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

 

In the popular version of the Ahadith on Riba al-Fadl, six commodities have been mentioned as quoted above. Yet, in another version, a companion Mamar ibn Abdullah reports that he used to hear the Prophet (s.a.a.w.) as saying: “Food for food (should be purchased) equal for equal.” He further reports that to those days their popular food was barley. In yet another version, Ubadah and Anas, the two leading companions, report that the Prophet has said “What is weighed is to be equal for equal as long as it is one and the same kind of commodity. Likewise is the case of what is measured. But if the two kinds are different then there is no harm (if it is sold differently.)”

 

 

 

These last two versions quoted by Imam Ahmed and Muslim and Darqutni respectively clearly establish that the common ground in all the above commodities is weight and measure, i.e. their fungibility: Thus, all fungible or nithli commodities shall be subject to the prohibition of Riba. We shall, however, revert to the subject of fungible and non-fungible kinds of property at a later stage. The general principle is that the exchange of a fungible commodity with the same commodity is allowed only if both the commodities are of the same quantity and are delivered then and there. But if the commodities are different, these may be sold with a difference in quantity as long as delivery is immediate. On the other hand, Imam Shafi’i has a slightly different view. He agrees with Imam Abu Hanifah in respect of silver, gold and cash but limits the application of the prohibition of Riba to only those commodities which are either edible or are common in their genus. The rest of the fungible items even if they are weighable cannot be included in the same category of prohibition with gold and silver. In support of his ruling to consider edibility as a deciding factor, he relies on the Hadith dealing with food for food quoted above. Imam Malik also has the same view as far as gold and silver are concerned. In respect of other items he considers fungibility and edibility as the Illah or ratio decidendi. However, the last-mentioned Hadith clearly supports the point of view of Imam Abu Hanifah that the prohibition applies to all fungible items. However, the discussion on this kind of Riba in so far as it relates to fungible commodities other than silver, gold, cash and currency is outside the purview of bank interest. For our purpose in the present discussion, it is relevant only to the extent of gold and silver, i.e. cash and currency, as far as it relater to banking and other monetary transactions.

 

 

 

It appears from a Tradition reported by Bukhan and Muslim and other traditionists on the authority of Abu Said Khudri that the tendency of Islam is to encourage monetary transactions as far as possible and to limit the scope of barter dealings to the minimum required. According to this tradition, the Messenger of Allah appointed a person on some assignment in Khyber (perhaps as a collector of revenues and Zakat). He brought dates of good quality. The Messenger of Allah asked him: “Are all the dates of Khyber like this one?” The man replied: “In fact we purchased one measure of these dates for two or two of these for three other kinds of dates: The Prophet declared it to be Riba, revoked the sale and forbade the person from doing it. He advised the man to sell the ordinary dates on cash in the open market and then to purchase dates of a better quality on cash. He also advised to adopt this procedure in all weighable items. This last sentence further supports the opinion of Imam Abu Hanifah that all weighable and measurable items are subject to the prohibition of Riba. The ground of this prohibition is that the principle of exact similarity is impaired. The Shariah has emphasized the principle of similarity and exactitude of the two commodities in sale and purchase to the maximum possible extent and any increase on one side only invalidates the contract. The parties should clearly know that both the commodities are exactly equal to each other in term of their quantities. The principle is that the lack of knowledge about the equality of the two commodities shall be presumed to be like having knowledge about the existence of the increase. Imam Shawkani has adopted this maxim as a title to a chapter in which he quotes the following Hadith: “It is reported from Jabbir who says that the Messenger of Allah has prohibited the sale of a heap of dates whose quantity is not known for another quantity of dates whose quantity is known”. Commenting on this Hadith which is -originally reported by Muslim and Nasai, Imam Shawkani says that the sale of one kind of commodity for that very kind is not allowed if the quantity of one of them is not known because a knowledge with certainty that both the commodities are exactly equal in weight and quantity is a precondition of the contract of sale. Without fulfilling this condition the sale will be invalid. Imam Shawkani further says that the ignorance of the quantity of one or both the commodities is always subject to the possibility that the quantity of one commodity may be bigger or smaller than the other commodity and that whatever is subject to this possibility shall be prohibited and should be avoided. The prohibition of this sale is not only because it has the possibility of the involvement of Riba but also the involvement of Gharar, or the uncertainty and speculation which may lead to dispute and litigation.

 

 

 

On the other hand the sale of non-fungible things is allowed both with increase as well as with deferred payment. There are Ahadith reported by Bukhari, Muslim, Abu Dawood, Trimidi, Nasai, Ibn-i-Majah, Imam Ahmad, Imam Malik, Dar Qutni, Bayhaqy, and others on the authority of Jabbir, Anas, Abdullah Ibn-i-Amr, Ali ibne Abi Talib, Samurah and several other companions to the effect that non-fungible thing may be sold with increase and deferred payment. In these Ahadith, instances have been reported where the sale of one camel of high breed for two, three, four or even twenty camels of a lower breed both on cash as well as deferred delivery may be allowed. Explaining this permission, Hazrat Abdullah ibn Abbas says that one camel (of high breed) may be costlier than two. It has been reported by Imam Bukhari and Imam Abdul Razzaq that Hazrat Rafi Ibn Khadij, a companion, once bought one camel for two camels and delivered one camel on the spot and promised to give the delivery of the other, next day. On the basis of these authorities Said ibn al-Musayyib, the most prominent Follower, has laid down the maxim, as quoted by Imam Bukhari, Imam Malik and Imam Ibn Abi Shaybhas, that there is no Riba in (sale and purchase of) animals. Similar views have been expressed by Ibn Sirin, another leading Follower. This has been the opinion of the overwhelming majority of the Jurists. But this applies only to such animals which are considered qimi or non-fungible in the market. As regards such animals as are treated fungible in the market, the prohibition will apply.

 

 

 

An important question relevant to the problem of Riba is that of the contract of `Inch’ which has been prohibited by the Prophet of Islam (p.b.u.h.). It has been reported by Tabarani, Imam Ahmad and Abu Dawood on the authority of Hazrat Abdullah Ibn-i-Umar that the Holy Prophet (p.b.u.h.) has said “when people become miserly and niggard about Dinars and Dirhams and enter into transactions on the basis of ‘Inah’, stick to their cattles and agriculture and abandon the Jihad in way of Allah, Allah imposes on them a colossal trial and disgrace and He will not lift it until the people revert back to their Din”. In this Hadith the term ‘Inah’ is very significant. Literally it means purchase on credits, sale on deferred payment or sale on the basis of loan. If the literal meaning of the word ‘Inah’ is taken then the Hadith would mean that the economic activity based on credit and loan brings ordeal and disgrace to people. However, the scholars of Hadith have mentioned a particular kind of sale which was known with the name of ‘Inah’. According to Firuzabadi, the well known classical Arabic lexicographer, the Inah sale was that a person would sell his commodity for a price to be paid later and then would re-purchase it back from him for a lesser price. The same explanation has been given by Imam Rafi’i. His explanation of the Inah sale is more elaborate. He says that in an lnah sale the seller would sell his commodity for a price to be paid later and would make the delivery of the commodity to the buyer and then would purchase it back before receiving from him the delivery of the price for a cash price lesser than the previous price. This explanation shows that it was similar to the buy-back agreement prevalent today. As a further support to the prohibition of this kind of sale, Ibn Qayyim refers to the Hadith reported by Imam Awzai that the Prophet (p.b.u.h.) has said: “A time shall come to mankind when they will legalise Riba under the garb of trade”. Commenting on this practice Ibn Qayyim says that in effect “it is an open and clear Ribabased transaction on which both the parties are agreed before entering into the actual contract. Only its name has been converted and an outer term of trade has been used without being actually intended. It is nothing but a trick, fraud and deception perpetrated against Allah the Almighty”. Ibn Qayyim further says that such tricks cannot affect the prohibition of Riba and cannot eliminate the evils because of which Riba has been prohibited. Rather, such tricks add further force and emphasise to those evils.

 

 

 

It has been pointed out elsewhere that the tendency of Islam is to discourage barter system and to encourage monetary economy as far as may be practical. The Holy Prophet (p.b.u.h.) issued certain instructions and laid down several principles which discourage barter trade. The prohibition of the exchange of fungible goods with the same fungible goods if they are of the same kind is a clear indication of that tendency. This is also supported by a Hadith reported by Imam Ahmad, Abu Dawood, Ibn Majah and Hakim on the authority of Abdullah ibn Amr al Mazini who says that the Messenger of Allah has forbidden from melting the coins prevalent and current among the Muslims without any excuse and to convert the Dirhams into silver and the Dinars into gold. Imam Shawkani extends the prohibition to the melting of other metallic coins or the fulus as well, particularly when these are current and popular among the Muslims. The wisdom of this prohibition, according to him, is the harm caused to the people by the reduction in the supply of available Dirhams and other coins as ‘a result of their melting and the resultant stoppage of their circulation. It shows that Muslim jurists were aware of the impact of the increase and decrease in the circulation of money on the inflation and deflation respectively. Ibn Ruslan has however exempted from this prohibition to melting of those coins which have been demonetized and substituted by new ones. According to him in such a situation the melting of the demonetized Dirhams is allowed with the purpose of extracting the gold or the silver from them.

 

 

 

In order to pre-empt the possible avenues and to foreclose the doors of tricks that may possibly be employed to enter usurious transactions through backdoors, the Prophet of Islam discouraged practices and modes of trade which could possibly be resorted .to for this purpose. One such example is found in the case of Hazrat Fadalah ibn Ubaid the details of which have been recorded by Muslim, Nasai’, Abu Dawood and Tirmidhi. Hazrat Fadalah reports: “On the day of Khyber I bought a necklace for twelve Dinars. (A dinar of Madinah was a golden coin of almost 4.5 grams of gold). The necklace contained some gold and some precious stones. When I separated the two I found that it contained more than twelve Dinars of gold. I mentioned it to the Prophet (p.b.u.h.). The Prophet said that it cannot be sold unless it is separated. The companion said: “I only wanted to purchase the stones”. The Prophet said: “No you cannot purchase it unless you separate the two”. The reporting companion says that the Prophet ordered him to revoke the deal until such time when the two were separated. It may be mentioned that he had purchased the necklace for seven or nine Dinars. The principle derived from this Hadith is that any deal in which a quantity of gold is sold for a smaller or larger quantity of gold is invalid whether it is the exclusive sale of gold or it includes other commodities.

 

 

 

This principle will also apply to all such commodities in the exchange of which the law of Riba al-Fadl applies. This principle is also supported by the Hadith which prohibits the sale of an unknown quantity of wheat for a known quantity of wheat as already pointed out. It is also supported by the Hadith in which the sale of one kind of dates for another kind of dates without weighing the two has been prohibited because of the absence of definite knowledge and verification of the quantity of the two commodities with exactitude. Likewise, is the case of necklace it was difficult to determine the weight of gold included in the necklace without it being separated from the stones. Moreover, mere separation is not sufficient for sale but it is to be ensured that the quantity of gold taken from the necklace was exactly equal to the quantity of gold represented by the Dinars. A large number of jurists including Hazrat Umar, Imam Shafi’i, Imam Ahmad and Imam Ishaq are of the view that the sale of a commodity which includes gold or silver as a part in any ratio is prohibited. However, Imam Abu Hanifah and some other scholars hold a different view. On the basis of the details reported about the case of necklace, Imam Abu Hanifah is of the view that if the gold included in the necklace etc. is lesser than the price offered the deal is allowed. He considers the excess amount to be the price of the stone. While the price of the gold will be presumed to be exactly the equal amount out of the Dinars paid. Imam Malik also holds a similar view but with a slight variation. He says if the gold does not constitute major component of the goods and the gold component in the commodity is less than one-third its sale is allowed without separating the two.

 

 

 

Another example of preventive measures taken by the Prophet to close backdoors of Riba is the prohibition of ‘Muzabanah’ sale which was prevalent in Madinah. It was the forward sale of dates while they were still on the trees for a certain quantity of ripe dates delivered at the time of the deal. This prohibition has been reported among others by Imam Bukhari and Imam Muslim on the authority of Hazrat Abdullah Ibne Umar. Muslim adds in one of his versions and the Messenger of Allah also prohibited the sale of any fruit without weighing it. In a Hadith reported by all the five major compilers of the Hadith Saad Ibn Abi Waqqas says that he heard the Prophet being asked about the sale of dry dates for fresh dates. The Prophet asked those around him: “Do fresh dates get reduced in weight when they are dried up?” They answered in the affirmative. The Prophet then forbade it.

 

 

 

On the basis of these Ahadith the overwhelming majority of Muslim jurists hold that the sale of unknown quantity of any commodity is invalid if the commodity is mithli or fungible. These examples show how the Shariah is sensitive about Riba and its contributives and how it closes all possible avenues to foreclose the door of Riba. Another example is the prohibition of buyback agreement, if it is misused for covering up any Riba-based dealing as is evident from the following Hadith reported by Dar Qutni: “A lady called on Hazrat Ayesha, Mother of the Faithful, and told her that she had sold something to Zaid ibn Arqam for eight hundred Dirhams to be paid later and she had immediately purchased it back from him on cash payment of 600 Dirhams. Hazrat Ayesha said to her: “Woe to what you have purchased and woe to what you have sold! The Jihad undertaken by him with the Messenger of Allah has been thereby put to a naught unless he repents”.

 

 

 

Another important question in the ‘context of the discussion of Riba and its meaning in the Qur’an and the Hadith has been technical status of the Hadith which lays down the principle that every loan which entails benefit and usufruct is Riba. This has been accepted principle right from the beginning and the technical discussion about its status in terms of the categories of Ahadith has never been taken to be a basis or justification to dispute the authenticity of this principle. Some scholars raise the issue of the status of this dictum as a Hadith and conclude that the principle laid down on its basis is not acceptable because technically it has not been declared to be a Hadith of the highest category of sound Hadith. A number of scholars have discussed the technical status of the Hadith including late Maulana Zafar Ahmad Usmani who had dealt with this question in a scholarly treatise entitled Kashf al-Duja an Wajh Ma’na alRiba. The late Maulana Zafar Ahmad Usmani dealt with different aspects of the question of the authenticity of this Hadith and has concluded that the principle laid down in the Hadith is an acceptable principle supported by a number of reports and principles. Relying on the sayings of leading authorities of the science of Hadith, Maulana Zafar Ahmad Usmani says that the general acceptance of Hadith by the jurists is a clear indication that it is a valid Hadith and has to be accepted as a basis of laying down the principle. He has quoted the names of various companions and other early authorities who have relied on these reports and accepted the Hadith as a fundamental principle. Moreover this Hadith and several other Ahadith and sayings of the Companions highlight different forms of Riba as prevalent among the Arabs, some of which have been accepted without any scrutiny by writers like Dr. Fazlur Rahman, Shaikh Tantawi and Justice Qadeeruddin Ahmed. As far as this principle is concerned objection has been raised to doubt the authenticity and blur the acceptability of this Hadith on weak grounds. Maulana Zafar Ahmad Usmani has quoted several statements of the Companions recorded by different compilers of the Hadith to support the principle that usufruct or benefit accruing from a loan is Riba. These statements put together reach the status of consensus of the Companions and their followers. It can undoubtedly be considered to be a tacit consensus because in the absence of any counter-opinion, the views expressed by several Companions about the usufruct or benefit accruing from loan being Riba, such views should be accepted as Ijma `. It means that the remaining body of the Companions agreed to the views of these Companions. Therefore, even if there is any doubt at all in the fact that this statement is a Hadith, it makes no different in view of the unanimity of the Companions. It may be pointed out here that a unanimous ruling of the Companions constitutes an integral part of the Sunnah and has the authority of not only Prophet of Islam (s.a.a.w.) but also enjoys the support of the Qur’an.

 

 

 

Before parting with the discussion on the nature, classifications of Riba and impact of its prohibition on trade and business, it appears appropriate to discuss the rationale and wisdom (Hikmat) in the prohibition of Riba to all its forms. This discussion does not mean that we consider the wisdom to be the ratio decidendi or illah or the deciding factor of this prohibition. Riba is prohibited because Allah has prohibited it. The wisdom discovered by finite human beings cannot be the illah or the deciding factor behind a divine decree. Following discussion is based on the writings of Muslim scholars as well as the submissions made before us.

 

 

 

Muslim scholars have been addressing themselves to the important question of the rationale of the prohibition of Riba from the very beginning. These include both classical writers and commentators of the Qur’an as well as the modern Muslim scholars. The well known commentators of the Qur’an, Imam Fakhruddin Razi and Allamah Khazini have identified the following main reasons of 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 the sphere of human activity suffers adversely. A capitalist prefers risk-free money-lending to risky operations of trade, commerce and industry with the result that cash-flow is diverted from real and productive economic activity to unrealistic and non-productive usurious practices. Thirdly, interest puts an end to the pious act of giving free loans to people. When interest is prohibited people would be happily prepared to share their resources with others in a spirit of cooperation and sacrifice. In a society where interest is rampant, no one is ready to come to the help of others without claiming his own premium. This puts an end to the sentiments of brotherhood and charity. 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 Ribabased transactions give rise to a strong tendency of causing injustice to the poor which adds to the wealth and affluence of the wealthy. Similar views have been expressed by Syed Qutb in his well-known commentary, Fi Zilal al- ur’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 devoiding 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 Egypt of 20th Century considers injustice to be the base of the prohibition of the 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 (s.a.a.w.) 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 injustly “.

 

 

 

The Qur’an has also referred to the elimination of Zulm as the wisdom and rationale behind and prohibition of Riba in Chapter-11:279 which mentions that neither the lender nor the borrower should be wronged. In this verse the term ‘Zulm’ has been used which is the antonym of Adl (justice) in Islam. Some people take very cursory view of wrong and injustice mentioned in this Qur’anic verse. It has been contended that wrong and injustice is found only in an interest charged on a loan taken by the poor for personal and consumption purposes. Undoubtedly the increase on consumption loans falls under the category of Riba and is prohibited. But it does not ipso facto mean that increase on other forms of loans does not involve any injustice or wrong. If the rationale and wisdom of the prohibition of Riba is to close the door for every wrong and injustice in all its forms and at all possible levels, then the prohibition of Riba must extend to all increases on all forms of loans, i.e. those meant for personal and consumption purposes as well as those for commercial and production purposes.