Returned Loan Guarantee Check: How to Stop Bank Execution?

You have received a notice from the execution court that the bank has filed the security cheque for your loan for enforcement, even though you have already repaid a large part of the loan, and the cheque itself was a blank cheque you signed on the day you signed the loan agreement? This is one of the most common situations that reach a cheque lawyer in Dubai. The direct answer: yes, you can object, and the correct route is to file an execution objection (an execution dispute) before the execution judge, showing that the cheque is a security cheque for the loan and not a payment cheque, that the amount written on it does not match the real debt after your partial repayments, and that the dispute between you and the bank is a substantive dispute over the amount of the debt, not merely a bounced-cheque case.

In this article we explain, under the Commercial Transactions Law and the Civil Procedure Law, how to file the execution objection before the execution judge, which documents prove the partial repayment and that the cheque was blank, and when the execution judge decides to stay the enforcement of a bounced loan security cheque.

Loan security cheque bounced: how do I stop the bank's enforcement and file an objection before the execution judge?

A bounced loan security cheque: what does it mean legally?

When granting a loan, the bank asks the customer for a signed cheque, usually blank or for the total value of the loan, and calls it a security cheque. When the customer falls behind on instalments, the bank fills in the cheque with whatever amount it sees fit, presents it for payment, the cheque bounces for insufficient funds, and the bank then takes it to the execution judge as a bounced cheque.

The problem is that the law knows nothing called a security cheque. Under the Commercial Transactions Law a cheque is a payment instrument payable on sight, and writing the word security on it does not change its nature before the drawee bank or before the execution judge at the first stage. But this does not mean the bank can collect whatever it likes: enforcement is limited to the real debt actually due, not to the figure the bank wrote on the cheque. We explained the background in Guarantee Cheques in the UAE: Issues, Solutions, and Objection Methods and in Reasons for Check Bounce in UAE and Criminal Reporting.

Can the bank enforce the security cheque directly without filing a lawsuit?

In principle, yes. Under the Commercial Transactions Law, a cheque returned for lack or insufficiency of funds has become an executory instrument, and its holder may take it directly to the execution judge without filing a substantive lawsuit and obtaining a judgment. Banks know this advantage well and use it, because an execution file opens the door to attachment of accounts, salary and vehicles, and to a travel ban request, within a short time.

However, the executory force of the cheque does not mean the amount written on it is correct and final. The Civil Procedure Law permits compulsory enforcement only for a right that is certain in existence, determined in amount and due for payment, and the Commercial Transactions Law obliges the drawee bank to make partial payment up to the available balance and to hand over the original cheque endorsed accordingly, while referring any dispute over enforcement of the cheque to the execution rules before the execution judge. This is where your role begins: moving the file from a mere bounced cheque to a substantive dispute over the amount of the debt. See also Suspension of Execution and Annulment of Executive Document in the UAE for the cases in which enforcement is stayed.

The objection before the execution judge: the difference between a provisional objection and a substantive dispute

Under the Civil Procedure Law, the execution judge alone has jurisdiction, as a matter of urgency, over substantive and provisional execution disputes. You need to distinguish between two kinds of application:

• The provisional objection: an application to stay enforcement temporarily until the merits of the dispute are decided. It is assessed on the face of the documents without examining the underlying right, for example that the debt is not yet due because the loan is payable in instalments and the bank has not claimed acceleration. A security deposit of AED 5,000 is lodged on filing and is refunded if the objection is accepted.

• The substantive dispute: an application for a decision on the underlying right itself, namely that the amount claimed is not due, wholly or partly, because you repaid part of the loan, or because the cheque was filled in with an amount that contradicts the loan agreement and the account statement.

One point you must know before anything else: filing the objection does not stay enforcement automatically. If the execution judge finds that the objection submitted to him is in reality a substantive dispute, he directs you to file it within 7 working days, enforcement continues unless he issues a stay decision, and no later objection stays enforcement. That is why the objection petition is drafted from the outset on the basis that your dispute with the bank is substantive: the amount of the debt after partial repayment, the validity of the way the cheque was filled in, and the way interest and fees were calculated, which we detailed in Can Banks Claim Contractual Interest for Loan Delays?. The execution judge's decision on determining the enforced amount and on whether to continue enforcement may be appealed directly before the Court of Appeal.

How do you prove that the cheque was a security and that the amount written on it is wrong?

The burden of proof here falls on you, because the cheque is a commercial instrument bearing your signature. Under the Evidence Law in Civil and Commercial Transactions, witness testimony is not admissible to contradict or go beyond the contents of written evidence, and the balance of a right may only be proved in writing. Here lies your advantage: most of your evidence consists of documents issued by the bank itself, and extracts from electronic payment systems have the evidential value of electronic evidence.

• The loan agreement: it usually states expressly that the cheque is delivered as security for the facilities, which proves its nature.

• The loan account statement and instalment receipts: they prove the partial repayment and show the true remaining balance, exposing the inflated amount on the cheque.

• The liability or settlement letter: any correspondence from the bank stating an amount different from the cheque amount supports your defence.

• The blank cheque: differences in handwriting or ink between the signature and the amount and date, a request to produce the original cheque, and where necessary the appointment of a handwriting expert. See also Is Completing a Blank Signed Check by the Beneficiary Forgery?.

• Appointment of a banking expert: ask the execution judge to appoint an accounting expert to calculate the actual indebtedness after deducting what was paid and excluding any fees or interest not agreed upon.

If some payments were made in cash or by transfer without a receipt, see Proving Debt Without Written Evidence in the UAE and Are WhatsApp Messages Proof of Loans and Debt Claims?.

Filing the objection before the execution judge step by step

Can a bounced loan security cheque turn into a criminal complaint?

Since the amendment of the Commercial Transactions Law, the bouncing of a cheque for insufficient funds is no longer a crime in itself, and the route has shifted to direct civil enforcement. Offences remain confined to bad-faith conduct, such as instructing the bank not to pay without a legitimate reason, closing the account or withdrawing the entire balance before the cheque is presented, signing in a way that prevents payment, or forging the cheque. If you have done none of these, your case with the bank is purely civil.

Moreover, under the Commercial Transactions Law the criminal action in cheque offences is extinguished if the full value of the cheque or its balance is paid before compulsory enforcement begins, or if a settlement is reached. Conversely, if the bank or its employee filled in the cheque with an amount or date contrary to what you agreed in the loan agreement, the matter deserves legal study, because misuse of an instrument delivered by way of security may fall within breach of trust under the Crimes and Penalties Law, in addition to its civil effect on the validity of the amount. Details of the criminal side are in Cheque Regulations in the UAE: Crimes, Enforcement, and Legal Rights and When is an Arrest Order Issued for Cheque Cases in UAE?.

Legal time limits you must watch

Practical tips before filing the objection

Legal references

• Federal Decree-Law No. 50 of 2022 on Commercial Transactions

• Federal Decree-Law No. 42 of 2022 on Civil Procedure

• Federal Decree-Law No. 35 of 2022 on Evidence in Civil and Commercial Transactions

• Federal Decree-Law No. 31 of 2021 promulgating the Crimes and Penalties Law

• Federal Decree-Law No. 38 of 2022 on Criminal Procedure

• Federal Decree-Law No. 14 of 2018 on the Central Bank and the Regulation of Financial Institutions and Activities, and the Central Bank's Consumer Protection Regulation

Frequently asked questions about bounced loan security cheques and execution objections