How to resolve bounce cheque dispute in UAE?


The cheque bounce is a very frequent problem in the UAE faced by people. It is a criminal offence in UAE, and legal implications/penalties can be financially very severe. The bouncing of cheque may arise during commercial transactions, companies’ exchanges, bank loans, and individual transactions, etc.

What is a cheque?

A cheque is intended to act as a payment customarily recognised instead of money. In UAE the federal law no. (18) of 1993 Issuing the Commercial Transactions Law regulating the issuance and circulation of cheques. Article (483) of the law defines a cheque as “an order issued by a person (the Drawer) to a bank (the Drawee) to pay on the date indicated therein (Date of Issuance), a specific sum of money to the order of a third person (the Payee), being the beneficiary, or the bearer thereof”.

Dishonour of cheque in UAE

In UAE ‘Dishonour of a cheque’ is a criminal offence and the defaulted party has to undergo penalties in terms of fine and imprisonment. Cheque fraud is ‘depositing of a fake or manipulated cheque’. It is done in the following manner:

  1. Submitting of fake cheques;
  2. Submitting manipulated cheques having details changed i.e. amount, date or the beneficiary details etc.;
  3. Manipulating a cheque through magic ink, which disappears after some time allowing a fraudster to fill in certain details;
  4. Writing a cheque when one does not have sufficient balance to honour the cheque.


Cheque bounce

In UAE Article 401 of the Federal Law Number 3 of 1987 of the Penal Code and its amendments (for short ‘the UAE Penal Code’), provides that imprisonment or fine shall be imposed on the one:

  • Drawing cheque in a bad faith without sufficient funds or
  • Who withdraws all or parts of the funds after giving the cheque making the balance insufficient to cover the amount of the cheque, or
  • Who asks the drawee to stop payment making the cheque non-payable.


The same punishment shall be imposed upon the person who endorses or delivers to a bearer draft knowingly that the account has no sufficient funds to meet the amount mentioned in the cheque.

Liability for cheque dishonour 

The UAE has enacted the federal degree no. 14 of 2020 that has amended and added new articles to the commercial transaction law no. 18 of 1993 of the country. The new changes came into force from January 2022 and new regulations have been imposed pertaining to commercial cheques. The most important amendment that is brought is limiting the criminalization in instances of returned cheques due to insufficient funds. There is still criminal liability in the case of bad faith on account of the issuer of the cheque or other specific criminal actions as included in the new changes.

New changes:

Lesser criminal liability:  The new amendments have narrowed down the criminal liability in cheque bouncing issues. After the latest amendment to the law only the below mentioned actions will invite criminal action, such as:

  • Intentional falsifying of cheques;
  • Fraud cases: The issuer the cheque aks the respective bank not the pay the cheque amount, pursuant to clause, the signature on the cheque in that case would be considered as acknowledgement of the debt;
  • Providing counterfeit cheques;
  • Withdrawing the account balance before the date of the cheque encashment to prevent the cheque from being cleared.

Partial Payment of Cheque

After the new amendment the practice of partial payment of cheque has now become mandatory. If the amount available for payment is less than the cheque’s value, then the drawee bank has to pay the amount partially. The beneficiary can proceed to claim through legal measures in the civil courts the remaining amount. The banks will provide a ‘partial payment certificate’ to the presenter of the cheque containing the basic details including the emirates id/passport number, trade license details (if issuer is a company), IBAN number, contract details such as telephone and address.

Applicable Penalties:

  • Whoever endorses/ delivers a bearer cheque knowingly that there are sufficient funds to pay such cheque may not be drawn shall be subject to a penalty of no less than 10% of the cheque value (minimum of AED 1,000) and not more than the cheque value. The penalty shall be double in case of repetition (Ref. taken from Article (641) Bis (1));
  • An order may be passed of withdrawal of existing cheque book from a convicted person who has breached the law and he/she shall also be prevented from obtaining any further cheque books for 5 years. (Ref. taken from Article (643));
  • Convicted defendant not surrendering his existing cheque books to respective banks within 15 days from notification shall be sentenced to a penalty of no less than AED 50,000 (AED Fifty Thousand) and no more than AED 100,000 (AED One Hundred Thousand). (Ref. taken from Article (643));
  • Any bank violating the order given above shall be sentenced to a penalty of no less than AED 100,000 and no more than AED 200,000. (Ref. taken from Article (643))

The new changes to the law of the UAE have been effected to strengthen the rights of the cheque drawer and drawee. It also ensures that a cheque collection process is made more effective. The recent changes are well aligned with the international best practice and endeavoring to bring fairer commercial practices.