Case Study: Cheque Bounced due to Closed Account can now be filed as a Cheque Execution Case.

25 March 2024

Suchi goel

In the United Arab Emirates (UAE), the legislative framework governing cheque transactions is characterized by stringent regulations aimed at safeguarding the reliability and effectiveness of cheques as a primary payment instrument. Under the provisions of the Federal Commercial Transactions Law, a bounced cheque resulting from "lack of balance or insufficient funds" is accorded the status of a direct execution deed. This designation grants the holder of such a cheque the authority to pursue enforcement measures without the need for protracted litigation proceedings.

However, a notable discrepancy emerged within the judicial system, particularly between the Court of Cassation in Abu Dhabi and its counterpart in Dubai, regarding the treatment of cheques returned due to "account closure." While the Abu Dhabi Court of Cassation equated such instances with bounced cheques, deeming them eligible for execution deed status, the Dubai Court of Cassation adopted a divergent stance. The Dubai court maintained that the legislative intent explicitly confined execution deed classification to cases of insufficient funds or lack of balance, excluding cheque returns resulting from account closure.

In response to this discord, the Attorney General of the Federation intervened by submitting an application to the Authority for the Unification of Federal and Local Judicial Principles. Following thorough deliberation, the authority resolved to recognize cheques returned due to account closure as eligible for execution deed status. This pivotal decision represents a concerted effort to uphold the rights of cheque holders, enabling them to pursue enforcement actions directly before the execution judge.

The implications of this harmonized approach extend beyond mere legal technicalities. By affording holders of cheques returned due to account closure the same rights as those stemming from insufficient funds, the UAE judiciary reinforces the foundational principles of fairness and equity in commercial transactions. This unified interpretation not only bolsters the confidence of cheque holders but also underscores the commitment of the UAE to maintain the integrity and efficiency of its financial systems.

Conclusion

This harmonized approach serves to empower the holders of bounced cheques due to account closure to seek recourse efficiently and effectively within the legal framework of the UAE. It stands as a testament to the UAE's commitment to upholding the integrity of commercial transactions and protecting the interests of all parties involved.

ALKETBI TOUCH:

Our team of professionals is can offer valuable insights into the opportunities and challenges presented by the new regulatory landscape. Our guidance not only helps companies mitigate risks but also enhances their reputation and competitiveness in the market. If you request further guidance or you have concerns and queries, Let us know!