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Cheque bounce is a never-ending problem in the UAE, and it affects many individuals at some point in their lives. In the UAE, it is considered a criminal offense, with financial and legal aftermath. Bounced cheques can occur in a range of business transactions, such as stock exchanges, bank loans, property leases or purchases, and individual transactions.

Bounced cheque complaints and lawsuits can be caused by many factors, the most common of which is the debtor's failure to pay the obligation to the creditor on the agreed-upon due date. Both criminal and civil proceedings can be brought against an offender under UAE Federal Law No. (3) of 1987, promulgating the Penal Code. As a result, it is critical for anyone working with cheques in the UAE, particularly those who do not want to "intentionally" commit a crime and face the consequences, to understand how to properly issue and accept cheques, as well as how to deal with situations where deposited cheques are returned unpaid.

What is Cheque?

A cheque is intended to act as a payment/negotiable instrument, customarily recognised instead of money. The Federal Law No. (18) Of 1993, issued under the Commercial Transactions Law, regulates the issuing and circulation of cheques in the UAE. Article (483) of the law defines a cheque as "an order issued by a person (the Drawer) to a bank (the Drawee) to pay on the date indicated therein (Date of Issuance), a specific sum of money to the order of a third person (the Payee), being the beneficiary, or the bearer thereof."

What causes a Cheque Bounce?

Cheques are widely used in both business and personal transactions in the United Arab Emirates. They are one of the most common kinds of rent payment and are also used as a method of security in Dubai.

You might face civil and/or legal consequences if a cheque you wrote bounces, is returned, or is dishonoured. When does a cheque bounce or turn into a bad cheque in the United Arab Emirates? A cheque might be returned for any one of the following reasons:

  • The bank indicates that the funds available in the drawer's account at the time of issue are insufficient to meet the amount stated on the cheque, either partially or completely; as a result, the bank rejects and marks the cheque.
  • The issuer issues a stop-payment order to the bank.
  • The drawer omits or changes his signature on the cheque, preventing it from being cashed.
  • Before the issued check is submitted for payment, the drawer's bank account is closed

  • Most recent Law:

    The UAE government has established new guidelines that will take effect in January 2022. These are changes to the Commercial Transactions Law that address the legal consequences of failed cheques. The purpose of the new legislation is to:

  • We collect payments from Dubai banks and other emirates using various modes of payment collection.
  • Declare any bounced cheque to be an executive document to be produced in the proper court of law and to be instantly executable.
  • It also increases issuer-beneficiary reconciliation, resulting in fewer criminal cases.

  • As a result, these new changes will aim to reduce the number of bounced cheques in the UAE. It will assist in the establishment of more stringent measures and consequences for defaulters while also assisting the recipient. New rules will be in effect from January 2nd, 2022 onwards.