settle bounce cheque issues in Dubai for the kind of transactions as per stated in the Article 5 that includes:
“(a) The Judicial Control Authorities, including Police Stations, shall refer all cheque complaints to the Committee.
(b) The Public Prosecution and Courts are not allowed to investigate the bounced cheques included in this Decree, and should suspend the hearing of any complaint or criminal case related to these cheques and refer the same to the Committee”
The courts take into consideration certain factors before the implementation and enforcement of the law that includes:
The Dubai government is quite liberal with the penalizing formalities when the perpetrator in a cheque bounce issue is a foreigner as there are certain relaxations though the law is applicable to all.
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