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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