Changes to the UAE Commercial Transactions Law in relation to Dishonoured Cheques

The UAE cabinet recently approved the issuance of a Federal Decree-Law to amend several provisions of the UAE Commercial Transactions Law.

Amendments include changing certain provisions covering dishonored cheques, issuance of cheques without consideration, deliberate tactics used by the drawer to avoid cheque payments, criminal/penal aspects; by providing the beneficiary of the cheque speedy and advanced mechanisms for recovery and security.

Below we highlight some of the salient changes made in this regard:

  1. Where the consideration for clearance is less than the cheque amount, the bank may partially clear the cheque according to the balance available with it, unless the bearer rejects the same. In case of a partial clearance, the bank shall annotate, upon each partial clearance, on the backside of the cheque to that effect and shall give the bearer the original cheque and a certificate of such clearance; and subject to the other provisions of this law.

 

  1. The court may order that the cheque book be taken away from the convict and no new cheque books be delivered thereto for a period not exceeding five years. This shall apply to the below instances:

 

    • Any person who endorses or hands over a bearer cheque to another person while knowing that the cheque is uncovered with a current balance for the clearance thereof or that it is non-withdrawable.

 

    • Ordered or requested the bank before the due date to stop the cashing of the said cheque; apart from the ones that have been rightly objected to as per provisions of this law.

 

    • Closing the account or withdrawing the entire balance thereof before the cheque is issued or before being presented to the bank for cash, or the account was blocked.

 

    • Deliberately signing a cheque in a manner precluding the cheque clearance.

In addition to the above, the court may order to publish a summary of the judgment, at the expense of the convict in two daily widely-circulated Arabic and English newspapers issued in the UAE, or in two Arabic and English electronic publication platforms; and moreover, also inflict certain monetary penalties.

Any criminal actions instituted for the above shall lapse if the full value or the outstanding balance of the cheque has been cleared before the forced execution procedures have been initiated as set in this law; and an amicable settlement has been reached before the action is finally adjudicated.

  1. Any person who knowingly as per the UAE Penal Code forges/fabricates cheques, accepts amounts paid through a forged/fabricated cheque, unlawfully takes advantages of a cheque duly executed in the name of another person, or renders the utilization thereof related to a fraudulent offense, etc., may additionally also be subject to monetary penalties under this law. Furthermore, the court may also order publication of such order in daily newspapers in the UAE as mentioned in the preceding paragraph.

 

  1. The court may also order (along with monetary penalties) that the convict be prohibited from practicing any commercial or occupational business for a period not exceeding (3) three years for certain defaults as highlighted above; if the crime has been committed due to or in connection with practicing such business.

Accordingly, certain Articles of the UAE Penal Code shall be repealed once this decree-law comes into force, as expected on 2 January 2022.

It remains to be seen how these new procedures will co-exist and operate in practice with other core legal principles in this regard.