A cheque by definition operates as an order by the drawer to the bank to pay the amount specified to the bearer’s name on the date indicated. Bounced cheques can be a source of financial inconvenience and frustration for companies. Understanding the rights and legal options available is crucial for companies to protect their financial interests and seek appropriate recourse in due time.
A cheque must be presented for payment within 06 months from the date indicated therein. In the event a presented cheque is not honored, the bank will return the original cheque along with a dated statement by the bank confirming that the cheque was not passed due to insufficient funds. The statement issued by the bank must also specify the date when the cheque was presented.
The bearer may accept partial payment up to the sum available in the issuer’s bank account. If such partial payment is accepted, the bank will make an annotation on the cheque and issue a certificate of such payment. Acceptance of partial payment will not affect the bearer’s right to claim payment of the remaining amount under the cheque.
A dishonored cheque accompanied by the bank statement as noted above, is treated as an executive document, entitling the bearer to file for execution in the UAE Courts. We can then initiate the process of initiating precautionary measures, such as a travel ban to restrict the drawer from leaving the country and seizing assets like vehicles and bank accounts.
It is important to remember that banks are obligated to notify the UAE Central Bank in the event of a dishonored cheque or its partial payment. Consequently, the drawer may also be blacklisted by banks, making it difficult to open a bank account or conduct financial transactions. Considering the severity of the consequences arising from a bounced cheque, it is recommended to verify the adequacy of funds before issuing cheques.
When faced with a bounced cheque, parties may seek to resolve the issue by mutually agreeing on a payment schedule. If a settlement cannot be reached, the bearer can take appropriate legal recourse within the legal limitation period. YMB offers specialized services to our clients in recovering unpaid debts, including negotiating with debtors and obtaining executory and precautionary orders, to effectively safeguard our clients’ financial interests. Contact our expert advisors to know more!
