Where a cheque is returned unpaid in the UAE, the holder has two routes to recover the amount: a criminal complaint against the person who issued the cheque, or an application to the execution court for an order that the amount be paid. Which route is available depends on the reason the bank returned the cheque.
First Step: Deposit the Cheque
However strong the suspicion that the account holds no funds, the cheque should still be deposited on or after its date. When the bank declines to pay, it returns the cheque with a notice stating the reason for the return. The reason recorded on that notice determines which route the holder may take.
Can You Open a Criminal Case for a Bounced Cheque in UAE?
The issue is not whether the cheque bounced. The issue is why it bounced. A criminal complaint is available where the return reason shows bad faith conduct by the issuer, rather than a simple shortage of money. The principal examples are:
- the issuer signed the cheque with a signature that does not match the bank’s records, or otherwise wrote it deliberately so that it could not be paid;
- the issuer closed the account, or knew it was closed, before issuing the cheque or before it was presented;
- the issuer withdrew the balance after issuing the cheque so that it could not be paid; or
- the issuer instructed the bank to stop payment without a lawful reason.
Where the offence is established, the court may impose imprisonment of six months to two years, a fine of not less than 10 per cent of the cheque amount (with a minimum of AED 5,000) and not more than double the cheque amount, or either of those penalties. The penalty is doubled for a repeat offence. This is set out in Federal Decree-Law No. (50) of 2022 Promulgating the Commercial Transactions Law (the “Commercial Transactions Law”), Article 675.
Can You Open a Civil Case for a Bounced Cheque in UAE?
Since 2 January 2022, a cheque returned solely because the account lacks sufficient funds is no longer a criminal matter. A cheque returned for insufficient funds, in whole or in part, is an executory instrument, so the holder may apply directly to the execution judge for an order that the amount be paid, without first filing a claim and waiting for a judgment on the merits. This is set out in the Commercial Transactions Law, Article 667.
Once the execution file is opened, the issuer is notified and called on to pay. Where payment is not made, the execution court may order the attachment of the issuer’s bank accounts, vehicles and real property, and may impose a travel ban. The grounds on which the issuer may resist execution are limited.
Is It Better To Open A Criminal Or A Civil Case For A Bounced Cheque?
Lawyers often prefer the criminal route where it is available, because of the pressure it places on the issuer. A criminal case, however, results in a penalty rather than an order to pay, so the money is recovered because the issuer chooses to pay in order to end the case. The execution route leads directly to recovery, but its practical value depends on whether the issuer has assets in the UAE that can be reached.
Before choosing a route, the holder should consider:
- what reason the bank’s return notice records;
- whether the issuer is in the UAE and whether a travel ban would have practical effect; and
- whether the issuer holds bank accounts, vehicles or property in the UAE.
Whichever route is taken, a cheque made out to the holder is strong evidence that the amount is owed.
Frequently Asked Questions
Is issuing a cheque without sufficient funds still a crime in the UAE?
Not in itself. Since 2 January 2022, a cheque returned only for insufficient funds is pursued through the execution court. Criminal liability remains where the issuer acted in bad faith.
Can the issuer stop a cheque because of a dispute over the underlying deal?
As a rule, no. A stop payment instruction is lawful principally where the cheque was lost or stolen, or where the holder has been declared bankrupt. An issuer who stops a cheque over a commercial disagreement may face a criminal complaint, although the court will consider the circumstances of each case.
Does paying the cheque end the criminal case?
As a rule, yes. Payment of the cheque amount, or a settlement with the holder, ends the criminal case, and where it follows a conviction the court may suspend execution of the sentence.
Can a travel ban be imposed over a bounced cheque?
A travel ban may be imposed on either route. In a criminal case, a travel ban may be ordered while the complaint is investigated. In execution proceedings, the holder may ask the execution court to impose a travel ban where the issuer does not pay after being notified.
What documents are required to open an execution file for a bounced cheque?
The holder will generally need a copy of the cheque, the bank’s return notice stating the reason for the return, and proof of identity. Where a lawyer files the application, a power of attorney is also required.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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