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Nowadays cheque is one of the most widely used commercial instruments across the globe for doing transactions. This payment mechanism is not only secured but also offers readily available money just by presenting it before the bank.  However, one of the common phenomena associated with the cheque is the issue of ‘cheque bounce’ on account of non-availability of funds in the bank account of the issuer. In almost all the countries, it is looked upon a serious offense, which attracts penal punishments, and UAE is no exception to it. Recently, UAE government has passed a new law namely Federal degree number (14) of 2020, which has made sweeping changes to commercial transaction law no. 18 of 1993.

Out of all the changes, one of the significant changes is limiting the scope of decriminalisation of all the offenses involving cheque bounce.

What does this new law offer?

  1. Partial Payment of Cheque – With the introduction of this new law, the partial payment has become mandatory. As per this new law, if the balance in the issuer’s bank account is lower than the value of the issued cheque, then the drawee bank will pay a partial amount. To recover the rest of the amount, the beneficiary can initiate legal actions through the civil court. The court can order the issuer to pay the remaining amount in lump sum or in instalments. The process of recovery is governed by Article 635 of the new law.


  1. Narrowed Criminality: The major highlight of the new law is that it has decriminalised certain offense. After this law will come into force, only the following offenses will attract criminal punishments.
  • Issuance of cheque in bad faith.
  • Deliberately falsifying of cheques
  • In the instance of fraud i.e., when the issuer orders or instructs his bank to withheld the cheque and did not pay the amount. The signature shall be considered as an acknowledge of debt.
  • Withdrawing money from the account before the date of encashment to prevent the cheque from being cleared.


  1. Revised Penalties The penalties are revised to a very good extent.
  • As per Article 641, if a person issues a cheque knowing that the amount in the bank is not sufficient and the cheque will not be cleared, he will be subject to a penalty of no less than 10% of the cheque value, subject to the minimum of AED 1,000. However, in case of repetition, the penalty shall be doubled.
  • Article 643 of the new law provides that if an order of withdrawal of chequebook has been issued and the person breaches the law, the offender will not chequebook for the next 5 years. Further, if the convicted defendant doesn’t surrender his passbook within 15 days, he shall be a subject to a penalty of not less than AED 50,000.
  • Any bank which violates the aforesaid rules, shall be a subject to a penalty of not less than AED 100,000.

In short

The recent amendment can be looked upon as a progressive step which aims to strengthen the rights of both the drawer and the drawee. With this amendment, the cheque collection process will become more effective and hassle free. However, if you have still any legal issues pertaining to cheque bounce, it is advisable to seek the assistance of a legal attorney to avoid any future litigation.

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