The UAE Cabinet issued the Federal Decree-Law No. 14 of 2020 (Decree Law) amending various provisions of the UAE Penal Code and the Commercial Transaction Law, which will come into force on 2nd of January 2022. The major part of the amendment in relation to Cheque Bounce are as follows:
The Decree Law inter alia cancels articles 401, 402, and 403 of the UAE Penal Code which sets out the penal provisions for the issuance of cheques with bad faith/insufficient funds thereby decriminalizing cheque bounce cases.
The Decree Law amends Article 641 of the Commercial Transaction Law, which states that the following acts will be considered a crime of a bounced cheque and punishable by criminal law:
- If the drawer instructs the banker not to encash the cheque presented by the beneficiary.
- If the drawer withdraws all the available money in the account or closes the account before the cheque is presented.
- Deliberately signing a cheque in a way that makes it unpayable.
The Decree Law aims not only to protect the rights of the drawee but also creates several mechanisms and alternative resolution to settle the matter through encouraging reconciliation, and urging the payment of the value of the cheque.
Amendment to Article 635 of the Commercial Transaction Law under the Decree Law will constitute the cheque returned due to insufficient fund as an executive instrument to be executed directly before the court of execution in accordance with the relevant provisions of the UAE Civil Procedures Law (Federal Law No. 11 of 1992 as amended) relating to execution of judgments/orders.
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