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You will have to honour signed cheques in UAE

Ashish Mehta
Filed on March 8, 2020 | Last updated on March 8, 2020 at 10.20 pm
honour, cheque, uae, signed, legal view


An indorser shall be liable for payment of the value of the cheque, save where otherwise stipulated.

Q: I was employed as a finance manager in a company between 2006 and 2018. I am not a shareholder or partner in the said company and my name is not mentioned in the trade licence of the firm. In October 2018, my company gave me a one-month notice period and terminated my employment without settling the end of service benefits due to me. Further, the firm had authorised me and the company's chief financial officer to sign on certain documents (cheque submitting/discounting, trade facility documents, etc.) in order to avoid delay in its business operations. However, certain documents such as the guarantee/bank loan etc were not signed by me and were signed by all partners and the owner of the company. Owing to the aforesaid authorisation to sign on certain documents, I had signed on the back side of cheques (indorsed) and submitted them at a bank counter in the same company account as instructed to me by my boss. However, last year, the owner of the company left the UAE and the bank thereafter discounted some of the customer/supplier cheques. The cheques on which I had signed on the back side have now been dishonoured which has resulted in the bank filing a case against me. Is there any legal recourse available to me?

A: At the outset, it is presumed that you had signed on the back side of cheques based on the authorisations and instructions given to you by your company, thereby you indorsed the cheques. Pursuant to your query, it may be noted that the provisions of Federal Law No. (18) of 1993 on Commercial Transactions Law (the 'Commercial Transactions Law') shall be applicable.

As per the provisions of Commercial Transactions Law, an indorser of a cheque shall be liable for payment of the value of the cheque. This is in accordance with Article 609 (1) of the Commercial Transactions Law, which states:

1. An indorser shall be liable for payment of the value of the cheque, save where otherwise stipulated.

2. An indorser may ban re-indorsement of a cheque, in which case he shall not be liable for payment of the cheque to such persons who acquire it by a subsequent indorsement."

Further, the dishonour of a cheque due to insufficient balance in a bank account will attract criminal proceedings against an indorser of a cheque in the UAE. This is in accordance with Article 401 of the Federal Law No. (3) of 1987 related to issuance of Penal Code (the 'Penal Law of UAE').

You have mentioned that the company's banker has discounted the cheques, which were indorsed by you. If the said cheques were dishonoured, the banker of your company may file a criminal /commercial case against you only for the value of the discounted cheques, which were indorsed by you and subsequently dishonoured.

As you have not specified the cheque amount and the emirate in which the bank is based where you had deposited the cheque, we shall presume it was deposited in a bank based in the emirate of Dubai. Based on the said presumption, it may be noted that pursuant to Law No. 1 of 2017 called 'Criminal Order Law', if the cheque amount is less than Dh200,000 the punishment may be by fine and the fine may vary between Dh2,000 and Dh10,000 depending on the cheque amount.

Based on the aforementioned provisions of the Commercial Transactions Law and the Penal Law of UAE, you may be held liable for the dishonour of cheques that had been indorsed by you. It is recommended that you consult a legal practitioner in the UAE to avail further counsel on this matter.

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: Readers may e-mail their questions to: or send them to Legal View, Khaleej Times, PO Box 11243, Dubai.

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