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Misgivings About Law on Cheques

Mohammed Al-Ansari, the Managing Partner at Al-Ansari Law Firm participates in the legal forum on post-dated cheques held by The Peninsula on Wednesday 27/12/2009

Misgivings About Law on Cheques :: Wednesday 12/27/2009

A new law (Number 26 of 2006) to be enforced from May 2010 making post-dated cheques immediately encashable, irrespective of the date written on them, will lead to more court cases, according to a prominent lawyer. Already, the number of litigations relating to bouncing cheques is very high, said lawyer Mohamed Al Ansari. Attending a legal forum last week, he pointed out that the articles of the new legislation had a number of contradictions which, once enforced, might create a lot of difficulties. He was taking part in a monthly legal forum titled ‘Legal Salon’ launched by The Peninsula in collaboration with the Faculty of Law, Qatar University, on December 23.

This was the first forum the newspaper held at its premises. A number of law professors from Qatar University, bankers and lawyers attended the event. The forum made it clear in a nutshell that the new law, once enforced, will not recognise post-dated cheques, which have become a sort of guarantee of payment for landlords, lending banks as well as traders. Post-dated cheques are also used by big business houses as well as the government. The law (No 26 of 2006) regulates commercial trading activities and has as many as 846 articles. The law is being partly implemented since January 2007. However, articles 560 to 605, which pertain to cheques, were kept in abeyance and are to come into force from May 2010 since more than three years’ grace period was given to people and entities to make preparations to deal with a system without post-dated cheques.

Law professors, taking part in the Legal Salon, however, pointed out that although the new legislation gives cheques the status of bills of exchange rather than debt instruments (which post-dated cheques are) it does not suggest any substitute to post-dated cheques. They also said that the new law (article 605) specifies that the names and personal details of people who issue post-dated cheques which bounce should be published in the official gazette. Others who participated in the legal forum included Dr Mohamed Salem Abu Faraj, from the Faculty of Law, Qatar University, Dr Salah Zaineddin, Associate Professor of Commercial Law, Qatar University, Dr Bashir Saad Zaghlool, Professor of Commercial Law, Qatar University and Dr Zain Al Abdin Sharar, Assistant Professor of Commercial Law, also at Qatar University.

The bankers included Rizk Kamel, retail lending manager, Commercialbank, and Mohamed Sami Abu Sheikha, relationship manager, also from Commercialbank, aside from lawyer Al Ansari.

The Peninsula was represented at the legal forum by Editor-In-Chief, Khalid Abdul Rahim Al Sayed, and Acting Managing Editor, Parvez Khusro.

Intervening in the debate, banker Rizk Kamal said that one way to make sure that people and entities which issued post-dated cheques were protected against risks of legal action was that they should have written undertaking with the those receiving the cheques saying that they (cheques) would be deposited in the bank only on or after the dates mentioned on them. In other words, if a cheque is issued five months in advance, for May 5, 2010, on January 5, 2010, for example, it should be deposited by the receiver in the bank on after May 5, 2010.

“This is a good way to protect the issuer of a post-dated cheque but the written undertaking inked with the receiver of the cheque will have no legal protection,” said the law professors. “It won’t be recognised by the law.”

In other words, a person found guilty of issuing a post-dated cheque that bounces will have to face legal action irrespective of whether or not the receiver undertook to deposit the cheque in a bank on a particular date. He has the right to deposit a post-dated cheque in the bank immediately after he receives one.

Participants at the legal forum agreed that under the circumstance the best way was to create awareness about the risks involved in issuing post-dated cheques after the new law comes into force among all the parties concerned — banks, people as well as commercial establishments. It was also suggested by the participants that the recipients of post-dated cheques should also shoulder some ‘moral’ responsibility once the new legislation comes into force and do not harass the issuer. According to the new law, issuing a cheque that bounces due to inadequate funds in a bank will be a criminal offense punishable with three months to three years’ imprisonment or a fine of QR3,000 to QR10,000 or both.

The punishment would, however, not mean that the offender does not have to pay the cheque amount in question. He will be required to pay the disputed sum along with legal and other expenses, said the participants. However, cheques that bounce after being deposited six months after they are issued would attract no legal action at all, the new law makes it clear.

THE PENINSULA

Source ::: The Peninsula / By MOBIN PANDIT & MOHAMED SAEED