How Does the Court Recover Money in Bounce Cheque Cases if the Accused Refused to Pay?

How Does the Court Recover Money in Bounce Cheque Cases if the Accused Refused to Pay? Reforms related to bounced cheques were recently introduced by the Government of United Arab Emirates. These reforms were introduced through the Federal Decree Law No. 14 of 2020. The new law made changes to the Federal Decree Law No. 18 of 1993 relating to commercial transactions (Commercial Transactions Law) and the erstwhile penal code of the UAE.

Previous Position & New Changes The key changes relate to the changes in the criminality attached to the offense of bounced cheque.

Previously, under the erstwhile Penal Code of the UAE (Federal Law no. 3 of 1987), cheque bounce due to insufficiency of funds could lead to criminal sanctions in the form of imprisonment (Article 401).

However, the new law deleted this provision from the Penal Code, effectively it means that there will be no criminal liability if the cheque has bounced because of insufficiency of funds.

The new law instead provides the following remedy for insufficiency or unavailability of funds: if a cheque is bounced, the beneficiary can use the bounced cheque to file for an execution case before the courts in the UAE under Article 635 bis.

Article 635 bis of the amended Commercial Transactions Law states as under. “A check whereto a notice of unavailability or insufficiency of funds is affixed by the drawee shall constitute a writ of execution under the Implementing Regulation of aforementioned Federal Law No. 11/1992, and its bearer may request its full or partial compulsory execution.

The provisions, procedures and rules set out in the Implementing Regulation referred to in this Article shall govern the execution thereof and the challenge thereto.”

The amended Commercial Transactions Law also entitles the beneficiary of the cheque to obtain partial payment of the cheque under Article 617 of the Commercial Transactions Law. This is applicable where the funds available are less than the value of the cheque. The issuer will certify that part payment has been made, with the beneficiary’s right to receive the remaining outstanding amounts continuing.

Execution Proceedings Accordingly, once the bank confirms unavailability or insufficiency of funds, Article 635 bis of the amended Commercial Transactions Law permits the beneficiary to file an execution case in accordance with the Civil Procedure Law (Federal Law No. 11/1992) before the courts in the UAE. This essentially means that execution proceedings can now be filed against the issuer of the cheque and as part of the execution proceedings, the court could order the attachment or seizure of movables, shares and real estate etc. of the issuer of the cheque (up to the value of the cheque).

Provisional Seizure & Other Actions under Civil Procedural Law

If the judgment creditor believes, based on serious evidence, that the debtor will flee or smuggle or conceal his funds, leading to loss of guarantee of creditor’s right, the creditor may request the court to provisionally seize property and assets of the debtor under Article 111 of the Cabinet Decision 57 of 2018 On the Regulation of Federal Law No. 11/1992 on the Civil Procedure. The court may conduct necessary investigations, requests statements, evidence and affidavits before accepting the application for seizure.

In addition to provisionally seizing the assets of the debtors, the creditor may, in accordance with the Cabinet Decision 57 of 2018, as part of the enforcement proceedings, request the court to impose: (a) attachment/seizure of movables or debts of debtor in hands of a third party; (b) attachment/seizure of stocks, bonds, revenue and shares; (c) attachment/seizure and sale of real estate; and (d) bankruptcy proceedings.