Property bounced-cheques' panel brings jail back into reckoning

The Special Judicial Committee created to deal with bounced cheques in real estate transactions in Dubai has allowed criminal proceedings to be opened in one case.

While the case did not actually result in jail for the issuer of the cheque under the criminal legal procedure, legal experts have stated that this is now a legal precedent for authorities to initiate criminal action against a person bouncing a cheque in a real estate transaction.

According to Hadef & Partners: “We successfully persuaded the committee to refer the matter to the authorities, who have the power to jail the issuer of the bounced property cheque. A criminal complaint was filed and an arrest warrant was issued against the chairman (who signed the cheque) at which point the developer paid the amount in full and our client dropped the criminal complaint.”

The dispute, the Dubai-based law firm said, arose out of a payment due by a developer to a master developer in relation to community infrastructure. The developer requested the payment to be broken down into several payments and guaranteed the payments with post-dated cheques. Subsequently, the cheques from the developer were not honoured.

The developer argued that the infrastructure was severely delayed and that the cheques should be cancelled. The master developer argued that not only was the infrastructure to all intents and purposes complete, but that the developer used and had received the desired benefit of the infrastructure. The committee agreed with the master developer and referred the claim back to the appropriate authorities who initiated criminal proceedings.

“It is, therefore, apparent that if the merits of the case are clear the committee will allow the authorities to enforce the provisions of Article 401 of the Penal Code including the imprisonment of the person who signs a cheque which is subsequently dishonoured,” Hadef & Partners said.

The decision is final and cannot be appealed.

In November last year, Judge Fahd Rashid Al Shamsi, a member of the committee, had told Emirates 24|7 that not a single person has been sent to jail for a bounced property cheque since the setting up of a judicial committee.

The committee, which holds two meetings every week, deals with about 120 cases per month. Of the cases, 90 per cent are referred by prosecutors, courts and police. The remaining 10 per cent is registered directly by the developer.

In November 2009, Decree no (56) of 2009 was issued to set up a judicial committee to adjudicate disputes based on bounced cheques in real estate transactions. The committee consisted of a panel of three members: a representative from the Dubai Land Department, a judge from the Dubai Court of First Instance and a judge from the Dubai Court of Appeal who heads the committee.

The committee is given the exclusive responsibility of adjudicating such disputes and has the power to cancel the bounced cheque; order the cheque to be replaced with a new cheque with a date determined by the Committee; or refer the bounced cheque to the competent judicial authority to take the necessary legal action against the issuer.

According to the decree, police departments, public prosecutors and courts are prevented from taking any actions relating to bounced cheques covered by the decree and are required to forward any such claim to the committee.

Besides, all proceedings involving real estate related bounced cheques are suspended or stayed until the committee issues its relevant ruling.

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