Dishonor of Cheque


Article 401 of the Penal Code of the UAE states that “A punishment of confinement or a fine shall be inflicted upon any person who, in bad faith draws a cheque without no existing or withdrawal provision, or after issuing the cheque, withdraws all or part of the fund so the balance becomes insufficient to settle the amount of the cheque, any person who endorses or delivers to another cheque payable to the bearer, whilst being aware that there are no existing funds covering its value, or it cannot be drawn, shall be liable to the same punishment.”

The aforementioned is the summaries of the outcome of Dishonour of cheque only however the cheque can be issued for different occasion and will have accordingly different outcome as per the subject in below:

  1. Guarantee Cheque
    • Gurantee cheque issued in favor of banks and finance
    • Issued in favour of Indivdial
  2. Corporate cheque or personal Cheque
  3. Post Dated Cheque or Current date Cheque
  4. Discounted Cheque
  5. Blank Cheque
  6. Lost Cheque
  7. Cheque in favor of Land rod
  8. Cheque is issued following to the terms of Agreement

The UAE’s Commercial Transactions Law states that issuing a cheque while knowingly lacking the funds to cover it is a criminal offence. Cheques are widely used as collateral for large purchases and loans made to businesses and consumers.

There has been some movement in the right direction. The Central Bank has endorsed a direct-debit system that will replace cheques in certain transactions, and the establishment of a national credir bureau due by the end of this year, will allow banks to share data on customer lending. These initiatives, coming on top of a December 2012 decree by the President, H.H. Sheikh Khalifa, that federal courts should not accept bounced cheques alone as evidence of a crime, will hopefully ensure the demise of the cheque as an instrument of security on loans.