What are the new changes in bounce cheque in the UAE effective 2022?

The new changes will be in force from January 2022 onwards and impose new rules governing commercial cheques in the UAE. One of the significant changes being made concerns the limited scope of criminalization in instances of returned cheques on account of insufficient funds. The instances in which criminality will still apply are the instances wherein bad faith exists on account of the issuer of the cheque or other specific criminal actions as included in the new changes.

New changes:

• Narrowed Criminality: The new amendments bring in narrowed criminality in matters concerning cheques. Pursuant to the new changes, only the following actions will invite criminal action, such as:
• Intentionally falsifying of cheques
• Instances of fraud: This covers circumstances wherein the issuer instructs the respective bank, not the pay the cheque amount, pursuant to clause… the signature on the cheque would be considered as acknowledgment of the debt
• Providing counterfeit cheques
• Withdrawing the account balance before the date of the cheque encashment in order to prevent the cheque from being cleared.
• Partial Payment of Cheque: With the new amendments, the practice of partial payment of the cheque has now become mandatory. This applies if the amount available for payment is less than a given cheque's value, then the drawee bank is now required to pay the amount partially. Further to the said, the beneficiary can then proceed to claim the remaining amount by initiating legal measures through the civil courts. The banks in such instances will provide a ‘partial payment certificate’ to the presenter of the cheque with all the basic details of the issuer of the cheques such as the emirates id/passport number, trade license details (if the issuer is a company), IBAN number, contact details such as telephone and address.

Further, the courts may issue an order against the issuer of the cheque to pay the entire cheque amount or the remaining balance due on the cheque. Article (635) Bis states that A cheque, which bears the drawee's stamp as non-paid for the unavailable or insufficient fund, shall constitute an executive instrument as per the Executive Regulation of the Federal Law No. (11) of 1992, and its bearer shall have the right to demand the coercive enforcement, wholly or partially. With respect to its enforcement and dispute related to it, provisions, procedures and rules provided for in the said Executive Regulation should apply.’

Applicable Penalties:

The new amendment has revised the penalties and imposes the following:

• Whoever endorses or delivers a bearer cheque while knowing that there are sufficient funds to pay such cheque or that such cheque may not be drawn shall be subject to a penalty of no less than 10% of the cheque value, subject to the minimum of AED 1,000, and no more than the cheque value. The penalty shall be double in case of repetition (ref : Article (641) Bis (1))
• An order of withdrawal of existing cheque book from a person convicted of breaching this law and also to prevent such convicted defendant from obtaining any further cheque books for up to five years. (ref: Article (643))
• Convicted defendant who does not surrender his existing cheque books to respective banks within fifteen (15) days from notifying him to do so shall be sentenced to a penalty of no less than AED 50,000 (AED Fifty Thousand) and no more than AED 100,000 (AED One Hundred Thousand).(ref: Article (643)) o Any bank which violates the order provided for in the above two paragraphs shall be sentenced to a penalty of no less than AED 100,000 and no more than AED 200,000. (ref: Article (643))

The new changes have thus been effected to strengthen the rights of both the cheque drawer and drawee and also to ensure that a cheque collection process is made more effective. The new changes are well aligned with the international best practice and endeavors to bring fairer commercial practices at both individual and institutional levels.