Cancelling a cheque in the UAE can be a daunting process for many individuals and businesses alike. Whether you’ve issued a cheque that needs to be retracted due to various reasons or you’re on the receiving end of a bounced cheque, understanding the cancellation process is crucial.
In this comprehensive guide, we’ll delve into the intricacies of cancelling a cheque in the UAE, providing you with valuable insights and step-by-step instructions to navigate this procedure effectively.
Canceling a cheque is known as “protest to a cheque†in banking terms. According to the new Commercial Transactions Law which came into effect on January 2, 2022, stop payment orders from the cheque issuer to the bank are no longer valid except under two specified conditions.
The amendment was made by the CBUAE to create awareness among cheque users on
topics like the decriminalization of issuing cheques without sufficient funds and
the criminalization of holding back from partial payment of the cheque amount.
Legal Framework:
The UAE has stringent laws governing cheque transactions to ensure the integrity and reliability of financial instruments. Under UAE Federal Law No. 18 of 1993 on Commercial Transactions and its subsequent amendments, bouncing a cheque due to insufficient funds or any other reason is considered a criminal offense, subject to penalties and legal consequences.
1. When a cheque is lost or stolen. If the issuer or bearer loses the cheque or checkbook, it can be canceled.
2. When the account holder goes bankrupt.
In the first scenario where a checkbook is stolen, misplaced or obtained through
fraudulent methods, the bearer or the issuer can request the drawee bank to halt the
payment. Only in these two cases can a cheque be canceled.
On every other occasion, the “protest to a cheque†remains invalid.
The amendments are meant to bring in some positive impacts on the banking system. The
law now can protect the interests of both the beneficiaries and the drawers by practicing
strict rules of justice and equality. The law also helps in enhancing the national economy by
improving international competition standards.
As part of the modifications made, confidentiality terms have also been redefined. As long
as the disclosure is made within the boundaries of the statement, a bank employee’s
a declaration that there is an insufficient fund for the value of the cheque/part of the value of a cheque is not considered a violation of banking secrecy. According to a note from the
CBUAE, “there is no breach in the banking secrecy if the bank employee’s statement is that there is an insufficient fund, or that there is a part of it in the drawer’s/ client’s account to cash the cheque is confined to that only, without referring to other data.â€
Also, as per the new law, when the bank provides the certificate of partial payment to the
beneficiary/bearer or states that there is an insufficient fund to cash the cheque, this is not the disclosure of the client’s account secrecy if the bank’s statement is restricted to that only, without providing other details.
The account holder cannot sue the bank for disclosing account confidentiality under these circumstances. However, bank employees can be punished if they refuse to cash a cheque without providing valid reasons. This is also applicable if the bank employee refrains from partial payment of the cheque refrain from issuing the partial payment certificate, or refrains from giving back the original cheque.
The legal and economic functions of the cheques can be assured by following the below-mentioned rules:
These include:
ï‚· Obligating the bank to pay the cheque at least partially.
 Making a cheque from the drawee’s bank account with insufficient funds is an
executive document to be implemented directly through the execution judges.
There are several reasons why individuals or businesses may need to cancel a cheque in the UAE:
Conclusion:
Cancelling a cheque in the UAE requires careful consideration of legal requirements, procedural steps, and potential implications. By following the guidelines outlined in this comprehensive guide, individuals and businesses can navigate the cheque cancellation process effectively, safeguarding their financial interests and ensuring compliance with UAE regulations. Remember, proactive communication, timely action, and adherence to legal standards are paramount when dealing with cheque transactions in the UAE. Stay informed, stay compliant, and protect your financial well-being.
In the dynamic landscape of financial transactions, knowledge is your most valuable asset. Empower yourself with the insights shared in this guide to navigate the complexities of cheque cancellation in the UAE confidently. Your financial security and peace of mind are worth every effort invested in understanding and adhering to the rules of the game.
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