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In the UAE, a bank cheque is widely used for commercial transactions. However, with its growing usage, the cases of bounced cheques are also rising rapidly. A bounced cheque, also known as a bad or defective cheque, is considered a serious offence in the country and attracts criminal punishment.

Article 401 of Federal law no (3) 1987 states that, if the cheque is bounced, the issuer may face fine or jail depending upon the decision of the public prosecutor. This Article also enumerates the condition in which a cheque will be considered as a bounced one –

1). The account of the issuer has insufficient funds to cover the amount of cheque.

2). The bank received an order from the issuer to refrain from making the payment of cheque.

3). The issuer’s bank account is closed before the cheque is encashed by the drawee.

4). If the signature of the account holder or payee name is incorrect in the cheque.

Criminal Proceedings in a Cheque Bounce Case
If the cheque is bounced, the beneficiary lodges a complaint in the nearest police station. On the basis of this complaint, the police officials contact the drawer and ask to present it in the station.If the case is not settled at the station, then it is transferred to the public prosecutor for further investigation.

The prosecutor prepares a report after hearing the contention of both the parties. The decision of the public prosecutor may ranges from paying the estimated value of the cheque or serving a jail term. A travel ban could also be imposed on the drawer.

The report of the public prosecutor is transferred to the criminal court. On the basis of that report, the court issues the final judgement. During this period, The parties are also allowed to put forth their arguments with supporting documents. The judgement may involve a fine ranging from AED 1,000 tol AED 30,000 and criminal punishment (1 to 3 years) or both.

Recently, for the speedy disposal of the cases involving small amounts, the government has made some laws, and one day courts have been set up in the Emirates of Abu Dhabi, Dubai and Ras Al Khaimah. The main speciality of these courts is that the judgement is issued within 24 hours of filing the case.

Further, the government recently promulgated the Law No. (1) of 2017. This law enables the Dubai Public Prosecution to impose only fines or penalties in case of simple wrongdoings or the amount of the cheque is less than 20,000 AED. However, this decision can be challenged within 7 days before the criminal court.

In the UAE, it is also a common practice that while issuing a loan or a credit card, a bank generally asks for a blank security cheque. If the borrower fails on the repayment, the bank presents this cheque but the cheque gets bounced due to insufficient funds. In this situation, the borrower is subject to criminal liability.

So, it is advisable that one should be highly careful while dealing with the cheque and seek legal assistance while indulging in complex transactions.

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