Cheques have become an antiquated method of transaction in the West owing largely to the potential for forgery and fraud as well as technological advances negating use thereof. However, in the UAE, cheques are the default method for provision of security against a loan, rental payment as well as day-to-day business transactions.
Treatment of dishonoured cheques in the UAE, and penalty imposed on the drawer, has historically been viewed as somewhat draconian with prison sentences often applied under the UAE Federal Penal Code (Federal Law No. (3) of 1987) ensnaring debtors in a vicious cycle, unable to afford the debt due while simultaneously dispossessed of access to resources with which one may hope to settle amounts owing. This coupled with mounting legal costs and court fees serves only to entrench their financial turmoil.
The wording of the Federal Penal Code provides presumption of bad faith on the part of 'anyone who draws a draft without a sufficient and drawable balance'. However, in practice, it is far more common for a cheque to be deposited by the payee as a tool to threaten and blackmail rather than male fides on the part of the drawer.
In a society in which persons are answerable to potentially negligible debts with threat of imprisonment, or lengthy court action in defence thereof, it becomes difficult to contract freely, business and commerce suffers and consumer comfort is reduced owing to the severity of the consequences that may result should circumstances beyond their control render them unable to honour cheque payment.
It is, therefore, enlightened that new rules applicable to the emirate of Dubai include a criminal order relating to prosecution of bounced cheques which provides mechanism for certain offences to be penalised per fine and settled outside of the Criminal Court.
The new Penal Order System established pursuant to Law No. (1) of 2017 authorises the public prosecutor in Dubai to expedite certain minor offences and misdemeanors' judicial procedures which, as from December 2017, includes a stay of criminal proceedings relating to bounced cheques for an amount not exceeding Dh200,000 and provides instead for fine determined according to the value of the bounced cheque.
Cheques for a value in excess of Dh200,000 will still be subject to the Federal Penal Code, as will a cheque of any amount where the court is satisfied that fraud is present.
Under the new Penal Order System, where a cheque has bounced, the payee may now present the cheque to the prosecutor for provision of a criminal order reflecting the penalty prescribed. Debtors will be accountable to prosecution for the value of the fine limited per the Law and accordingly will likely be in a better position from which they may negotiate a viable settlement arrangement with their creditors.
Creditors seeking full payment of dishonoured cheques to the value of Dh200,000 should therefore commence civil action against their debtors as opposed to initiating criminal prosecution as leverage to recover amounts due. Alternative methods of dispute resolution such as mediation should also be considered in order that settlement may be reached between the parties.
Provision of an alternative to criminal proceedings should help to remove the stigma associated with bounced cheques and enhance debtor accountability instead of inspiring fear and evasion. With the added benefit of alleviating the case load of the public prosecutor, it must be noted that this is a progressive step in the right direction.
The writer is in-house legal counsel at GCP Group. Views expressed are her own and do not reflect the newspaper's policies.
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