P L d 2000 s c 225 (Riba prohibition stayed)

 

 

 

However, this principle of equating paper money with gold and silver may be applied to stable currencies without any difficulty or problem. The problem arises when we deal with a currency which has no stability. As far as the minor inflationary or deflationary trends are concerned the tendency of Shariah is to ignore them and to leave them to be determined by the independent market forces provided they are operating in an atmosphere of freedom, fairplay, justice and law-abiding market. But if the inflationary trend exceeds its natural limit and renders the currency totally unstable and undependable it can no more be equated with gold and silver. Here, an important question arises: How to decide whether a level of inflation is within the normal limits or has exceeded the acceptable normal limit. Unless this important question is decided the solution of the problem of inflationary trends and to save the rights of the creditors is not possible. The Qur’an requires (al-Baqarah: 287) that neither the creditor is done injustice nor the debtor. It also requires (al-Araf 85, etc.) that peoples’ money should not be reduced. In view of these two Qur’anic injunctions if the inflation rate exceeds the limits of justice and fairplay steps shall have to be taken to protect the creditor from suffer and loss. But the problem is that inflation is not a simple and easy-to-understand phenomenon. It is a complicated issue which can be solved only through a long-term planning and major changes in the fiscal, monetary and economic policies of the country. There are a number of forces which contribute to the emergence of hyper-inflation or galloping inflation. We will, however, deal with this question shortly.

 

 

 

The principle of controlling Ghabn Fahish may be invoked to protect the rights of the creditor and to save him from loss. The Ghabn Fahish, which literally means excessive loss, has been defined as a loss which cannot be estimated by the experts. Muslim jurists have variously defined the amount which may be considered to be falling under Ghabn Fahish. What may be concluded from their discussion on the subject is that i an inflation which reaches the stage of hyper-inflation or galloping inflation is to be treated under the principle of Ghabn Fahish and would call for steps to be taken for the protection of the rights of the creditor. Here, the principle developed by the jurists in respect of fulus seems to be applicable. They have concluded that if the circulation of the copper coins is stopped or the value of the fulus substantially falls as compared to their face value, they will loose their status as medium of exchange and stock of value and will no more be considered as Thaman Istilahi or legal tender. In such a case the original value of the fulus as prevalent at the time of the transaction shall have to be paid. Under this principle as long as a currency continues to be within the normal limits of inflation, the difference of its latent value will have to be ignored and all transactions, payment and repayment will have to be made on the basis of its face value. But as soon as it exceeds that limit and enters the province of hyper-inflation it will be taken to have caused Ghabn Fahish to the creditor. Now, if the creditor is paid the same currency on the basis of its face value it will be an injustice to him in terms of Qur’anic verses quoted above. In that case he will have to be paid in accordance with the actual value of the currency as existed at the time of the contract. There have been jurists who are of the view that the payment should be made according to the value which existed at the time when the reduction in the value took place. But it is difficult to agree to this proposition in the context of inflation affecting the paper money. In the case of fulfus it was possible to identify a particular date on which the value was reduced but it is not possible in the context of a paper money always to identify the particular date on which the hyper-inflation took place. Inflation is a continuing and on-going process. Sometimes it continues to be within the normal limit while sometimes it crosses that limit and is called hyperinflation. If demonetization or devaluation takes place by an order or decision of the Government which substantially reduces the value of money we may take that particular date to determine the value to be paid to the creditor. But in cases where a formal devaluation or demonetization has not taken place it may not be possible to determine with certainty and exactitude as to the date on which the hyper-inflation took place. In view of this absence of certainty and exactitude the safest way is to fall back on the date on’ which the transaction had taken place.

 

 

 

It has been asserted time and again by many people that whether bank interest is Riba as interpreted by Jassas does not include bank interest. This has been claimed by Mr. Khalid M. Ishaque as well as some other scholars whose writings have been placed before us in support of this contention. However, when the views of Jassas are examined in the light of his own writings, particularly his commentary on the Qur’an this assertion turns out to be baseless. He says in his Ahkam al-Qur’an (Volume 1, page 551) that ‘ in Shariah, the term Riba also includes meanings and  situation which did not fall under the literal meanings of Riba as generally understood by the Arabs. The well-known statement attributed to Hazrat Umar (r.a.) refers only to those meanings and situation. The reason is that the word Riba has become a term of the Shariah after the revelation of the Shariah and it needs elaboration as far as the extension of its meaning to this new situation is concerned. Hazrat Umar only referred to this elaboration, otherwise, there is no question of these aspects being hidden from Hazrat Umar. The form of Riba prevalent among the Arabs was that they advanced their capital such as Dirhams, Dinars etc. to people on the condition that the debtor will return this capital to the creditor at the maturity date along with the access determined by the creditor.’ This statement of Abu Bakr Jassas is not only very comprehensive but repels several misunderstandings created by some modern writers. It clearly shows that the concern of Hazrat Umar was never in respect of the prevalent and known forms of Riba. It was only about those new forms which were declared to be Riba for the first time by the Shariah in addition to the existing form or forms. Secondly, he clearly says that the definition of Riba is so clear and well-known that it could never be unknown or unintelligible to a man like Hazrat Umar. Thirdly, lie clearly and emphatically identifies the form of Riba prevalent in pre-Islamic Arabia.

 

 

 

A survey of the literature on Hadith, Tafsir and pre-Islamic history clarifies beyond any shadow of doubt that in spite of the variety of the forms of Riba, the common element in all these forms was the stipulated increase demanded by the creditor over and above the principal amount payable in a contract of loan or sale. Tabari, Jalaluddin Suyuti, Ibn-i-Kasir and Mahmood Alusi in their respective commentaries have collected example, of various transactions prevalent as Riba during the pre-Islamic days ‘these forms can be reduced into the following:

 

 

 

(i) Charging of interest on a loan advanced to a debtor to consideration of the time allowed for repayment. (al-Durr al-Manthur. Volume 1, page 366). This is the simplest form of Riba and undoubtedly includes the present day banking interest.

 

 

 

(ii) Compound interest charged on the principal amount and the interest accruing thereto in case the debtor failed to pay the debt at the appointed time. This was the case of charging interest at exorbitant rates doubling and redoubling the principal amount. The reason of singling out this form of Riba in Verse No. 130 of Aal-i-Imran is that it was so obviously evil and heinous that every single person agreed that it should be prohibited. This form of compound interest had a tendency of doubling and redoubling the payable amount. The interest charged by many of our banking and non-banking financial institutions definitely falls under this category where in spite of paying double the amount a poor debtor is chased by the creditor.

 

 

 

(iii) The creditor would require the debtor to mortgage his valuables such as ornaments, jewellery and weaponry by fixing its price much lower than its actual market value. The loan was advanced keeping in view the lower price of the mortgaged property. They settled their claims by either confiscating the mortgaged goods or selling them at a higher price in the market.

 

 

 

(iv) As has been expressly reported by several authorities the creditor advanced commercial and productive loans on interest to leading businessmen and entrepreneurs. The principal amount along with the interest, both simple and compound, had to be repaid by the debtor irrespective of the success or failure of the business or enterprise. Hazrat Abbas used to advance such loans before Islam and it was this kind of interest which was abolished by the Holy Prophet (peace be upon him) in his Farewell Address (see among other sources al-Durr al-Manthur, Volume 1, page 364).

 

 

 

(v) Animals and cattle, particularly camels, were also advanced by way of loans and the animals to be repaid were required to be in higher in age than those originally loaned. In case the debtor was unable to pay at the maturity date the requirements of the animals in terms of age etc. were increased and, thus, the creditor would receive ultimately a fully developed and grown up he- or she-camel in return of a young child-camel of one year or even lest.

 

 

 

All these forms are included in what he has been called as Riba al-Nasiah (or interest on deferred payments), Riba al-Duyun (or interest on loans). Riba al-Jahiliyyah (or interest prevalent in pre-Islamic Arabia), Riba al-Qur’an (or interest prohibited by the Qur’an), Riba Jah (or express interest) or Riba Haqiqi (or real interest). These are various names given only for convenience and facility of understanding by various scholars to one and the same thing. This kind of Riba was known to the Arabs both before Islam and also at the time when the revelation regarding the prohibition of Riba was given. This kind of Riba is to be distinguished from the second category introduced by Islam by way of preventive measures. The Arabs did not consider this second kind of transaction to be Riba before its prohibition by the Holy Prophet (peace be upon him). This has been termed by the jurists as Riba al-Buyu (or interest on sales), Riba al-Naqd (or interest on cash), Riba al-Fadl (or interest by way of excess), Riba Khafi (or tacit interest) or Riba al-Hadith (or interest prohibited by the Hadith).. The variety of names given to these two categories of Riba is sometimes confusing to non-experts and has led some scholars to misunderstand and misinterpret the relevant texts and passages of jurists. As the first category of Riba was clearly and unequivocally understood by all and sundry, the jurists did not discuss it in much detail. Most of the discussion in the fiqh books is concentrated on the second category because it was something new and prohibited for the first time in Islam. This second category of Riba has been defined as the excess of one of the commodities in a sale of barter or exchange of cash if both the commodities are the same. Thus the exchange of wheat for wheat or gold for gold or silver for silver with excess or deferred payment on either sale has been declared as Riba al-Fadl. However, we shall come to this category of Riba later.

 

 

 

Muslim Scholars have addressed themselves to the important question of the rationale of the prohibition of Riba. These include both classical writers and commentators of the Qur’an as well as the modern Muslim writers. The well-known commentators of the Qur’an, Imam Fakhruddin Razi and Allamah Khazini have identified the following main reasons for the prohibition of Riba. Firstly, Riba-based transactions have a tendency of eating up .people’s money without consideration. A habitual interest eater gets money without any risk or labour whether the transaction is on the basis of cash payment or on the basis of deferred payment. Secondly, when interest gains currency it prevents people from productive activities such as trade and commerce with the result that this sphere of human activity withers away. Thirdly, interest puts an end to the pious act of giving free loans to people. If the interest is prohibited people would be happily prepared to give consumption loans to the needy persons in the society. Fourthly, for a Muslim, the very fact that the Qur’an has prohibited Riba is sufficient to abstain from it without seeking any further rationale or wisdom to justify its prohibition. Fifthly, the Riba-based transactions have a strong tendency of causing injustice to the poor and to add to the wealth and affluence of the wealthy. Similar views have been expressed by Sayyid Qutb in his well-known commentary Fi Zilal al-Qur’an (Volume III, page 33). He says that the hallmark of an Islamic society is love and respect of each other’s rights by the members of the society. People should demonstrate moral purity and good behaviour. When a person demands interest from another  person he can do so only after divorcing himself from good morals and conscience and whenever a society adopts this practice the whole society becomes devoid of mutual love, affection and the spirit of cooperation. Shaikh Muhammad Abu Zahrah, a leading jurist of modern Egypt considers injustice to be the basis of the prohibition of Riba. Injustice has been condemned and prohibited in respect of everyone. It is not something which may be prohibited for some people and may be accepted as permissible for others. The Holy Prophet (peace be upon him) reports that Allah, the Almighty, has said: “My Servant! I have declared injustice to be prescribed for Me and prohibited it to be practised among you. Therefore, do not deal with each other unjustly”. Similar grounds have been mentioned by other commentaries of the Qur’an. In particular, the moral aspects of interest and its social implications have been highlighted by many jurists and the commentators of the Qur’an. Reference may be made to Qadi Sanaullah Panipati and Shaikh Abdul Haq Muhaddith Dihlivi. The former, a leading authority on Tafsir in late 19th Century Muslim India, has discussed the moral, spiritual and social implications of eating interest. He says that every human action has an impact on the inner psyche and the spirit of the person concerned. When a person commits an act in a habitual way, it becomes part of his personality and becomes integral to his spirit and psyche. Experience has shown that interest hardens the hearts and inculcates misery in the life of many and creates cowardice to such an extent that it cannot be properly explained (Tafsir Haqqani, Volume III, page 20).

 

 

 

In view of the clear and express prohibition of Riba, particularly Riba al-Nasiah, there is a unanimity among the jurists that if a person denies the prohibition of Riba al-Nasiah (interest payable on debts) and claims that it is not prohibited shall be treated to have denied an essential of Islam and shall be considered to be outside the fold of Islam. This view has been recorded in Mirqat, a commentary of Mishkat, a well known collection of Hadith (Volume III, page 313) as well as in Sawi’s commentary of Jalalayn (Volume 1, page 116).

 

 

 

The upshot of this discussion is that the classification of Riba as made by Muslim jurists right from the beginning, has been mostly to facilitate understanding its rationale and grounds of prohibition. The most important and fundamental classification is that of Riba al-Nasiah and Riba al-Fadl. Generally, the former is considered to he the Riba par excellence while the latter was included in the definition of Riba by way of extension by Prophet (peace be upon him) to foreclose any possible avenue or backdoor to have access to Riba. Nasiah ‘or Nasi literally means deferment or postponement. The term Plasi has been used in the Qur’an in another context to convey the meaning of deferment and postponement in the Qur’an (Chapter IX: 37) the term Nasi has been used in the sense of interchanging the months of the calendar with a view to postpone the month of Hajj to avoid certain prohibitions which were in vogue in pre-Islamic Arabia. This literal meaning of Nasi and Nasiah is an integral part of the technical meaning of the term Riba al-Nasiah which simply means increase of a debt i.e. a deferred payment. There have been various forms of charging this increase as well as the deferment of the payment but tile variety of form of increase or the mode of deferment was never held qtr understood to have any impact on the prohibition of Riba. According to the unanimous view of Muslim Jurists any stipulated increase on the principal amount to a deferred payment is Riba. Some scholars have called this form of Riba as the Riba par excellence, Riba al-Qur’an, Riba al-Jahiliyyah. It was called the Riba par excellence because this is the most important and most widely prevalent form of Riba. It is also the earliest form of Riba prohibited in almost all the major religions of the world as we shall sec later, it was called Riba al-Jahilivvah because it was the most popular mode of Riba in practice during the Days of Ignorance. It is called Riba of the Qur’an because this form of Riba was directly hit by the Qur’anic prohibition. Those who think these arc different fortes or categories of Riba are mistaken as the nature and the definition of all these forms is one and the same. Riba al-Nasiah is further classified by some latter writers into simple Riba and compound Riba. However, these latter categories might have some importance for purposes of calculation and accounting, they have no relevance as far as the prohibition is concerned. An increase on the principal amount, whether simple or compound, falls under Riba and is prohibited. Some writers of the recent past have tried to build-tin a theory according to which only compound interest would fall under Riba and simple interest would be permissible. They rely on Chapter III: 130 of Qur’an where the believers have been forbidden to eat Riba doubled and redoubled. On a deeper examination this logic is eroded when seen in the light of other Qur’anic verses on the subject, particularly verses 278-279 of Chapter II as well as the bulk of Ahadith on the subject. In order to understand the historical context and the chronological order in which the Qur’anic verses on Riba were revealed a brief discussion on these verses is needed. This discussion, in fact, is mostly based on the study made by Dr. Sayyid Tahir who placed before the Court his valuable article entitled Qur an and Riba, published in the Qur’anic Horizons, Lahore, April-June, 1996.

 

 

 

The first Qur’anic revelation on Riba is 30:39, which is a Makkahn Surah. According to Maulana Abul A’ala Maududi (TaJheem-u1-Qur’an, Vol. 3, pp. 726-7), its time of revelation is 5 years before the Hijrah of the Prophet (peace be upon him). Maulana Amin Ahsan Islahi (Tadabbur-eQur’an, Vol. 6, pp. 90--100) notes that the verse is a part of the message in which Muslims are advised to become single-minded about Islam as the way of life. For this purpose, the suggested line of action is (i) development of Taqwa, (ii) extreme caution against shirk, (iii) establishment of Salat, (iv) spending on one’s near-relatives, the destitute, and the wayfarer, and (v) caution against Riba. The verse 39 of Surah Rum emphatically says that the Riba-based investments on your part which you undertake, in order to increase your wealth on the basis of other people’s (i.e., the borrowers’ assets, do not increase from the point of view of Allah. However, rest assured about the acceptance of what you give by way of Zakat for the sake of Allah; those who give Zakat are the ones whose net worth increases manifold with Allah. This verse is a complete message in itself. It contain reference to the undesirability of Riba which appears in the perspective of lending, and Zakat in the general sense of charitable and other expenditures for the sake of Allah. The verse laid the seed of Riba-free economic system which was to be given to the Muslim society later.

 

 

 

The second verse to the chronological order is 4:160. The circumstances at the time (e.g., the expulsion of Bani Qainqa’ from Madinah in Shawwal 2 A.H.) and the text of the verses implies that they were revealed quite early in the Madinan period. Al-Nisa 4:153--162. is in response to a provocation by the Jews of Madinah whereby they sought through the Prophet (peace be upon him) the revelation of a book directly from the Heavens exclusively for themselves. Almighty Allah (SWT) did not respond to this absurd demand, but observed that they belonged to the same lot who wanted to see Him during the time of Prophet Musa and then went to disobey Him time and again.  After this, Allah the Almighty recounts the major crimes of the Jews, which invited His wrath on them. In this perspective, the verse 160 and its companion verses 161 and 162 are as follows:-

 

 

 

We (i.e., Allah) decreed many a previously permitted things haram  for the Jews, because: (i) they did zulm; (ii) they stopped others from the Way of Allah in virtually all matters (Al-Nisa 4:160); (iii) they charged Riba despite being forbidden to do so: and (iv) they ate into the wealth of others without any Shariah justification- And, We have prepared a painful doom for these disobedient persons (Al-Nisa 4:161). However, We will give a great reward to those (among the Jews) who are clear-minded about the truth, without a grain of doubt, and who believe in the Qur’an and all other Revealed Books, establish Salat, give Zakat and believe in Allah and the Day of Judgment. (AI-Nisa 4:162).

 

 

 

These verses are self-explanatory. Though their immediate addresses were the Jews of Madinah, in the general style of the Qur’an they are also meant to bring the likes and dislikes of Allah to the attention of the Muslims.

 

 

 

The third revelation on Riba consists of Aal-i-Imran, 130--136. Among these verses, the verse 130 is the principal one, and the remaining six verses reinforce its message. According to the commentators (for example) Maulana Amin Ahsan Islahi Tadabbur-e-Qur’an, Vol. 2, pp. 167- 234), this passage was revealed after the Battle of Uhad that took place in Shawwal, 3 A.H. These verses are as follows---:

 

 

 

O Believers, don’t eat Riba on top of Riba. And, he afraid of Allah so that you may be successful (Aal-i-Imran, 130). And, be afraid of the fire of Hell, which is prepared for the disobedient (Aal-i-Imran. 131). And, obey Allah and the Messenger (s.a.w.) so that you mad benefit from Allah’s Mercy (Aal-i-Imran, 1321. And, rush toward the forgiveness of your Lord and the Paradisc whose boundary spans the heavens and the earth; it (the Paradise) is prepared for the Allah-conscious. (Aal-i-Imran; 133).;

 

 

 

 (As to who are the J Allah-conscious note that) They are the people who spend for the sake of Allah in both good and bad times, who control their temper and who forgive others. Surely Allah holds such mohsineen very dear (Aal-i-Imran, 134). Moreover, they are the ones who, in the event of committing any mistake or anything against themselves to remember Allah and seek His forgiveness for their sins. After all, who is it except Allah who can exonerate failings? Furthermore, they are the people who do not insist on their mistakes knowingly. (Aal-i-Imran, 135).