You could be detained, fined if cheque is dishonoured in UAE.
Q-Recently, I happened to give someone an undated cheque for personal reasons. However, after a few months, I closed the bank account associated with that cheque. He has promised to return the cheque at a later date. What will happen if he tries to withdraw the money using the cheque? What would be the legal impact under such circumstances?
Pursuant to your first query, it may be noted that in accordance with the prevailing laws of the UAE, the drawer of the cheque may be subject to penalties if he/she had issued the cheque in bad faith and it was dishonoured, owing to insufficiency of funds, or withdrawal of necessary funds from the corresponding account by the drawee, or any such other act which prevents the cheque from being cashed. This is in accordance with Article 401 of the Federal Law 3 of 1987 on issuance of Penal Code (the 'Penal Law') of UAE which reads as follows:
"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 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 not sufficient balance to honour the cheque that it is not drawable."
Further, the bearer of the cheque shall also reserve the right to initiate civil proceedings against the drawer of a cheque for recovery of the amounts in the event of dishonour of the cheque held by him. This is in accordance with Article 550 of the Federal Law No. (18) of 1993 on the Issuance of the Commercial Transaction Law, which reads as follows.
The bearer of a bill of exchange, in case of non-payment thereof on the date of maturity, shall have recourse against the endorsers, drawer and other obligors thereof."
In view of the foregoing, it may be noted that the person holding the cheque shall reserve rights to initiate a criminal complaint against you with the competent authorities, concurrently with a civil suit for recovery of money, in case he presents the cheque given by you to the bank concerned and the same gets dishonoured subsequently.
Pursuant to your second query, you have not mentioned the amount mentioned in the cheque. It may be noted that the legal impact following dishonour of the cheque shall depend on the kind of legal proceedings initiated against you. In the event of a criminal complaint, upon prosecution and subsequent conviction, you may be asked to pay a fine or be sent for detention.
However, it may be noted that dishonour of a cheque shall not automatically result in prosecution for you or shall make you a defendant in a civil claim, unless the bearer of the cheque initiates appropriate legal proceedings against you.
Know the law
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 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
Ashish Mehta is the founder and Managing Partner of Ashish Mehta & Associates. He is qualified to practise law in Dubai, the United Kingdom, Singapore, and India. Full details of his firm on: www.amalawyers.com. Readers may e-mail their questions to: email@example.com or send them to Legal View, Khaleej Times, P.O Box 11243, Dubai
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