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Bounced cheques and courts’ workload Marie Nammour / 1 September 2013 Cases of bounced cheques are seemingly a continual problem for banks and the business world and, in turn, a problem for courts — with one legal advocate suggesting banks adopt a stricter approach to issuing cheque books to customers. Bounced cheque cases which result from business dealings, leasing contracts, credit cards or real estate and contracting project deals worth millions of dirhams, constitute a huge workload for criminal courts which handle these cases on a daily basis. Though there have not been any recent figures on what percentage of criminal cases are bad cheque cases courts handled last year, officials say it is not a small part. According to the 2012 Annual Report of the Dubai Courts and the Dubai International Financial Centre (DIFC) Courts, as many as 37,816 criminal cases were examined by the Dubai Courts in 2012 — an increase of 13 per cent from the previous year, when 33,432 criminal cases were heard. Though there are no available updated figures released by the Public Prosecution on the number of the bad cheque complaints received by Dubai police stations, media reports suggest local banks have received about 1.4 million dud cheques worth a total of $46.8 million in the year to February. Recovering the money In order to recover the money lost when a cheque bounces, complainants must file a civil lawsuit. A civil court starts to look into the lawsuit once the criminal side is determined by the Court of Misdemeanours or the two higher courts (if the defendant decides to appeal). “The claimant needs to wait for the 15-day legal deadline to pass and if the defendant does not appeal then (the claimant) can proceed with the civil lawsuit. He has to provide the civil court with copies and documents from the Public Prosecution stating that the verdict was final.” If the defendant is found guilty, the court will refer the civil lawsuit to the competent civil court and the claimant can pursue it to recover his money. “The case then falls in the hands of the execution judge who would compel the defendant to pay up the cheque or the latter would risk being jailed again.” Such civil lawsuits may take between three to four months at the Dubai Courts before a ruling could be issued. Al Dakhakhny said his firm’s smallest case was for a cheque worth Dh30,000, while the biggest case handled was for a cheque worth Dh3.5 million. mary@khaleejtimes.com Those bounced cheques constitute about a fifth of the overall cheques the local banks received as per statistics by the Central Bank in the same period of time. There has even been a proposal by the UAE Bank Association to the Ministry of Justice to set up courts specialised in the bounced cheque and financial cases to preserve the rights of the banks, the lending and financing firms and other parties.   Cheques are a tool Counsel Ahmed Al Dakhakhny of Saeed Al Barq for Advocacy and Legal Consultancy, told Khaleej Times one way some cases could be prevented was through banks limiting issuance of cheque books. “The cheque is a means for settling one’s financial dues. If the banks adopt stricter criteria for issuing cheque books to their customers they would be contributing somehow to curbing the problem of misuse of cheques. The criteria would take into consideration, for instance, the customers’ financial conditions and whether they would be able later to respect the trust the other party gave to them by accepting their signed cheques.” He said when the Emirati legislator put the Penal Code together, he dedicated certain articles to the bounced cheque cases. “The cheque is a tool of financial settlement used in business dealings among people. By protecting the cheque, the legislator has protected the economy and the businesses.” He said bounced cheques severely interrupted the running of businesses and could threaten the ability of a business to deliver on agreements. “Giving a bad cheque can stall a whole process of dealings; to name a few the businesses of trading, exportation and importation, and construction and contracting”.  Al Dakhakhny said the cheque was a way to fulfil one’s financial obligations without using cash and giving someone a cheque rather than cash suggested a certain trust by the receiver. However, when the cheque bounced, it meant the person who issued it betrayed that trust — which naturally entailed legal consequences. “A defendant on trial in a bad cheque case would face fraud and breach of trust charges”.   Penalty depends on the Judge’s discretion According to article 401 of the Penal Code, any person who writes a bounced cheque shall be slapped with a fine of no less than Dh500 and given a jail sentence of no more than 3 years. Issuing a bad cheque, however, does not result in the defendant’s deportation, Al Dakhakhny pointed out. “The judge will look into the case circumstances, namely the cheque value, the defendant’s conditions and the reason why the cheque bounced. The penalty will depend on the judge’s discretion”. He revealed that his office had an average of four to five bounced cheque cases seen by the Dubai Courts on a daily basis. “Our clients in those cases are of different nationalities. They come from various backgrounds. We have the businessmen, the investors, the workers and other low-income employees. While the first category would take loans, and back it up by signing security blank cheques, to finance certain business projects, the second category would get indebted by an excessive and miscalculated use of credit cards. The low-paid people might also take loans just to survive till pay day.” Often, such people gave security cheques which they later failed to settle due to their cumulative interests, he said. “We have also other clients who were caught in such cases because of their carefree spending and their purchases of luxury goods. They wanted to buy an expensive flat TV set or a fancy sports car, for example, and they gave security cheques in return as a guarantee for re-payment of the debt. The cheques would most often bounce”. One of his clients is a 35-year-old Iranian investor who was sentenced to three years in prison by Dubai’s highest court, the Court of Cassation, after he lost an appeal on the charge of issuing a bad cheque worth Dh3.5 million. The court referred the civil lawsuit to the relevant civil court. In another case, another investor took a bank loan to finance his purchase of two residential units. The loan was worth more than Dh2 million. The investor was jailed after the bank took action against him when he defaulted the regular payment of instalments. He was told to settle two blank security cheques he had signed, worth in total Dh3.2 million. He was convicted and respectively sentenced to one year and three years in prison for both cases. In a different case, another accused has been ordered by the Court of Misdemeanours to pay a Dh5,000 fine for issuing a bounced cheque worth Dh250,000, and the civil lawsuit was referred to a civil court. What makes someone issue a dud cheque? According to the lawyer, in some cases, it is the lack of knowledge that pushes a person to such a crime as he would usually be oblivious to the legal effects that he might face when giving a cheque, with a high risk of bouncing, in any kind of transaction. In other, more common, cases, some might think their long-standing business deals with a particular party would spare or protect them from legal repercussions due to a relationship of good faith — which turns out to be unfounded. “They would not see the legal trouble coming until they are called to the police stations or served notice about a court case. mary@khaleejtimes.com Continue reading →