Bounced cheques: Exploring solutions

Haider al lawati -

Haiderdawood@hotmail.com -

The economic conditions that resulted from the decline in global oil prices since mid-2014 have created some problems to institutions and commercial companies in the region. This caused a negative impact on the obligations and activities of some businessmen and individuals in the Omani private sector because of payment delays, forcing them to incur losses, in addition to their cheques being bounced.

Data published recently by the Public Prosecution indicate that bounced cheque crimes headed the list of the ten top crimes in the Sultanate in 2018, with 4,715 cases. Last year, over 27,600 cases were registered for different crimes, of which 37 per cent were in Muscat Governorate, and 92 per cent committed by males.

Bounced cheques cases in the Sultanate and the GCC region are not something new despite the use of modern means of communication in clearing operations, deposits and daily withdrawals that reduced the need for paper cheques. The number of bounced cheques is massive due to the prevailing culture of using cheques as an alternative to promissory notes, bonds, etc. All Omani institutions and companies involved in the sale of cars, large household appliances, furniture, real estate and others deal in deferred cheques, which drove many customers to set up current accounts to obtain a chequebook.

According to data published by the Central Bank of Oman, millions of cheques are issued every year in the Sultanate by customers. The CBO Quarterly Bulletin for December 2018 shows that the total value of clearing cheques amounted to more than RO 15,774 million last year, through clearing over 4,785 million cheques during the same period at RO 3,269 on average per transaction value.

This data confirms that the Omani society depends very much cashing cheques in many aspects of their daily life.

This is largely due to the prevalent culture in the Omani society where expatriates working in commercial institutions sometimes convince citizens to issue cheques, especially for car sales, real estate transactions and so forth, without realising their involvement in this offence by forcing this act on them without knowledge of their financial status as they make these purchases.

As it is well-known, cheques are a guarantee instrument, like cash. They are different from other business documents, such as promissory notes and bonds, and are payable on the due date when submitted to the drawee bank. Bounced cheques, on the other hand, do not have sufficient cover to be cashed, making it necessary for the law to provide all the guarantees for cheques to maintain confidence in business transactions.

In the Sultanate, a number of penal legislations have been issued relating to bounced cheques in order to protect the rights of individuals and institutions dealing with this instrument on one hand, and maintain stability of transactions to restore customer confidence on the other hand.

The new Omani Penal Code issued under Royal Decree No 7/2018 addressed new cases of cheque crimes that did not exist in the previously repealed penal code.

Article (356) of the new Penal Code stipulates that: “Whoever commits any of the following acts shall be punished by imprisonment for a period of less than one month and not exceeding (2) two years, and a fine no less than (100) one hundred Riyal Omani and not exceeding (500) five hundred Riyal Omani:

(a) gives a cashable cheque not met with an existing balance, the balance of which is less than the value of the cheque, or the account is closed.

(b) withdraws, after giving the cheque, all or part of the consideration, so that the remainder does not fulfil its value.

(c) orders the drawee not to cash the cheque.

(d) writes or signs the cheque in a manner that prevents its cashing.

(e) endorses or delivers to another a cheque payable to its carrier, with the knowledge that it is not met with consideration sufficient to fulfil its full value, or that it is non-cashable.”

In all cases, the court shall oblige the convict of the crime to pay the value of the cheque and expenses incurred by the beneficiary, on the basis of a complaint by those concerned. Today, commercial banks are called upon to be aware of all aspects of this issue, and issue chequebooks only after ensuring that the customer has the ability to make the monthly payments towards banks, finance companies and/or others.