Cheque bouncing is, if an account holder issues a cheque despite of insufficient funds on the account or any other reason. A bounced cheque is also termed dishonored cheque, etc. But there are certain things that need to be noted about a bounced cheque in Dubai and UAE.
Charges on the bounced cheque in UAE
In UAE, most of the payments take place through cheques. Even though the concept of Direct Debit System has emerged, there are people who issue a cheque and even several banks request post dated cheques while approving a personal loan as security.
In the first half of 2018, 12.06 Million cheques were circulated in UAE, where 4.3% of those were dishonored i.e. bounced back. The person who is guilty of bounced cheque will be sent to jail and fine amount will be decided by the court. A travel ban will be imposed on the payer.
The new amendment of 2021 states that a person who issues the cheque with no sufficient balance in the account will be charged 10% of the cheque amount. This penalty will be doubled if the offence is repeated.
Charges on Bounced Cheque in Dubai
The charges on cheque bouncing are not the same in UAE and Dubai. In Dubai, as per the new law of 2017, cheque bounce cases will no longer be dealt with at the criminal court. It will be resolved with the fines itself i.e. no jail term for the issuer of a dishonoured cheque which is definitely a sigh of relief for cheque payers. This new law is applicable only in Dubai. While the rest of the UAE will abide by the traditional law i.e. detention and fine payment.
- In Dubai, If the amount on the cheque is below AED 50,000 then the fine amount levied is AED 2000
- In Dubai, If the amount on the cheque is AED 50,000 – AED 100,000 then the fine amount levied is AED 5000
- In Dubai, If the amount on the cheque is between AED 100,000 – AED 200,000 then the fine amount levied is AED 10,000
If the cheque amount is more than AED 200,000 then the penalty will be decided by the respective authorities. The fine amount will be addressing the government, not the beneficiary.
There were major amendments made to Federal Law No. 18 of 1993 which promulgated Commercial transactions. With the Federal Decree Law no 14 of 2020 the changes that were for fastening have been processed to ensure justice is provided. A balance is drawn for supporting sustainable economic development and usage of policy resources.
Decriminalisation
In most of the bounced cases jail time is not considered and here the major change is the punishment for bounced cheques in the country.
- Criminal cases may be applicable in the following cases
- When the drawer makes the bank not to cash prior to the due date
- The drawer closes the account or withdraws all the balances so the drawee cannot encash the cheque
- When is a cheque signed wrongly and wantedly just to avoid payment
Role of Courts
According to the new law, banks are obligated to issue a partial pay to the cheque holder if there is no full availability of balance in the account. In this case, it will still hold the right to refusal.
Earlier the account holder had to issue directions to the bank to issue the available balance to the cheque holder and make the partial payment.
Earlier there was a requirement to report the bounced cheque in the UAE to the police officials. As per the new law, one can go and approach the judge directly for an order of full payment. This new process is clearly easy to execution and it respects the rights of the involved parties in the case.
What is the time frame for the check presentation?
The cheque is due for payment as on from the date of issue. As per article 617 it should not be presented prior to the date and should not be presented after a time period of 6 months from the date given on the cheque as the issue date as per article 618.
The drawer should provide the payment consideration on the issue date and such consideration will continue to be with the drawee till the expiry of the time limit for the presentation of cheque.
According to article 634, it grants the bearer the right to have recourse against the drawer, even when the holder of the cheque fails to provide the cheque to the bank, action should be taken within the prescribed time limit.
Reasons for cheque bouncing
A bank cheque doesn’t bounce only if there are no funds available but also,
- If the signature on the cheque doesn’t match with the bank records
- If the validity of cheque is expired (usually 3 months from the date of issuance)
- If the details like amount in numerals and words are not the same
- If the details on the cheque are overwritten or corrected
- If the cheque is damaged
How to avoid Bounced Cheque issues?
In order to avoid fees and other issues with a bounced cheque the payer needs to
- Check the balance in the account before writing the cheque
- Ensure the signature is right on the cheque
- Ensure the cheque dated rightly
- Fill the details on the cheque without any errors