UAE redefines crimes involving cheques

Abu Dhabi - The amendments, which will come into force in 2022, include modification of certain rules dealing with “bounced cheques and the issuance of cheques without value”.

Photo: Alamy
Photo: Alamy

Issac John

Published: Mon 26 Oct 2020, 6:07 PM

Last updated: Tue 27 Oct 2020, 6:32 AM

The UAE Cabinet on Monday approved a landmark decree amending certain provisions of the existing “commercial transactions law” to allow drawers and payees of bounced cheques additional opportunities at reconciliation.

His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and the Ruler of Dubai, chaired the Cabinet meeting that redefined crimes involving cheques, a long-awaited reform that will go a long way in boosting business confidence.

The amendments, which will come into force in 2022, include modification of certain rules dealing with “bounced cheques and the issuance of cheques without value”. They seek to provide “fast, advanced and civil mechanisms” to recover the required payments.

As per the decree, bounced cheques will be “an executive document to be executed directly by an appropriate judge in court”.

The new decree, proposing a recourse to civil mechanisms, aims primarily to avoid criminal lawsuits and facilitate alternative procedures. It encourages reconciliation and stipulate payment of the value of the bounced cheques as the main condition for the abatement of a criminal lawsuit.

According to senior legal experts, this means cases of bounced cheques may not be deemed a criminal offence from 2022 when the new decree-law on ‘“Federal Law on Commercial Transactions’” will be enforced. However, they said such an assumption would require further clarification to be confirmed.

The latest amendments will ensure several mechanisms and options to ensure the collection of payments through cheques in a simple and fast way. One such method is that obliging banks would be asked to partially pay the amount after deducting it from the available fund in the account of the issuer.

“Though the existing legislations entitle the banks to effect partial payment of a cheque based on the available amount in the account, most banks do not implement it. The amendments will certainly help both the issuer of the cheque as well as its beneficiary,” said KK Sara Chandra Bose, partner of Dar Al Abdallah Advocates & Legal Consultants.

Ashish Mehta, founder managing partner of Ashish Mehta & Associates, said the intention behind the new rules appears to ensure drawers and payees of bounced cheques additional opportunities at reconciliation, before a criminal action gets initiated by the payee.

“This will instil increased confidence in the business community, and pave the way for greater transparency and cooperation in commercial transactions. This will also help during bankruptcy.”

Mehta said as per the initial reports the decree is set to take effect in the year 2022, and “therefore one must still wait for the full details to be released.”.

Bose said the amendments would encourage reconciliation, making civil action preferable over criminal action on bounced cheques. “The existing law on bounced cheques calling for criminal actions is not at all a business-friendly legislation, in my opinion. The amendment with respect to the joint account holders is not very clear.”

“At present if a joint account holder dies or is incapacitated, the joint account shall be frozen immediately on the death of a joint account holder and the funds lying in the account can be released only to the legal heirs of the deceased person by a court order,” said Bose.

Mehta said the business-savvy visionary leadership of the UAE has come up once again with an innovative idea to further improve the ease of doing business. “This announcement will enhance business confidence and is good news when the businesses require support during times of Covid-19.”

The amendments also feature the introduction of several ancillary penalties, including cancelling the cheque books of convicted people and preventing them from obtaining new cheque books for up to five years, as well as halting their professional or commercial activities.

“Additional penalties for offenders, barring banks and financial institutions, will also be introduced, including fines, suspension of licences to conduct economic activities for six months, and the revocation or dissolution of the licences of those who repeat violations.”

The amendments also deal with the rules on opening joint accounts. If one of the joint account holders dies or loses legal control, the other joint account holders must notify the bank within 10 days from the date of death or disqualification, and the bank must, from the date of notification, limit the ability to withdraw from the joint account within a party’s share of the account balance on the day of death or loss of eligibility.

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