UAE: Can I ask the bank not to encash my cheque due to fund shortage?

A reader asks for the latest rules around a cheque bouncing in Dubai.

Question: I had submitted a cheque to a client that is to be cleared in a month. I might face some cash issues, but the client is insisting that he will deposit the cheque no matter what. Can I stop it from being deposited by requesting the bank? Can you explain the latest rules around a cheque bouncing in Dubai?

Answer: Pursuant to your query, the provisions of Federal Law No. 18 of 1993 Concerning the Commercial Transactions Law and the Federal Decree Law No. 14 of 2020 Amending Certain Provisions of the Federal Law No. 18 of 1993 Concerning the Commercial Transaction Law are applicable.

Moreover, a bank may not stop the payment of a cheque to the beneficiary when he/she presents it to the bank for encashment. This is in accordance with Article 600(3) of the Amended Commercial Transactions Law, which states,

“The drawee (bank) may not reject the approval of the cheque if the drawer or bearer asks it to do, should the drawee (bank) have sufficient fund to partially or wholly pay the value of the cheque."

However, if the payor has insufficient funds in his bank account, a bank may pay the partial amount to the beneficiary unless the payee (beneficiary) of the cheque rejects such partial payment. This is in accordance with Article 617(2) of the Amended Commercial Transactions Law.

Moreover, an issuer of the cheque may not call upon a bank to stop the payment of a cheque issued by him or her due to insufficient funds. The issuer may only call upon the bank to stop payment of a cheque in case of a cheque is stolen, lost, destroyed or used in fraudulent ways. This is in accordance with Article 625(1) of the Commercial Transactions Law.

Based on the aforementioned provisions of law, it may not be possible for you to stop payment requests with your bank for the cheque issued to your client due to insufficient funds.

Moreover, in the event the cheque issued by you to the client is dishonoured due to insufficient funds, your client may consider filing a civil execution case against you for recovery of the amount under Article 635 of the Amended Commercial Transactions Law.

News Source: Khaleej Times