New UAE Law: What Happens if Postdated Rent Cheques Bounce?
Question: I am a Dubai resident and my business has run into some problems. With cheque bounce cases decriminalized in UAE, can you explain to me what happens if my postdated rent cheque is not honoured? I am confident I will have enough funds in my account before the cheque is due, but in case it does not, what must I do? I have requested the real estate company to not submit the cheque for encashment till I confirm but am yet to receive a positive response. Please advise the penalties if my cheque bounces in such a scenario.
Response: Pursuant to your queries, dishonour of a cheque on grounds of insufficient funds in the bank account is no longer a criminal offense in the UAE. Therefore, the provisions of Federal Decree-Law No. 14 of 2020 amending Certain Provisions of the Federal Law No. 18 of 1993 Concerning the Commercial Transaction Law (the ‘Amended Commercial Transaction law’) and the provisions of Circular No. 9 of 2021 Concerning the Disposal of Decriminalised Cases of Issuing Cheques in Bad Faith and Refusing to Pay (the ‘Circular No. 9 of 2021’) issued by Attorney General Office of Dubai Public Prosecution are applicable.
It should be noted that since January 2, 2022, the dishonour of a cheque on grounds of insufficient funds in the bank account of the payor is no more a criminal offence in the UAE. However, the payee of the cheque may file an execution case against the payor.
This is in accordance with Article 635 (Bis) of the Amended Commercial Transaction law, which states: “A cheque, which bears the drawee’s stamp as non-paid for the 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.
“With respect to its enforcement and dispute related to it, provisions, procedures and rules provided for in the said Executive Regulation shall apply.”
Based on the aforementioned provisions of law, if your cheque issued to the real estate company is partially or entirely dishonoured due to insufficient funds, then the company may file execution proceedings against you. These may be the same as execution proceedings which are followed upon obtaining final judgements in the civil and commercial cases in the UAE.
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