Tuesday, March 28, 2017

Dishonored Cheques and related laws in the UAE

Dishonored cheques are a reoccurring problem in U.A.E and there has been a sharp increase in criminal cases and complaints filed with the UAE courts and the courts’ case load has substantially increasing every year

Criminal court: From a criminal court’s perspective, the word ‘security’ on a cheque does not alter its nature as long as it satisfies the formal requirements set out in the law. Article 596 of Law No. 18 of 1993 (Commercial Transactions Law) sets out the mandatory particulars that must be stated on a cheque i.e. an unconditional order to pay a specific sum of money. A security cheque, on the other hand, normally makes payment subject to the fulfillment of a condition. There is a clear difference, then, in the meaning, the criminal court attaches to cheques compared to the civil court.

The criminal court and civil court function separately. When the reciever of a cheque which bounced files a complaint in the police station against the issuer, the case is forwarded to the public prosecution and then to the criminal court. The criminal court may convict the issuer based on evidence provided by the complainant and give him two options - pay the money or go to jail.

It is important to note that the UAE legislator has revised Article 401 of the UAE Penal Code dealing with the issuance of Cheques in bad faith under Law No. 34 of 2005, by adding a clause that stipulates:

“The criminal case shall terminate if payment is made or assignment is established after commission of the offence and before a final ruling is made in respect thereof. If this occurs after the ruling became final, its enforcement will be seized.”

Civil court

However, in case of failure to get cheque amount despite imprisonment, the complainant should present his case to the civil court to claim the money along with documents and evidence to prove it. The civil court could then either demand the issuer to pay or face jail term.
Completed jail term

If a certain person was convicted for a bounced cheque case and has served jail term, he or she stands released after the period. However, if the original complainant files the case again in the civil court, he or she will have to pay the unpaid amount or go back to jail. In case there is no pending or second case once the jail term is completed, the person is free to leave the country after collecting his impounded passport.

Who signed the cheque

In companies or partnership firms, not all partners or stakeholders can be held liable in the event of a cheque being issued without sufficient funds to pay it off. The criminal liability shall be borne by the individual who signed the cheque - whether it be a manager or another partner. Other people's private funds have no bearing on the value of the cheque. Its value shall be realised only through the assets of the company.

However, if the losses or lack of funds, which resulted in the cheque bouncing of the company, are proven to be a result of any kind of fraud by the owners or partners, the case may take a different direction.
Owners or managers abscond

If it is proved that the company, which the complainant has dealt with, does not have enough funds to settle the cheque’s value, he or she can file a criminal case against the manager who signed the cheque, even if he or she has left the country. After a judgement is issued, the questioner may request the concerned authority to include the manager’s name in Interpol’s wanted list.