What to do if you have a loan in UAE and you lose your job

The bank may, at its discretion, initiate criminal and/or civil charges against you.

Q. I had taken a loan from a UAE bank two years ago. Then, in January 2019, I lost my job but my monthly instalments are going on as scheduled. However, last week, the collection team deposited my security cheque of Dh249,000 and it bounced. I want to know what happens after that, as I went to the bank and they took a new cheque from me but did not return the old cheque.

It is understood that you have availed of a loan from a bank two years back. In January 2019, your employment was terminated but you continued paying the equated monthly instalments as per schedule. However, the collection team of the bank deposited the security cheque amounting to Dh249,000, which resulted in the dishonour of the cheque.

Thereafter, they obtained a new cheque which was issued by you, without returning the previous cheque. Your query is pertaining to the process that occurs after the previous cheque was dishonoured and a new cheque was issued.

It may be noted that the dishonour of a cheque due to insufficient balance in the bank account shall attract criminal proceedings against the signatory of the cheque in the UAE. This is in accordance with Article 401 of the Federal Law No. 3 of 1987 in issuance of Penal Code of UAE (UAE Penal Code).

The provision reads: "Detention or a fine shall be imposed on anyone who, in bad faith, gives a draft (cheque) without a sufficient and drawable balance or who, after giving a cheque, withdraws all or part of the balance, making the balance insufficient for settlement of the cheque, or if he orders a drawee not to cash a cheque or makes or signs the cheque in a manner that prevents it from being cashed.

"The same penalty shall apply to anyone who endorses a cheque in favour of another or gives him a bearer draft, knowing that there is no sufficient balance to honour the cheque or that it is not drawable."

It may further be noted that since the cheque amounts to Dh249,000, Law No. 1 of 2017 on Criminal Orders (Criminal Order Law), which is only implemented in Dubai, shall not be applicable owing to cheque amount exceeding Dh200,000.

Therefore, the punishment as stipulated under Article 401 of the UAE Penal Code may be imposed on the signatory of the cheque.

The bank may, at its discretion, initiate criminal and/or civil charges against you.

In the event of the bank pursuing criminal charges for the dishonour of the cheque, you may present the evidence before the court that may indicate the continued payments of the equated monthly instalments (EMI) made by you against the loan you have availed from the bank.

Based on the evidence placed before the court, it may dismiss the charges against you if it deems that you had honoured the payment obligations towards the loan as per schedule.

Further, it may be prudent on your part to document all the EMI payments being made to the bank towards the loan.

Ashish Mehta is the founder and Managing Partner of Ashish Mehta & Associates. He is qualified to practise law in Dubai, the United Kingdom and India. Full details of his firm on: www.amalawyers.com. Readers may e-mail their questions to: news@khaleejtimes.com or send them to Legal View, Khaleej Times, PO Box 11243, Dubai.