A returned cheque confuses many people: some treat it as a crime that must be reported at once, while others see it as a mere civil disagreement with no consequence. In truth, a returned cheque is first a banking event, and its legal effect is then determined by its cause: some causes remain within the direct civil enforcement of the cheque as a writ of execution, while others amount to a criminalised act for which a criminal complaint may be filed. In this guide we explain the causes of return and the effect of each, and when criminal jurisdiction arises, under the Commercial Transactions Law and the Criminal Procedure Law of the United Arab Emirates.

What Are the Reasons for a Returned Cheque in the UAE, and When Does It Become a Criminal Complaint?

First: A Returned Cheque Is a Banking Event with a Legal Effect

It all begins when the cheque is presented to the drawee bank and is not honoured; the bank then records the reason for non-payment on the cheque and issues a certificate to that effect. This is the "banking event." The "legal effect," however, is not the same in every case.

Under the Commercial Transactions Law, a cheque on which the absence or insufficiency of funds has been recorded becomes a writ of execution enforced directly without need of a prior judgment, whereas a criminal complaint may only be filed where the return is coupled with an act expressly criminalised by law. The first step is therefore always to read the reason for return recorded on the cheque, because that is what determines the track.

Second: Reasons a Cheque Is Returned in the UAE

There are several grounds on which a bank may decline to honour a cheque, the most notable being:

Third: The Effect of Return — Partial Payment and the Cheque as a Writ of Execution

Under the Commercial Transactions Law, where the available funds are less than the amount of the cheque, partial payment is mandatory on the bank to the extent of what it holds, unless the holder refuses it. The bank must endorse this payment on the back of the cheque, hand the holder the original cheque and a certificate to that effect, and the holder retains the right to recover the balance. The bank must also notify the Central Bank of the account holder's particulars in accordance with the applicable rules and regulations.

More importantly, a cheque on which the absence or insufficiency of funds has been recorded is deemed a writ of execution, and its holder may seek to enforce it, in whole or in part, by compulsory means before the Execution Judge, in accordance with the rules and procedures laid down in the Civil Procedure Law. Nor may the bank refuse to pay a cheque that has funds despite the drawer's opposition, save in cases of loss and bankruptcy, and the court may not order suspension of payment even where a case on the merits of the right is pending.

Fourth: When Does a Return Become a Criminal Complaint?

Mere insufficiency of funds is no longer an imprisonable act; rather, the Commercial Transactions Law confined criminalisation to certain acts committed deliberately. A distinction is drawn between a fine penalty and an imprisonment penalty:

Fifth: How and Where Is the Complaint Filed?

Under the Criminal Procedure Law, the complaint is submitted to the Public Prosecution or to a judicial law-enforcement officer, and in cases of flagrante delicto it may be made to any member of the public authority who is present. Judicial law-enforcement officers must accept reports and complaints brought to them regarding offences and take the precautionary measures necessary to preserve the evidence of the crime. The law also obliges anyone who learns of an offence that the Public Prosecution may prosecute without a complaint to notify the Public Prosecution or the nearest judicial law-enforcement officer.

Sixth: Combining Compulsory Enforcement and the Criminal Complaint

Neither track replaces the other. The Commercial Transactions Law expressly provides that if a criminal case for one of the cheque offences is brought against the drawer, this does not affect the cheque's eligibility for compulsory enforcement or the taking of judicial measures as a writ of execution, nor the right of the beneficiary or cheque holder to claim compensation in accordance with the procedures prescribed by law. In other words, the cheque holder may pursue the enforcement track to recover its value while filing, at the same time, the criminal complaint whenever one of the criminalised acts is present.

Legal References

• Commercial Transactions Law — Federal Decree-Law No. (50) of 2022 — Federal legislation.
• Criminal Procedure Law — Federal Decree-Law No. (38) of 2022 — Federal legislation.
• Crimes and Penalties Law — Federal Decree-Law No. (31) of 2021 — Federal legislation.
• The amending Federal Decree-Law — No. (14) of 2020 — the historical source for decriminalising the cheque without funds and establishing partial payment.
• Central Bank instructions and regulations — on the mechanism of partial payment of the cheque and the handling of returned cheques.

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