Issuing a cheque to a beneficiary when there are insufficient funds to clear that cheque is an offence when this was done in bad faith, prescribes the UAE law.
A bounced cheque as a result of economic hardship is therefore likely to become a criminal offence. The minimum penalty for issuing a bounced cheque of any amount is one month in prison; this can exceed to a three-year sentence at most.
However, that is the penalty given by the Criminal Court. The case can be brought before the Civil Court too, which deals with commercial disputes. “This court cannot issue a sentence, but aims to settle the dispute,” explains Dr Zaher Mohammad Zaher, legal consultant. Donot sign a guarantee cheque when asked to do so, but rather sign an agreement.
Economic downturn brought many cases and complaints about bounced cheques. Not only the court has its hands full dealing with these matters; majority of inmates at prisons in Dubai are also convicts of financial fraud, say the lawyers.
In response to the situation, court rulings encourage settlement rather than issuing prison sentences or applying non-prison penalties such as fines.
Usually banks ask customers to issue a guarantee cheque as a security, like, when writing out a loan, “The guarantee cheque is signed without a date, and can be used when the lender fails to make the due payments. When the guarantee cheque cannot be cleared, banks often present this cheque at the court. The issuer never intended to clear that cheque.”
Failure to clear a written cheque does not necessarily lead to imprisonment, as this further complicates the chances of providing a payment.