This article is written to provide the readers with the procedural knowledge to defend a cheque bounce case in Dubai on behalf of a party facing a cheque Execution Case for a bounced cheque, under the new Federal Decree Law No. 14 of 2020.
The Federal Decree Law No. 14 of 2020, Amending Certain Provisions of the Federal Law No. (18) of 1993 Concerning the Commercial Transaction Law, came into force on 2 January,2022. As of 2 January, 2022, the procedure to seek legal remedies for bounced cheques, due to insufficient or no balance, has completely changed. Under Article 2 of the Decree 14/2020, Article 635 has been incorporated in the Federal Law no. 18 of 1993.
Article 635 states that “A cheque, which bears the drawee’s stamp as non-paid for unavailable or insufficient fund, shall constitute an executive instrument as per the Executive Regulation of the Federal Law No. (11) of 1992 and its bearer shall have the right to demand the coercive enforcement, wholly or partially”. As a result of this article, the cheque bearer can use a bounced cheque as an execution deed, provided that the drawee bank certifies the cheque as bounced, due to no balance or insufficient balance in the issuer’s bank account to cover the entire value of the cheque.
The cheque bearer can proceed directly to the Dubai court to file for an execution case for the payment of the cheque amount.
In Dubai, cheques are often issued for various reasons other than the purpose of payment only. In many cases, cheques are used as collateral or security or a guarantee of payment for transactions between the parties. Sometimes, the value of such cheques exceeds the amount of the transaction’s value.
Where a cheque has been issued by a party for collateral or security or a guarantee for payment between parties and the cheque bearer maliciously deposits the cheque. A cheque gets bounced due to insufficient or no balance in the account, then the issuing party may find him/her in a situation where an Execution Case has been filed against him/her, for the bounced cheque. Consequently, the cheque issuer being the judgment debtor will be at the risk where his or her assets will be attached by the court and be liquidated to pay the cheque bearer.
In such a situation, the cheque issuer shall immediately upon notification from the Execution Court file a civil case in a Court of Competent Standard, claiming that the issued cheque is not valid and cannot be cashed by the other party. At the same time, the cheque issuer shall request the court to order the cheque bearer to return the cheque or pay an amount equivalent to the cheque to the cheque issuer.
Once the Civil Case has been filed, the cheque issuer shall file an objection to the execution case and apply for a stay of all procedures until the final decision has been reached in the Civil Case.
After the completion of the Civil Case, if a final judgment is provided in favor of the cheque issuer, then based on the final judgment, the cheque issuer shall make an application to the Execution Court to close the cheque bounce case and cancel all procedures.
