Cheques Under Recent Legal Legislations in the United Arab Emirates

  • Home
  • Builder
  • Cheques Under Recent Legal Legislations in the United Arab Emirates

Cheques Under Recent Legal Legislations in

the United Arab Emirates

Definition and Nature of Cheques : 

The definition of cheques varies in each country according to its financial system and in accordance with its legal context. However, the United Arab Emirates, through the principles of its federal Judiciary, has provided a specific definition for cheques, stating that it is :

A written document containing a financial commitment issued by a person (the drawer) in favor of another person (the beneficiary) to pay a specified amount of money upon demand.

In the case that the drawer fails to issue the cheque in accordance with its requirements and conditions, or if the cheque is bounced due to insufficient funds covering its value in the drawer’s account, pursuing legal action against the drawer to claim the cheque’s value has become easier under the recent amendments to the Cheque Law, issued by Federal Decree-Law No. 14 of 2020 regarding cheques, as detailed below.

Recent Amendments to the law regulating Cheque in the UAE : 

Previously, when a cheque is bounced due to insufficient funds in the drawer’s account, it would result in criminal prosecution of the drawer for issuing a bounced cheque, punishable by imprisonment or a fine, subsequently, civil proceedings may be initiated to claim the cheque’s value, or resorting to civil litigation initially. However, in order for the holder of the cheque to commence enforcement proceedings against the cheque’s issuer, multiple procedural steps were required. All of these steps have been completely changed under the current law.

The legislature has abrogate the criminal offense of issuing a cheque without sufficient funds and has adopted a completely different approach.

This allows the cheque holder to initiate enforcement proceedings directly against the debtor’s (the drawer’s) assets and funds.

The legislator has criminalized specific acts related to cheques, such as fraud related to cheque issuance, non-compliance with cheque requirements, withdrawing the entire balance before cashing the cheque, or deliberately issuing a cheque in a manner that prevents its cashing .

Moreover, the recent amendment in the law allows for partial payment of the cheque amount if the full value of the cheque is not available in the debtor’s bank account, provided the holder of the cheque agrees to it. This means that if an amount of the cheque is available in the account, the beneficiary can withdraw this account, then, the cheque shall be endorsed for the remaining amount.

Legal ways for Claimimg the Amount of the bounced Cheque Under the Current Law : 

If the cheque is submitted within the legal period to be cashed , and the full or partial value is not paid, the cheque holder (the beneficiary) can directly claim the outstanding amount through the following :

Under the recent amendment to the law, if the debt is indisputable and the cheque fulfills all formal requirements, the holder of the cheque may file directlt an execution file against the drawer’s assets to collect its due amount.

In this case, the cheque is considered an enforcement bil, which shall beexecuted immediately upon the holder’s request, through compulsory means upon being endorsed with the execution formula. Measures such as seizure and set attachment on the drawer’s assets can be undertaken.

This approach represents one of the new legal amendments that have streamlined many of the lengthy legal stages and procedures without the need for initiating legal proceedings through conventional means, thus saving time and resources.

Conditions of putting the Execution formula on the cheque : 

Certain conditions shall be met in order to submit a request to the court to put Execution formula on the cheque, such as insufficiency of funds in the drawer’s account, as evidenced by a certificate issued by the bank on which the cheque is drawn. Additionally, the cheque shall meet the formal requirements for validity, along with documentary evidence of the parties’ identities such as IDs and commercial licenses.

The procedural system introduced for the execution of cheque in the UAE has facilitated and expedited efforts and means of execution. Upon the creditor’s registration of an execution file, the competent judge may issue a travel ban against the debtor, then notify them of the execution procedures, and allow them of the legal period to settle the bounced cheque amount or the remaining amount. If the drawer (the debtor) does not take any action during this period, such as payment or settlement, procedures for compulsory execution, including inquiries and attachment on their funds and assets, will proceed, preparing for selling it in auctions.

Practical Applications : _

Given the importance of cheques as a secure means of fulfilling rights, people shall be aware to prevent debtors from manipulating cheques at the time of issuing them, lest all enforcement procedures be rendered void thereafter. One of the most common ways of manipulation is altering the cheque’s signature to differ from the drawer’s real signature, or signing the cheque in a way that prevents it to be cashed.  through these ways, the cheque drawer can manipulate the signature, so that the beneficiary cannot cash the cheque, thus avoiding a cheque execution file to be filled against him.

In our law firm, Abdullatif Aljassmi Advocates and Legal Consultants, we have witnessed numerous cases that exemplify this. One of the most notable cases involved a plaintiff who initiated execution proceedings against a company that had issued him a cheque which was bounced.

However, the company which issued the cheque, filed a grievance to object the execution, claiming that the cheques were forged and that the authorized signatory did not sign them. Despite this, the court of first instance, relying on the evidence presented by our legal team, concluded that there was an investment relationship between the company which issued the cheque and the beneficiary. Accordingly, the court issued its judgement on 28/10/2022, to dismiss the objection and order to continue with the execution proceedings against the company and obliged it to pay the court fees and expenses “.

Afterwards, company issued the cheques appealed the judgment, insisting on its claim of forgery of the cheques. This led the appellate court to refer the cheques to the forensic laboratory, which concluded that the signatures on the cheques were indeed forged.

Despite the first instance and appellate courts concluded that there is an investment relationship between the company and our client, and confirmed that the cheques were issued from the company’s chequebooks, but the discrepancy in the signatures invalidated the execution procedures of the cheques.

The matter did not end there, our client was also referred to the Public Prosecution on charges of cheque forgery based on the court’s decision.

Consequently, our legal team presented sufficient legal evidence to exonerate our client from the accusation of forgery, however, the matter is still under investigation by the Public Prosecution.

Furthermore, to ensure the fulfillment of our client’s financial rights, the legal team at the firm conducted a study and pursued an alternative avenue to enable the client to recover his embezzled funds by filing a lawsuit against the company issued the cheques before the competent commercial court to claim his rights and seek compensation for his lost earnings.

Therefore, the court assumes a difficult approach to be followed by the  creditor when collecting cheques from its debtor, requiring verification of the identity of the signatory and to sign in his presence, or verify through banks on which the cheque is drawn of the identity of the authorized signatory in case the cheques are drawn from a company account, and verifying the matching of the drawer’s signature with the signature confirmed by the bank

Therefore, given the importance of cheques as a vital financial tool used to fulfill obligations and their significant implications in proving debt and facilitating civil and commercial transactions, and the substantial benefits they entail for society and business in both its civil and commercial aspects, Abdullatif Aljassmi Advocates and Legal Consultants, through an elite ream of the best lawyers and consultants, handle all lawsuits related to cheques and finances, and enforcement procedures till collecting the rights of the clients through the adoption of the best and fastest procedures among the various options available.