Press Dossier    By Date   28/12/2021 New amendments on cheque provisions to take effect from January 2

KHALEEJ TIMES, Tuesday, Dec 28, 2021 | Jumada Al-Uola 21, 1443

New amendments on cheque provisions to take effect from January 2

Emirates: The Central Bank of the UAE has stated that the new amendments on cheque provisions shall take effect from January 22, 2022.

On this score, the apex bank issued a detailed statement on these new amendments that come under the Federal Decree-Law No. 14 of 2020 dated 9/27/2020, whereby some provisions of Federal Law No. 18 of 1993 promulgating Commercial Transactions Law (the Law) shall be amended.

The clarification issued by the CBUAE aims to raise cheque users’ awareness on the decriminalisation of issuing a cheque without sufficient fund; raise cheque users’ awareness on the criminalisation of refraining from partial payment of the cheque’s amount; and boost cheque users’ awareness on tougher administrative penalties for issuing a cheque without sufficient fund.

The apex bank noted that the Commercial Transactions Law has been amended in accordance with best practices to keep pace with international developments. It also aims to develop a tight legislative framework for these transactions to govern dealing in cheques in such way as to ensure that it plays its role as a payment tool, in place of cash.

Generally, the new amendments to the Penal Code decriminalise several cheque-related issues, especially issuing a cheque without a sufficient fund, and introduce amendments and new legal provisions Chapters (Three) related to the cheques contained in Book Four of the Federal Commercial Transactions Law, to achieve the following objectives:

Reducing the negative practical aspects of dealing with cheques, in light of the best and most successful international practices.

Consolidating the principles of justice, fairness and equal opportunities, by balancing the interests of the beneficiary (in fulfilling their rights in the fastest way possible) and the interests of the drawer (in terminating the criminal case against them upon payment).

Maintaining a solid national economy and a judiciary system based on efficiency and quality; and boosting the rule-of-law and international competitiveness indicators, in line with the state’s general vision and strategy.
 

With regards to the most important features and most prominent provisions contained in the amendments, the bank said that some crimes were retained to achieve the desired objectives of decriminalisation and its replacement by some civil measures.

The cases of criminalisation and fraud related to cheque were listed as follows:

Cases of fraud when issuing the cheque: including requesting the bank not to cash the cheque before the due date without a legal reason (i.e. in cases other than those stipulated in Articles (620) and (625), where the cheque has been lost, or the bearer was declared bankrupt).

Criminalisation cases related to fraud and misuse of cheques.

Closing the account, or withdrawing the entire balance before issuing the cheque or before presenting it to the bank for cashing, or if the account was frozen.

Intentionally writing or signing the cheque in a way that prevents its cashing.

Under the new amendment (Article 641 2), current cheque criminalisation in the Penal Code has been abolished, especially with regard to issuing a cheque without a sufficient fund, except for cases stipulated in the Law.

Criminalisation has become limited to the cases mentioned above. In any other cases - that is when the cheque was returned due to non-sufficient fund in whole or in part, the cheque bearer/beneficiary may refer the matter directly to the execution judge to obtain their rights by requesting for its implementation, in whole or in part, forcibly, as an executive document, in accordance with the procedures and rules specified by the regulations of the Civil Procedures Law.

The law regulates payment of cheques in Articles 617-627 with rules to ensure the cheque performs its legal and economic function.

In principle, the bank (the drawee) is obliged to pay the cheque’s value upon presentation where there is sufficient fund. It cannot refrain from paying, since this could affect the principal rights of the holder's ownership of the cheque in return for payment.

Although the law permits, the bank (the drawee) to refrain from paying if it receives opposition to this payment, but has narrowed the cases in which this opposition is permissible, limiting it to cases of cheque loss and bearer bankruptcy only, so that the cheque performs its intended function as a tool of payment.

Strong civil alternatives have been developed that lead to the collection of the cheque value in the fastest and simplest possible way, including: - Obligating the bank to pay the cheque (at least partially); and - Making a cheque from the drawee’s bank account with non-sufficient fund an executive document to be implemented directly through the execution judge, without resorting to lengthy legal procedures, as was the case previously (before the amendments). This means that there is no need to file a police report, or a complaint and ensuing follow-up of procedures with the police and prosecution, then the courts. In this case, the cheque has the power of an executive bond that does not require a court ruling, which should expedite legal action, so that a bank can exercise its rights and simplify the procedures for obtaining the cheque’s value. This should strengthen the cheque as a payment tool in commercial and financial transactions.

This provides the means to avoid criminal action and associated procedures, if the whole (or the remainder) of the cheque’s value is paid before commencement of mandatory execution procedures or the issuance of a final judegment.

A number of consequential penalties have been introduced, including: withdrawing the existing chequebook from the convicted person, preventing him from having a new chequebook for a maximum period of 5 years, and freezing the professional or commercial activities of the legal person.

New amendments have been introduced for legal person (except for banks and financial institutions), including the imposition of a fine, licence suspension for a period of 6 months, and licence cancellation or dissolution of the legal entity for repeated violations.

According to the CBUAE, the number of amended articles is (7) namely: 379, 600, 617, 641, 642, 643 and 644.The number of new articles is (9) namely: 635 , 641 1-4, 643 (1), 643 (2), 644 (1) and 644 (2) The new amendments on cheque provisions shall take effect from January 2, 2022. Except that the amendment in Article (379) on joint accounts shall be effective from the day following the date of publication of the law, i.e. 1st October 2020, as the law was issued on September 27, 2020 and published in Issue No. 687 (Supplement) of the Official Gazette on 30th September 2020.

This means that a period of more than one year and three months (since the law was issued) has been given to cheque users (individuals and companies) to prepare for the amendments, to ensure the stability of transactions, and for law enforcement agencies to reconcile matters and establish the appropriate procedures and mechanisms to implement the new procedures.

According to the apex bank, the payment of the value of a cheque is the payment of the amount specified in the cheque by the drawee bank to the cheque bearer or beneficiary.

The consideration for payment is the fund available in the account, the issuer’s cash in the bank's custody, a confirmed and specified amount, immediately due and disposable by drawing cheques on it.

The law specified the date for presenting a cheque for payment and stipulated in Article (618) that it must be presented within six months, if it was drawn in the State or abroad, and it is due for payment. Calculation of this period starts from the date indicated on the cheque (its issue date).

As this article clarifies, the period is calculated from the date indicated on the cheque as its issue date, and not from the date of partial payment.

The reason for shortening this date is the legislator’s wish not to oblige the drawer to maintain the consideration for payment with the drawee bank indefinitely.

The bank noted that if the bearer does not present the cheque within the time limit for its submission, his right to claim its value shall note be forfeited. Article (620/1) of the law states that "the drawee may pay the value of the cheque, even after the expiry of the date for its presentation."

This date has no binding force before the beneficiary or the bank, and its expiry does not preclude collection of its value from the drawee bank, as it does not result in the cheque losing its nature as a payment instrument to facilitate the flow of money. The effect of its expiry is limited to depriving the beneficiary of the defence that he has before the drawer.

The holder may be exposed to forfeiture of his civil right to the endorsers and the drawer by failing to take the procedures required by the legislator to fulfil their rights, including presenting the cheque at the time indicated by the Law.

If the drawer proves the availability of the fund over the six-month period, and the bearer does not submit the cheque to the bank to collect its value and withdraw this amount by an act not attributed to the drawer, the bearer’s right to recourse for the value of the cheque is forfeited to the drawer, as he is a negligent bearer.

According to the bank the partial payment of a cheque means to pay or settle part of the cheque’s value, and therefore, the drawer and all endorsers and guarantors (if any) are partially discharged.

UAE law did not require that in order to pay the cheque’s value, the consideration for payment at the drawee's bank should be equal to the cheque’s amount.

The cheque’s bearer may accept partial payment of the cheque’s value and postpone the remainder, if that is deemed to be in the bearer’s interest, if the drawer’s financial condition is poor, or if it is in his interest to save whatever can be saved from the debt.

The cheque’s bearer shall not be obliged to accept partial payment; he shall have the choice to accept partial payment, or refuse to pay and recourse to the drawer the full amount of the cheque, but if he chooses to accept partial payment, the drawee bank shall not refrain from that. The cheque bearer may request the drawee bank to mark the partial payment on the backside of the cheque, and the latter shall give him the original cheque along with a certificate confirming the same.

In implementing Article (617) of the Law, if the amount available in the account is less than the amount of the cheque, the bank must make partial payment of the amount in its possession, unless the cheque bearer refuses this. In such cases, the bank shall mark each partial payment on the backside of the cheque, and give back the original cheque along with a certificate of payment to the cheque bearer (according to a mechanism that is being discussed with banks currently, and will be circulated soon).

In the event of collection through the cheque bearer/beneficiary’s bank, the latter will give a certificate of partial payment to the cheque bearer/beneficiary. The bank should keep a copy of the partially-paid cheque and a copy of the partial payment certificate issued by it.

The cheque bearer shall have the right to recourse for the remainder of the original cheque as an executive document after partial payment, in accordance with the provisions, procedures and rules specified in the regulations of the Civil Procedures Law, and as per Article (635 ) of the law, or by protesting after the expiry of the periods stipulated in Article (632) of the Law.

The partial payment certificate referred to in Article (617) of the law shall not be considered a cheque, and is not protected. It is given to the cheque bearer to prove his civil rights before the judicial authorities.

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