As in many other jurisdictions, there are certain legal requirements and conditions that must be met for a cheque payment to be enforced in the UAE.
In the past, bounced cheques were considered a criminal offense, which meant the beneficiary had the right to complain directly to the police station to file a criminal complaint against the drawer.
Recently, Federal Decree-Law No. 50 of 2022 on the issuance of the Commercial Transactions Law has stipulated new rules concerning bounced cheques by allowing the beneficiary to directly enforce the cheque before the court of the state to collect the cheques from the drawers by applying all possible execution procedures.
In this article, we will explain the right and effective ways to collect the returned cheques.
When to seek a direct enforcement case:
In the event of a cheque bouncing due to insufficient funds, the new law grants the beneficiary the right to file a direct case before the enforcement department at any UAE court, which allows the beneficiary to recover the cheque amount.
One of the best advantages of direct enforcement is that the claimant/ beneficiary can request the court to issue a travel ban against the drawer in parallel with the enforcement case as a precautionary measure that helps to secure the claimant/Beneficiary's monies.
The travel ban order should be circulated at all ports and exits of the state, which should prevent the drawer from traveling outside the UAE. Moreover, the travel ban order should remain active as long as the enforcement case is still active until the full settlement of the claim amount by the respondent/ the drawer.
Excluded cases from the cheque’s direct enforcement.
- Acting in bad faith
Fraudulent activities using cheques, such as issuing orders to the bank not to honor the cheque, withdrawing the entire balance before the cheque's due date, and intentionally writing or signing the cheque in a manner that prevents its encashment.
- Bank account closures.
- Signature mismatches.
In return, the issuer of the disputed cheque can contest the enforcement of the cheques through the registration of an objective dispute with substantial reasons regarding the validity of the cheque or his exoneration from the liability of the drawn cheque if he has sufficient supporting reasons.
The new amendments in general aim to decriminalize cheques in the Penal Code to achieve the following objectives:
- Reduce the drawbacks revealed by the practical experience of cheque transactions in a better and more successful light.
- Establish the principles of justice and fairness and ensure equal opportunities by balancing the interests of the beneficiary in obtaining their rights as quickly as possible and the interests of the drawer in extinguishing the criminal lawsuit filed against them upon payment.
- Achieve a strong national economy and a judiciary based on efficiency and quality and elevate the indicators of the rule of law.
Article is written by Fady Abdelmaksoud Court Clerk.
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