New Regulations For Bounced Cheques In Dubai

Criminal punishment related to bounced cheques in the UAE disproportionately disadvantages entrepreneurs and SMEs, economists and business owners said on Tuesday. Given the nature of the criminal penalties such as restricting the cheque issuer's freedom of movement either with confinement during investigations or withholding his passport as a guarantee in connection with the criminal proceedings involving the bounced cheque creates a big incentive for the issuer to settle with the beneficiary.
In November, a senior banking official said lenders in the emirate are working together to try to stem the number of small business owners fleeing the country with unpaid debt, a trend which had allegedly reached around AED5 billion ($1.4 billion) by that point.



The Fariq brothers' ordeal may be unusual, but it starkly illustrates an inescapable reality: the criminalization of debt has put a formidable weapon in the hands of landlords, banks and other creditors, who can send someone to jail with a single document showing a check has been returned for insufficient funds.
The new Federal Bankruptcy Law (Federal Decree Law No. 9 of 2016) provided some relief by providing a modernised restructuring and insolvency framework, and allowing for a stay of criminal proceedings relating to bounced cheques which were issued prior to the commencement of a scheme of composition or restructure.

The announcement was made by the Higher Committee of the Nationals Defaulted Debts Settlement Fund, a recently-established scheme which allows UAE nationals in serious financial difficulty to apply to have debts settled or written off provided that the applicant meets certain criteria.
Rather than going through the court system, cases of bounced cheques falling within the scope of these new rules will instead be dealt with by the public prosecutor, relieving pressure on the Dubai court system and bringing about a speedier resolution for offenders.

This is in accordance with Article 401 of the Federal Law No. 3 of 1987 related to issuance of Penal Code (the 'Penal Law of UAE'), which states: "Detention or a fine shall be imposed on 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.
That includes making changes in the cheque which deprives the beneficiary from encashing it for example purposely signing the wrong signature or omitting one's signature altogether or having insufficient funds in the account at the time of issuance of the cheque.