WHAT TO DO WHEN THE CHEQUE HAS A WRONG SIGNATURE?

01 September 2023

Shuchi Goel

Receiving a cheque in the UAE is part of the day to day business and many transactions still require cheques

Dubai: The Regulatory Authority in the UAE has taken into consideration the importance of the cheques in the daily lives of the residents and has addressed this issue  by constantly updating the penal code and the civil code. 

1 -What is considered as a cheque in the UAE??

In accordance with Article 627 of the Commercial Transactions Law: A cheque is a written instruction from an account holder to their bank to pay a certain amount of money to a named individual or organization. A cheque guarantees the payment to the payee and is a legally enforceable instrument. 

When you receive a cheque form its owner but it bounces due to different or improper signature, it could be due to two reasons:   

      1.       the erroneous signature was made in good faith and the issuer is willing to rectify the error, a resolution can be reached amicably without resorting to legal measures.

      2.      the incorrect signature was deliberately or maliciously affixed, in such a case a legal action can be pursued to recover the owed amount.

The second scenario is an infringement of the commercial transactions law- Federal Decree No. 50/2022.This law governs the provisions of the cheques in the UAE.        

2 – When is a cheque considered as bounced cheque in the UAE? 

  In accordance with UAE regulations, a cheque is considered bounced or dishonored under the following circumstances:

1.      Insufficient funds equivalent to or greater than the cheque amount on the day of issuance.

2.      Inaccurate or mismatched signatures, missing or erroneous dates, or overwriting on the cheque.

3.      Closure of the bank account prior to cheque issuance.

4.      The issuer's directive to the bank not to honor the cheque.

3 – How to handle a cheque with a signature mismatch or complete wrong signature when given by its owner?

The first step is to call the issuer and explain the cheque you received has a wrong signature as per the bank report and that you were not able to cash out the amount. Giving the issuer the benefit of the doubt is the right thing to do as probably the mistake happened unwillingly, it will be best to resolve the issue amicably instead of pressing legal actions. The issuer can directly palliate to your request by either issuing a new cheque or by calling his bank. 

In the event the issuer declines your calls constantly for more than three days in a row, you will understand that he had acted with bad intention to fraudulently induce you into believing he could honor his order then we advise you to file a complaint before the police station for fraud and initiate a civil case against the issuer. The process timeline is defined by the courts findings as the court will verify the signature following which a judgment will be issued. When a cheque is dishonored, you should seek a solution in a fast manner, as you may be facing many challenges if you take time to react or to decide upon the next actions, as the issuer may runaway and totally disconnect. 

4 – What is the punishment for signing a check improperly and dishonoring it in the UAE?

The incorrect signature of a cheque when prematurely decided and done intentionally is decided under the article 675 of the commercial Law. The penalty is imprisonment for a period not less than 6 months that can reach two years at maximum. Otherwise a fine can be paid and it will be valued minimum at ten per cent (10%) of the cheque value, for a minimum of AED5,000. 

In light of the above, it is clear that although a law decriminalizing the cheques bounced was issued, yet some cases are retained whereby the issuer of a cheque will be facing severe criminal and civil consequences of his acts when wrongdoing is done intentionally. Protecting your interests fall largely on you, therefore try to keep your dealings under the Law cover and abide by it as it protects you, even if the amendments made to the law aimed at providing more flexibility to the practicality of cheque dealing. 

ALKETBI TOUCH: 

Our team frequently provides legal assistance and advice on all matters related to financial cases especially cheque bounced cases whether on the criminal or civil fronts, in the event you are facing related issues, let us know.