Bounced Check Recovery in Dubai: What You Need to Know

In the United Arab Emirates, checks are one of the key payment instruments, especially when concluding large transactions, paying rent, and fulfilling credit obligations. However, if the bank refuses payment, a situation of Bounced Cheque arises, which can lead to serious legal consequences for the owner.

Bounced Cheque is a situation when the recipient’s bank refuses to honor it for various reasons, including a lack of sufficient funds. When attempting to cash or use the cheque for payment, the bank cannot complete the transaction due to non-compliance with certain criteria (insufficient balance in the account or if the issuer signs the cheque incorrectly, etc.).

In the UAE, checks are often regarded as a guarantee of solvency. Therefore, cheque bounces are interpreted not only as a financial miscalculation but also as a possible violation of the law. Under local laws, administrative liability and charges in criminal court may arise.

Cheque bounces can occur at any stage of its presentation for payment. Usually, this happens at the moment when the cheque holder tries to cash it at the bank or use it to fulfill their obligations.

If, during verification, it turns out that the cheque cannot be paid, the bank issues a Dishonored Cheque Notice, and the person attempting to receive the money is forced to contact the cheque issuer for clarification or debt repayment.

Let us consider the most common reasons for cheque bounces:

If you are faced with the issue of a bounced cheque or want to protect yourself and your business when making deals, it makes sense to consult with experienced lawyers. Our legal company is ready to help you understand the intricacies of UAE legislation, protect your rights, and minimize possible risks.

To simplify business transactions and reduce criminal liability in cases of bounced cheques, changes to UAE legislation came into effect in 2022.

For a series of violations related to issuing bounced cheques, administrative or civil liabilities are now provided instead of criminal prosecution. The emphasis is placed on compensation for damages and the enforcement of monetary recovery using civil law instruments, while minimizing the risk of prison sentences.

If it is proven that the cheque issuer intentionally deceived the recipient (for example, knew about the lack of funds in the account or used knowingly invalid details), or if the amount of damage is very large, the judicial authorities can still pursue criminal penalties.

Another important innovation is the mechanism for partial payment of checks. The bank is obligated to pay the available portion of funds in the payer’s account, while recording the remaining amount as debt. This reduces the total size of the debt and lowers the risk of being accused of a full bounced cheque. The bank must provide the recipient with written confirmation of the partial payment and the remaining debt amount.

At the same time, the recipient of the cheque receives more flexible tools for debt collection. For example, it becomes easier to issue a court order for enforced execution. The forced execution procedures increase the likelihood of quickly obtaining the owed funds.

The legislator paid special attention to accelerated court orders (Order for Payment), which help the creditor receive money without a full court trial. For this, it is sufficient to present evidence of the existence of a debt obligation (i.e., the check itself).

When returning a check, the bank issues a document confirming the inability to process the payment (through a certificate or notification). The check recipient can use this notification as a basis for a bounced cheque case at the civil courts.

Most often, the first step is a pretrial claim to the payer: the check recipient offers to pay the debt voluntarily, compensate for the missing amount, or replace the check. If the parties reach an agreement, legal proceedings can be avoided.

If pretrial settlement does not yield results, the beneficiary of the check has the right to go to court, and legal proceedings unfold. Considering the new bounced cheque law of 2022, civil remedies are being applied to more and more cases, and a simplified court order procedure may be applied for debt collection.

Depending on the amount and circumstances of the case, the proceedings may take place in a civil or administrative court. If signs of fraud or intent are identified, the complainant may pursue a criminal case.

The party demanding payment must confirm the existence of the debt (primarily using the check itself and the return notice). The payer must prove the absence of intent, the invalidity of the claims, or payment already made.

The simplified Order for Payment procedure allows for the quick recovery of a debt based on a cheque. In a more complex dispute, the court may require the defendant to settle the debt as well as cover court costs.

With the right strategy and timely legal support, many bounced cheque cases in the UAE can be resolved either out of court or by successfully defending your position in court. Our legal firm is ready to provide comprehensive assistance at every stage: from document analysis to representation in UAE courts.

After receiving a notification about cheque bounces, it is necessary to contact the bank first:

If the issue is due to insufficient funds in the payer’s account, some banks allow the check holder to resubmit the check after replenishing the balance, which may resolve the issue without additional disputes.

If the check has not been paid, but you have the issuer’s contact information, try to resolve the issue directly. Perhaps they are willing to pay the amount in another way, issue a new check with correct details, or agree on a payment plan. In some cases, the parties may reach an agreement without involving lawyers or filing a lawsuit.

If the bank refused to process the check and the payer refuses to repay the debt, the next step may be taking the matter to court.

In the UAE, there is a procedure for expedited debt recovery based on cheques. If you have a check and confirmation from the bank regarding its return, you can file an application for an Order for Payment. Prepare the application and attach a copy of the cheque, the bank notification, and other supporting documents like a bank statement. Submit it to the Civil Court. If the judge approves the request, the defendant is obligated to pay the debt within the specified timeframe.

If the cheque amount is large or additional disputes arise, a full civil lawsuit can be filed. The court may require the payer to settle the debt, impose additional penalty sanctions, seize the debtor’s property, or freeze bank accounts.

If the situation cannot be resolved peacefully, or the amount of debt is significant, the best step is to seek legal assistance from a qualified lawyer. Experienced attorneys will help assess the situation and propose the optimal legal course, prepare a complaint for court, conduct negotiations with the payer or their representatives, as well as challenge the payer’s actions if the cheque was stopped unlawfully.