Dec 22, 2020
by Anushri Yadav
Taking into consideration the frequent usage of cheques in commercial as well as individual transactions, the Governments across the world classifies Cheque bounce as cognizable financial offence which could entail both civil and criminal liability against the defaulter. A person is said to be in default of committing an offence of dishonored cheque, when any cheque drawn by him against any other person, for the payment of any amount, in order to discharge any debt or liability, whether in whole or in part, is returned by a bank unpaid for any valid reason which could be insufficient funds in the account, irregular signature, overwriting etc.
By virtue of Article 401 of Federal Law number 3 of 1987, UAE Penal code, if a cheque is bounced due to any reason mentioned therein, the drawee shall be liable for a punishment with imprisonment or with fine or both. However, the Emirate of Dubai in the year of 2017 introduced Dubai Law No.1 of 2017, Criminal Order as per which the Dubai Public Prosecutor is permitted to hold the defaulter guilty of Cheque bounce by penalizing him only with fine and not with imprisonment. Accordingly, under the Decision No. 88 of 2017, the defaulter can escape the criminal prosecution by paying fine if the value of the cheque is less than AED 200,000. The amount of fine for the cheque bounce cases varies depending on the value of the cheques which are as follows:
| Cheque Amount (AED) | Fine (AED) |
| >50,000 | 2,000 |
| 50,000 – 100,000 | 5,000 |
| 100,000 – 200,000 | 10,000 |
Similarly, Attorney General Office in Abu Dhabi by issuing Decision No. 14 of 2020 has removed the criminal prosecution of the defaulter by just imposing fines in the cases where the value of the cheques does not exceed AED 500,000. Additionally, the Abu Dhabi Public Prosecution has also been authorized under the law to amend or cancel the fines imposed within the seven days of the passing of the decision. The law which has come into force on 16 March 2020 has also effectively revised the fines in the cheque bounce cases. The structure of fine under the law is as follow:
| Cheque Amount (AED) | Fine (AED) |
| >50,000 | 1,000 |
| <50,000 | 3,000 |
| 100,000 – 200,000 | 5,000 |
| 200,000 – 300,000 | 10,000 |
| 300,000 – 500,000 | 20,000 |
In UAE, the drawee subsequent or parallel to the filing of criminal complaint can also seek redressal before the Civil Courts of UAE by filing a cheque bounce case against the defaulter. By filing a civil case, the drawee can recover the claimed amount through a judgment, or a performance order issued by the competent courts obliging the defaulter/drawer/signatory of the cheque to pay an amount equivalent to the value of cheque with interest. Federal Law No. 18 of 1993, Commercial Transaction law by virtue of Part 3 (Article 515 to Article 644) governs the procedures as per which a civil case can be initiated against the defaulter.
However, it is pertinent for the claimant or bearer of the cheque to adhere to the period of limitation before filing a civil or/and criminal case. For filing a criminal case the period of limitation is 5 years from the date of receiving the cheque as per Article 20 of Federal law No. 35 of 1992 and 2 years from the expiry of the time limit set for presentation of the cheque for taking a civil recourse as per Article 638(1) of Federal Law No. 18 of 1993.
In India, Cheque bounce is considered to be a criminal offence under Section 138 of Negotiable Instruments Act, 1881. A criminal complaint can be filed by the drawee or the bearer of the cheque under Section 138, if the Cheque is dishonored due to the insufficient funds in the account or if the amount of the cheque exceeds the amount agreed with the bank to be paid from that account. However, the following conditions has to be satisfied before a criminal action is pursued against the defaulter:
The offence if proved under Section 138 will make the defaulter liable for a punishment of imprisonment which may extend up to 2 year or with fine which may extend to twice the amount of the cheque or with both.
Along with filing a criminal complaint, the drawer or the bearer of the Cheque can also institute a civil suit against the defaulter. In India, Civil litigation in recovery matter is generally considered a long-drawn battle, therefore, one relief is that a summary suit can be filed under Order 37 of the Civil Procedure Code, 1907 against the defaulter. Rule 1 of Order 37 states that it is applicable to all suits in which a Plaintiff seeks only to recover a debt or liquidated demand in money, where the sum to be recovered is a fixed sum of money. The advantage of filing a suit under Order 37 is that the Plaintiff is entitled to an immediate Judgment unless the Defendant has reasonable grounds to defend his case.
The UAE cabinet on October 27, 2020 passed a federal decree to amend various provisions of the Federal Commercial Transaction law. The amendments also cover the provisions related to the Bounced Cheques. Several ancillary penalties are expected to be introduced such as cancelling of the cheques book of the convicted person and abstaining them from obtaining a new cheque book for a period of five years as well as prohibiting them from conducting their professional or commercial activities for a period of six months, revocation or dissolution of the licenses of legal persons for repeated violators. The decree which will come into force in the year 2022 is expected to create a mechanism and alternatives that will ensure that the collection of payment through cheques becomes easy and expeditious.
The Ministry of Finance in India, on June 8, 2020 has proposed to decriminalise 39 section in 19 Acts including Reserve Bank of India Act, the Insurance Act and the Negotiable Instruments Act. This includes the classification of certain criminal offences into civil offences including Cheque Bounce. The reasoning that was released by the Governments was that in the post Covid response, criminalising procedural lapses and minor non compliances increases burden on the businesses and hampers the ease of doing business which could in turn hinder investments from domestic as well as foreign investors.
As the Governments are taking a forward step to decriminalise an offence that have been categorized as criminal offence for decades, it would be interesting to see how the government is planning to maintain an equilibrium between the ease of doing business and the faith and credibility in the efficacy of financial transactions through cheques. As for my opinion, the focus of the government should not only be on the decriminalisation of these financial offences but also to increase the fine and other ancillary penalties to bring deterrence among the offenders.
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