How to Enforce a Bounced Cheque in UAE Mainland Courts: A Practical Guide

Cheque execution or enforcement is a swift legal process in the UAE that allows recovery of funds from bounced cheques without pursuing criminal charges. With the enactment of Federal Decree-Law No. 50/2022 (Commercial Transactions Law), cheque bounce is now generally treated as a civil matter, but criminal charges may still apply in cases involving fraud, account closure, stop-payment instructions, or cheque tampering.  

UAE Legal Framework 

The cheque is a commercial paper containing an order issued by the drawer to a bank (the drawee) to pay, on the date indicated therein as being the date of issue, a specific sum of money to the order of a third person, being the beneficiary, or the bearer thereof. Federal Decree-Law No. 50/2022 – On the Promulgation of the Commercial Transactions Law – Commercial Code [Lexis® Middle East] 

Key Factors Leading To Cheque Dishonour  

Article 667 Federal Decree-Law No. 50/2022, A cheque marked for insufficient funds is treated as a writ of execution. A cheque is dishonoured (bounced) when the bank rejects payment, most commonly due to: 

1. Insufficient funds – in the drawers account, 
2. Account closure – before the cheque is presented. 
3. Technical issues (e.g., mismatched signature, post-dated cheque presented early, or stale cheque.) 

The enactment of Federal Decree-Law No. 50/2022 has changed how bounced cheques are treated in the UAE. Below are the civil and criminal liabilities for bounced cheques: 

This blog is a part of our Debt Recovery Services and UAE amends laws on Cheque Bounces Blogpost.

 Criminal and Civil Implications of Cheque Enforcement 

Civil Implications 

1. Primary Remedy: In the amended enactment if a cheque bounces due to insufficient funds, it is treated as a civil matter. The payee can approach the execution court to enforce payment.  
2. In most cases, this does not lead to a criminal record or imprisonment unless there is fraud involved. 

Criminal Implications 

Criminal liability remains only in specific situations, such as: 

1. knowingly issuing or endorsing a cheque without enough funds  
2. Deliberately instructing the bank not to pay 
3. Withdrawing all funds before the cheque is presented 

Enforcement of a Bounced Cheque Through UAE Mainland Courts: A Practical Guide 

If you’ve received a bounced cheque in the UAE, enforcing it through the mainland courts is now more efficient and straightforward. Thanks to updates in the law, a dishonoured cheque is now treated as an executory instrument. This means you no longer need to go through a lengthy procedure. 

Once the court receives the bounced cheque and supporting documents of the defaulter from the emigration, it can issue an execution order and take enforcement actions such as freezing assets or seizing property to recover the amount. 

This streamlined approach offers a faster and more effective way to secure payment compared to traditional litigation, making the mainland courts a practical choice for cheque enforcement in the UAE. 

Once the bounced cheque and necessary documents are submitted along with any help needed from the immigration authority for the details of the defaulter, the court can issue an execution order. This allows the court to take steps such as freezing assets or seizing property to recover the amount owed. 

Once the recovery process begins, the court sets a specific deadline for the defaulter to pay the required amount. The funds are first transferred to the court’s treasury and then, using the payee’s bank details, are credited to their account. If the process proceeds smoothly, the entire procedure can be completed within a reasonable timeframe. 

This streamlined system makes mainland courts a faster and more practical option for cheque enforcement in the UAE. 

Step-by-Step Procedure for Cheque Execution 

Here’s what typically happens when a cheque bounces:  

The payee’s bank issues the cheque bounce memo as proof the cheque wasn’t cleared, while the payer/ defaulter is notified regarding separately by their own bank.  

Verify the Cheque

Determine whether there’s a related contract or agreement behind the cheque. This helps identify if the cheque was guaranteed, which is rare – This helps understand the context of the cheque (e.g., was it issued as payment or as a security/guarantee) 

File with Execution Court  

1. If the cheque has bounced (i.e., returned due to insufficient funds or account closure), the holder may file an execution application with the execution court. 
2. Attach the original bounced cheque and the bank memo indicating the reason for dishonour. 

Executory Stamp

1. The court will stamp the cheque as an executory instrument, allowing it to be enforced directly. 
2. The stamp gives the cheque the status of a court-enforceable order.  

 Example: If Person X issues a cheque for AED 250,000 to Person Y as payment under a contractual obligation, and the cheque is dishonoured due to insufficient funds, Y can file an execution application before the Abu Dhabi Execution Court. Once the court stamps the cheque as an executory instrument, Y can proceed to enforce collection of the amount through legal enforcement measures (e.g., asset attachment, travel ban etc).  

Once it goes to the enforcement part of it, the executionary measures would be as follows: 

Executionary Measures

General Notice: The execution Judge would notify payer/ defaulter and would give a period at the judge’s discretion to make the payment. 

Identifying the Defaulter

If the necessary identification details of the debtor are unavailable, the court can request them from the relevant authorities. Once the required information is obtained, several execution measures may be implemented to recover the outstanding amount: 

Courts may impose several enforcement measures against a debtor, including  

1. travel bans to prevent them from leaving the country,  
2. freezing of bank accounts to secure funds for repayment, and  
3. seizure of assets such as vehicles or market investments like stocks and bonds.  
4. If the debtor does not comply with court orders, an arrest warrant can be issued.  

These measures are intended to protect creditors’ rights and ensure debts are recovered. 

Cheque Execution Against Companies

For companies that issue bounced cheques, the consequences are serious under the amended law: 

Travel Ban and Arrest for Management 

If a company issues a bounced cheque, the authorized manager who signed the cheque may face serious consequences. Additionally, partners can be held liable depending on their shareholding and the extent of their involvement. Given the complexities involved, seeking professional legal advice is strongly recommended. 

Freezing Company Assets and Accounts

The court may impose various restrictions on a company following a bounced cheque, such as suspending its trade licence, freezing its assets and bank accounts, or blacklisting the company, which can significantly impact its operations. The courts enforcement department will also assess and utilize company assets to recover the outstanding amount.  

Inter-Company Judgments

When a court rules in favor of one company over another in a commercial dispute involving a bounced cheque, the payment process is structured to ensure the winning party receives its dues. Typically, the court instructs the losing company to deposit the judgment amount into the court treasury, after which the funds are transferred to the winning company’s account. This official process provides a secure and efficient way to settle such disputes under court supervision, reducing the risk of further complications or delaysThus, there are numerous ways to recover the outstanding money in a cheque execution matter. 

When the Defaulter Requests for Leniency

In some cases, defaulters request the court to accept partial payment and lift travel bans, citing financial difficulty or requests to clear the remaining through instalments. The court may allow this under certain conditions, such as appointing a guarantor. The guarantor does not remove the defaulter’s liability but ensures the remaining amount is recovered. 

Example If someone owes AED 250,000 but can pay AED 150,000 upfront, they may request the court to allow payment of the remaining balance in monthly instalments and seek the lifting of a travel ban imposed on them. The court may approve such a request under certain conditions, such as appointing a guarantor, and will determine a suitable repayment period based on the circumstances of the case 

However, if the defaulter is completely unresponsive or the debtor’s request is unreasonable, the court is unlikely to grant such leniency. 

Benefits of Using UAE Courts for Cheque Recovery      

1. The amended law allows to approach the execution court for recovery of the amount, avoiding lengthy criminal procedure and police complaints. 
2. Bounced cheques are now treated as execution instruments, making the recovery process more efficient and reducing court workload. 
3. Most cheque bounce cases are now civil, which means they are simpler to handle, no need to file criminal complaints in most cases. 
4. In the UAE mainland courts, cheque holders can now recover funds from bounced cheques much faster and easier through the various ways mentioned above 

Conclusion 

 The UAE has taken major steps to simplify the cheque recovery process. With the amended law in place, bounced cheques can now be enforced directly through the courts without the need for long legal procedures or criminal complaints in most cases through various ways mentioned above. This makes debt recovery faster and more efficient. 

While courts may show leniency to defaulters who are willing to pay part of the amount and settle the rest in instalments, such flexibility is not offered if the defaulter remains unresponsive. The updated legal framework protects the rights of cheque holders while encouraging fair settlements and discouraging misuse.