How Do UAE Courts Recover Money from Bounce Cheque Defaulters?

The UAE authorities recently introduced new reforms concerning bounced cheques through the Federal Decree Law no 14 of 2020. The revised law improved the Federal Decree-Law No. 18 of 1993 in connection with business transactions (Commercial Transactions Law) and the UAE’s legal code.

Earlier Position and New Amendments

The UAE government has made notable changes to the punishment related to bounced cheque offenses.

In the past, if a cheque bounced due to lack of funds, it could result in a jail term (Article 401). However, the revised law does not retain the old provision of UAE’s Federal Law No. 3 of 1987. A bounced cheque due to insufficient funds will not result in imprisonment or criminal charges.

Instead, the revised law provides an effective solution for bounced cheques arising from inadequate funds. Henceforth, in case of bounced cheques, the beneficiaries may use the bounced cheques to file an execution case in UAE courts in line with Article 635 bis.

The provisions of Article bis of the revised Commercial Transaction are as below:

• A cheque attached with a written document stating the lack of funds by the drawee is the equivalent of an official, written order, enforceable under Federal Law No. 11/1992. Note that the bearer may request its entire or partial execution.
• The provisions, procedures, and rules mentioned in the above regulation will serve as a reference to address bounced cheques and related matters.
• Under the revised Commercial Transactions Law, the cheque’s beneficiary is also entitled to receive partial payment (Article 617 of the Commercial Transactions Law). This condition applies when the available fund amount is less than the cheque’s value. An individual issuing the cheque will confirm that he has made a partial payment and that the beneficiary will receive the outstanding amount gradually.

Execution Proceedings

When the bank confirms that the party issuing the cheque does not have sufficient funds in his account, the beneficiary has the right to file a case under the Civil Procedure Law (Federal Law No. 11/1992). As per Article 635 bis of the revised Commercial Transaction Law, the beneficiary can drag the other party to the UAE court.

Thereafter, the court will order execution proceedings to be carried out against the cheque issuer. In these proceedings, the court can order the authorities to attach/seize the cheque issuer’s assets, including movables, shares, real estate, etc. (equivalent to the cheque amount).

Other Legal Consequences Supported by the Civil Procedural Law

If the court or the presiding officer has sufficient grounds to believe (solid evidence) that the debtor will abscond, smuggle, or conceal his funds, resulting in the creditor losing his guaranteed rights, the court can initiate the following proceedings:

• Order the authorities to seize the debtor’s real estate and assets under Article 111 of the Cabinet Decision 57 of 2018 and Federal Law Regulation No. 11/1992 of the Civil Procedure.
• Also, the investigative bodies may conduct relevant inquiries, and request statements, evidence, and affidavits before approving the request for assets/property seizure.

Even the creditor may move to the court to enforce the following procedures:

• Under the Cabinet Decision 57 of 2018, the creditor may request the court to
• Attach/seize the movables, and debtor’s payables in a third party’s hands.
• Attach/seize the stocks, and bonds. revenue and shares.
• Attach/seize and sale of real estate and bankruptcy proceedings.

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