How does the court recover money in NSF check cases if the defendant has refused to pay? – Fund management / REITs

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Reforms related to NSF checks were recently introduced by the UAE government. These reforms were introduced through Federal Legislative Decree No. 14 of 2020. The new law made amendments to Federal Legislative Decree No. 18 of 1993 relating to commercial transactions (Commercial Transactions Law) and the old penal code of the United Arab Emirates.

Previous post and new changes

The main changes relate to the evolution of the delinquency attached to the offense of check without funds.

Previously, under the former Penal Code of the United Arab Emirates (Federal Law No. 3 of 1987), an NSF check due to insufficient funds could result in criminal penalties in the form of imprisonment (Section 401) . However, the new law removed this provision from the Penal Code, which effectively means that there will be no criminal liability if the check bounced due to insufficient funds.

The new law instead provides the following remedy in the event of insufficient or unavailable funds: if a check is NSF, the payee may use the NSF check to file a claim for enforcement in the courts of the UAE in under article 635 bis.

Article 635 bis of the amended law on commercial transactions states the following. “The check on which a notice of unavailability or insufficient funds is affixed by the drawee constitutes an enforceable instrument under the regulations for the application of the aforementioned Federal Law No. 11/1992, and its bearer may request total or partial forced execution.

The provisions, procedures and rules set out in the implementing regulations referred to in this article govern its execution and contestation.

The amended Commercial Transactions Act also allows the payee of the check to obtain partial payment of the check under Section 617 of the Commercial Transactions Act. This applies when the funds available are less than the value of the check. The issuer will certify that the partial payment has been made, the right of the beneficiary to collect the sums still due remaining to be recovered.

Execution procedure

Accordingly, once the bank confirms the unavailability or insufficiency of funds, Article 635 bis of the amended Law on Commercial Transactions allows the beneficiary to file a request for execution in accordance with the Civil Procedure Law (Federal Law No. 11/1992) in the courts of the UNITED ARAB EMIRATES. This essentially means that enforcement proceedings can now be brought against the issuer of the check and as part of the enforcement proceedings, the court could order the seizure or seizure of chattels, shares and property real estate, etc. of the issuer of the check (up to the value of the check).

Preliminary seizure and other actions under civil procedural law

If the judgment creditor considers, on the basis of serious indications, that the debtor will flee, tamper with or conceal his funds, resulting in the loss of the guarantee of the creditor’s right, the creditor may ask the court to temporarily seize the goods and assets of the debtor under Article 111 of Cabinet Decision 57 of 2018 on Regulation of Federal Law No. 11/1992 on Civil Procedure. The court may conduct necessary investigations, request statements, evidence and affidavits before accepting the request for seizure.

In addition to the provisional seizure of the debtors’ assets, the creditor may, in accordance with Cabinet Decision 57 of 2018, as part of the enforcement proceedings, request the court to impose: (a) the seizure/seizure of the movable assets or debts of the debtor in the hands of a third party; (b) seizure/seizure of stocks, bonds, income and shares; (c) seizure/seizure and sale of real estate; and (d) bankruptcy proceedings.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

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