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

 

(ix) In all transactions and dealings which involve any debt obligation the rights and privileges as well as the obligations and liabilities of both the. parties should be specified beforehand and shall not be subjected to any change or modification later without mutual consent. This will apply to the specifications of commodities and manufactured goods in the contract of Salam and Istisna and delivery in the payment of price in Bai-Muajjal.

 

(x) No debt or financial liability can be sold at a discount. The discounting of bills have, therefore, been prohibited.

 

(xi) Transfer of obligation is permissible and shall be regulated under the laws of Kafalah and Hawalah.

 

(xii) Delay in payment of debt or in the delivery of goods should be dealt with under the law of civil obligations, or if need be, under the penal law for which appropriate provisions may be made in the statute book. Any delinquency or neglect of duty or obligation shall be dealt with under the normal law and shall not, in any way, lead to the increase in the financial liability of the concerned party.

 

(xiii) No debt shall be compounded or increased because of any delay or delinquency, however long it might be.

 

(xiv) Only tangible things or legitimate entitlements shall be the subject of contracts of exchange, such as sales, rent, leasing, salam etc.

 

(xv) No one shall be authorized to sell a commodity or title thereto without taking it into his actual or constructive possession. As such forward sales not covered under the rules of Bai Salam shall be prohibited.

 

(xvi) In a Salam sale both, the delivery of the commodity and the payment of the price cannot be deferred. It amounts to the sale of debt for debt which is not allowed.

 

(xvii) Exchanges of gold for gold, silver for silver, money for money e.g. local against foreign, shall be void if it is not hand-to-hand, i.e. on the spot.

 

(xviii) All such agreements and transactions ‘in which two or more exchange contracts are interdependently combined, are void. For example, loan dependent on sale or sale dependant on a loan shall be void.

 

(xix) Benefits or usufruct accruing from the collateral is the right of the owner. Financier has no right to use or enjoy it.

 

(xx) Any uncertainty about the rights and obligations of the parties or the specification of the commodity or its value which may lead to a dispute or litigation invalidates the contract.

 

Under the Shariah no distinction can be made between interest and usury. It has been pointed out by different scholars that the distinction between usury and interest has no academic or scientific basis. It has been established that this so-called distinction is made to justify interest on weak and emotional grounds.

 

One way of winning acceptability for interest was to emphasize the common elements, if any, between profit and interest, rent and interest or hire and interest. This was done to attract legitimacy to interest by confusing it with other categories.. At the same time, the difference in the high and low elites of interest was played up to establish that it is only the high or exorbitant rate which was bad while the fair rate was something fully justified on economic grounds. Once the economic grounds were accepted at the popular level, there was no difficulty in giving them a moral .justification too. Through this device, the evil of interest, Riba or Biyaj was attributed to usury and interest was artistically extricated from the consequences of this blame. This sophistry, as it was, is devoid even of superficial sanction. Even this superficial distinction made centuries ago to tolerate sonic forms of interest, has been rendered meaningless by the emergence of bank interest and credit in a powerful and institutionalized way.

 

Man and Money by Prof. Shaikh Mahmud Ahmad quoted.

 

(qq) Islamic Jurisprudence---

 

----Riba---”Usury” and -interest”---Concept---No distinction between usury and interest---Interest is an exploitative category completely indistinguishable from what was called usury a few centuries back---Matter discussed in detail with its historical background.

 

Man and Money by Prof. Shaikh Mahmud Ahmad quoted.

 

(rr) Islamic Jurisprudence---

 

---- Riba---Prohibition---Monetary exchange and barter exchange---Law of Riba takes care of both the economies---Principles---Islam acknowledges not only the real money, namely gold and silver or anything which may represent them, but also takes into consideration the barter practices and quasi money if it meets the requirements of measurement and storage of value and usability for making deferred payments.

 

(ss) Islamic Jurisprudence---

 

---- Economy in Islam---Paper money---Nature---Fiat money is money for all practical purposes and will have to be taken as a substitute for gold and silver, the real and natural money---Bonds, securities, debentures, treasury bills which have a ready market and are negotiable and easily convertible into real money within a short time, these should be treated like a substitute of the fiat money and should be subject to those very limitations and restrictions which control the fiat and real money---Such other type of the money-of-account which have no ready market and not easily negotiable and convertible into real money, shall continue to be treated like personal instruments ‘and Sukuk---Principles developed to regulate the exchange of copper lulus will not be applicable to the paper currency and fiat money of today---Today’s paper money has practically become almost like natural money equal in terms pf its facility of exchange and credibility to the old silver and golden coins---Such money will, therefore, be subject to all these .injunctions laid down in the Qur’an and the Sunnah which regulated the exchange or transactions of gold and silver---Principles.

 

(tt) Islamic Jurisprudence---

 

----Economic in Islam---Inflation--Devaluation or demonetization---Ghabn Fahish---Meaning---Inflation which reaches the stage of hyper inflation or galloping inflation is to be treated under the principle of Ghabn Fahish and would call 1br steps to be taken for the protection of the rights of the creditor and in such a situation principle in respect of fulus would be applicable---Principle of fidus explained---If demonetization or devaluation takes place by an order or decision of the Government which substantially reduces the value of money that particular date of such change will be taken to determine the value to be paid to the creditor---Where, however, 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 hyperinflation took place and in view of absence of certainty and exactitude the safest way is to fall back on the date on which the transaction had taken place.

 

(uu) Islamic Jurisprudence---

 

---- Riba---Forms of---Common element in all the forms was the stipulated increase demanded by the creditor over and above the principal amount payable in a contract of loan or sale--Various transactions prevalent as Riba during the pre-Islamic days enumerated and discussed.

 

(vv) Islamic Jurisprudence---

 

---- Riba---Punishment---Riba is an offence of. unimaginable proportions and God simply does not recognize any person as a believer unless he gives up Riba.

 

(ww) Islamic Jurisprudence---

 

---- Riba---Prohibition---Exchange should take place only when both the commodities are fully similar and exactly equal to each other in terms of weight and measure and are delivered and received then and there, hand by hand---Any increase or decrease on either side or any deferred payment or delivery will render the transaction as Riba-based and will be disallowed.

 

(xx) Islamic Jurisprudence---

 

---- Riba---Riba al Fadl---Concept and historical’ background stated with examples and illustrations.

 

(yy) Islamic Jurisprudence---

 

---- Riba---Rationale and wisdom in the prohibition of Riba exhaustively explained.

 

(zz) Islamic Jurisprudence---

 

---- Riba---Prohibition---Prohibition of Riba extends 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.

 

(aaa) Islamic Jurisprudence---

 

---- Riba---Prohibition---Element of Zulm to be seen in the wide application of concept of justice in the field of distribution and resources and socioeconomic life in the society---Principles.

 

(bbb) Islamic Jurisprudence---

 

---Riba--and “interest”---Major difference.

 

(ccc) Islamic Jurisprudence------

 

Riba---Prohibition---Economic rationale and moral wisdom of the prohibition of Riba.

 

(ddd) Islamic Jurisprudence---

 

---- Riba---Prohibition---Evils of “interest” that bring into focus the contradiction and conflict between the practice of “interest” and the overall teachings of Islam categorised and exhaustively discussed.

 

(eee) Islamic Jurisprudence---

 

---- Riba---Prohibition---Riba comes into direct conflict with a number of Qur’anic dictates and precepts and as soon as interest is allowed, a number of Qur’anic Injunctions cease to operate---Illustrations.

 

(fff) Islamic ,Jurisprudence---

 

----Riba---Prohibition---Principle of mutual relation between profit and loss, discussed.

 

(ggg) Islamic Jurisprudence---

 

----Riba---Prohibition---Modern Banking System based on credit and loan--Life, dignity, property, honour and even freedom of people, not only on the national level but also at the international level is mortgaged to the creditors whose power and influence is constantly on the rise---Such situation is inconsistent with the teachings of Islam where loan and credit have been considered to be an evil which may be resorted to only in very rare and exceptional cases of extreme necessity---Principles.

 

(hhh) Islamic Jurisprudence---

 

----Riba---Prohibition---Justice---Implications---Humanitarian goals --- Realization --- Utilization of resources provided by God to mankind in such a manner that the universally-cherished humanitarian goals of general need fulfilment, full employment, equitable distribution of income and wealth and economic stability are realized which can only be achieved by providing a humanitarian strategy and an important, though not the only, element of such a strategy is the abolition of interest---Measures.

 

(iii) Islamic Jurisprudence ---

 

----Riba---Prohibition---Zulm---Meaning, scope and contours of Zulm in the context of Riba stated.

 

(jjj) Islamic Jurisprudence---

 

---- Riba---Prohibition---Muqasid al-Shariah.

 

(kkk) Islamic Jurisprudence---

 

---- Administration of justice in Islam --- Implications --- Economy --- Riba -- Elimination---Justice is a comprehensive term in Islam and covers all aspects of human interaction, irrespective of whether it relates to the family, the society, the economy or the polity and irrespective of whether the object is human being, animal, insect or the enviornment---Term “justice” has wide implications, one of the most important of these is that the resources provided by God to mankind should be treated like a trust and must be utilized in such a manner that the well being of all is ensured, irrespective of whether they are rich or poor, high or low, male or female, and Muslim or non-Muslim---Justice also demands that in the field of economics, the use of resources has to be in such an equitable manner . that the universally cherished humanitarian goals of general need fulfilment, optimum growth and full employment, equitable distribution of income and wealth, and economic stability are realized---Strategy to achieve the goals requires, among other things, the injection of a moral dimension into economics in place of the materialist and hedonist orientation of capitalism, abolition of interest is a part of this moral dimension.

 

(lll) Islamic Jurisprudence---

 

---- Riba---Prohibition---Inflation---Inflation set by as a formidable problem in the context of the elimination of Riba, analysed.

 

(mmm) Islamic Jurisprudence---

 

---- Riba---Prohibition---Indexation of loans, advances and various forms of credit---History and techniques of indexation as prevalent in different countries, outlined---Entire thinking and philosophy working behind the concept of indexation is Riba-based economic thought ---Indexation of loans, advances and various forums of credit, therefore, is not permissible in Shariah---Grounds stated.

 

(nnn) Islamic Jurisprudence---

 

----Riba---Prohibition---Indexation---Elimination of Riha---Formulation of new policy or adopting a new method or technique---Principle of Sadd al Dhariah or Foreclosure of the Door to be kept in view---Measures.

 

(ooo) Islamic Jurisprudence---

 

---- Riba---Indexation---Prohibition---Purview of prohibition on indexation covers not only loans and debts but also credit, barter, deferred exchange of currency. demonetization, delayed ,payment - of remuneration after devaluation or revaluation, indemnity and change in the unit of currency at the time of redemption of loan---Guiding illustrations provided.

 

(ppp) Bank---

 

---Functions of a Bank enumerated.

 

(qqq) Islamic .Jurisprudence---

 

----Riba---Prohibition---Modern Banking---Current accounts, fixed deposits, saving accounts, special accounts -and term deposits etc. cannot be considered as Amanat nor Wadiah---Principles---Such accounts cannot be considered to be ‘a Qard (loan) either because while a borrower is allowed to use, to invest or to spend the borrowed money, neither he is under obligation to pay any increase over and above the borrowed money nor a creditor (account holder) is allowed to receive any increase which is disallowed by Qur’an and Sunnah---Bank accounts, therefore, have to be investments within the meaning of Ra’s al-Mal of a Mudarabah or Musharkah, and banking operation will have to be in accordance with the principles that regulate the Mudarabah, Musharkah and other Islamic modes of financing.

 

(rrr) Islamic Jurisprudence--

 

---- Riba---Prohibition---Government bonds and securities in many cases represent a debt, loan or a deferred payment- --Shariah has expressly prohibited the sale or purchase of a debt for another debt---Sale or purchase of a debt in lieu of a deferred payment is not allowable under Shariah being hit by Sunnah---Open market operations involving the sale of debt for debt is also not allowed under Shariah---Such deferred payments should be sold or purchased on the basis of cash payment or, if cash payment is not possible, same may be processed through other Shariah compatible modes in the light of the law of Hawalah.

 

(sss) Islamic Jurisprudence---

 

---- Riba---Prohibition---Bank loans---Provision of loans extended by Banks to possible entrepreneurs and businessmen---Such loans are offered in the form of cash, opening of letters of credit, discounting of instruments etc.--Such loans are, to a very large extent, if not totally exclusive, advanced on the basis of interest whose payment alongwith the repayment of the principal is secured and guaranteed against a collateral; and the interest is charged in accordance with the prevalent rate---Interest charged on all these kinds of loan is to be paid by the borrower irrespective of the fate or the outcome or the duration of the loan and irrespective of the success or failure of enterprise for which the loan was advanced---Interest or increase charged on such loans fall under the category of Riba and is prohibited---Bank interest cannot be equated with profit accruing to a Musharakah---Principles.

 

(ttt) Islamic Jurisprudence---

 

--Riba---Prohibition---Bank loans---Contract of loans (Qard)---Lending transactions undertaken by Bank, are not in the nature of trust, deposit, Musharakah or sale but are in the nature of loan (Qard) pure and simple and have to be subjected to the restrictions placed by the Shariah on lending and borrowing of money and other fungible item---Any increase over and above the amount borrowed is Riba irrespective of the pretext on which the increase is claimed---Principles.

 

The true and legal position of bank loans under Islamic Shariah is that they are contracts of loans (Qard) because all the basic elements of Qard are found in these contracts. It has been held to be a Qard (loan) not only by almost all the contemporary Islamic scholars but also by the up-holders and experts of this system - even in the Western world. The repayment is guaranteed like a Qard, it is supported by a mortgage or a collateral like a Qard, the authority of the taker to use, spend, Invest or dispose it of is unlimited like a Qard; the lender has no concern with the purpose or the objectives for which it is taken. Finally, the success or failure of the enterprise of the purpose for which the loan was taken is absolutely irrelevant in both the cases. In view of all these obvious and significant facts it is not correct to claim that the lending transactions, undertaken by the banks are in the nature of trust, deposit, Musharakah or sale. It is in the nature of loan (Qard) pure and simple and has to be subjected to the restrictions placed by the Shariah on lending and borrowing of money and other fungible items. The most important of these principles is that the loan is to be returned exactly in the same quantity in which it was taken. Any increase over and above the amount borrowed is Riba irrespective of the pretext on which the increase is claimed. This principle is clearly embodied in the Qur’anic verses of Surah al-Baqarah (verse 279). It was understood by the Companions, the Followers and the later jurists to be the cardinal principle governing a loan. There is unanimity of views among all the jurists of Islam that any benefit accruing out of loan is Riba.

 

Surah Al-Baqarah (V: 279) ref.

 

(uuu) Islamic Jurisprudence---

 

--Riba---Prohibition---Banking---Letters of credit of banks---Purpose or the objective of the opening of letters of credit is not objectionable---Such Letter of Credit, if relates to the time and duration of payment and is collected to terms or percentage of the amount paid, it becomes Riba---Measures to bring the system according to Shariah, outlined.

 

The purpose or the objective of the opening of letters of credit is not something objectionable. On the other hand, it is a facility extended by the banks to the traders and the businessmen. The purpose of opening letters of credit is to facilitate quick and easy payment and the transfer of money from one place to another. This facility, being a lawful service, has to be properly compensated in terms of Shariah. If the payment of compensation or remuneration is linked with the volume of service, the Shariah has no objection.. In this case it will be a kind of service charge which has’ been already considered and approved by almost all the contemporary scholars and learned bodies. In this case it will be necessary that the rate of service charge is determined keeping in view the magnitude of the service, quickness of the payment and the level of credibility and performance of the bank concerned. Since it is related with the time or duration of payment and is collected in terms of percentage of the amount paid, it becomes Riba. There is no objection if the banks require collateral or hypothication of certain assets or securities to ensure timely repayment. provided the guarantor does not charge any interest and the mortgage is controlled by the law of Riba. The payment made by the bank 2o an importer or a purchaser under a letter of credit is again in the nature of Qard because it does not fall in any other legitimate category of transaction As such it is to be regulated under the law of Riba. It seems worthwhile if the State Bank of Pakistan determines certain fixed rates of service charge to he paid by the importer/purchaser to the bank as a compensation to the service rendered by the Bank. There ma) he different rates for different kinds of transactions provided these rates do not change with any delay in the payment and are not calculated on the basis of the amount of money involved. There may be flat rates for various kinds of transactions whenever letters of credit are needed to be opened.

 

(vvv) Islamic Jurisprudence---

 

----Riba---Prohibition---Banking---Discounting of negotiable instrument by State Bank of Pakistan has to be tackled in the light of Shariah --- Discounting of negotiable instrument is not tale but is the sale of debt for higher price and deferred payment is also involved in the sale of money for money and, therefore, is to be construed as a loan and has to be regulated as a loan-Increase ultimately earned by the Bank through the operation of discounting the instrument, thus, would fall under the category of Riba.

 

(www) Islamic Jurisprudence---

 

----Riba---Prohibition---Banking-activities undertaken by the Banks on payment of such fee, remuneration or service charges as may be fixed by the State Bank or determined by the concerned Bank under the general guidelines issued by the State Bank of Pakistan, not related to the time frame of any payment or repayment and calculated exclusively on the basis of volume of labour involved and the nature of service rendered, are allowed--Principles.

 

(xxx) Islamic Jurisprudence---

 

----Riba-- Prohibition- Analysis of interest-based banking operations in the perspective of Injunctions of Islam--- Development of Riba-free alternative modes conforming with the requirements of Shariah, suggested.

 

(yyy) Islamic Jurisprudence---

 

----Riba---Prohibition---Borrowing by the Government---Steps to be taken for interest-free economy---Summary of position taken by representative of the State Bank, the apprehension expressed, the difficulties counted, the explanation offered and the proposals mooted by the scholars, economists and bankers---Measure to be adopted outlined.

 

Federation of Pakistan through the Secretary, Ministry of Finance Government of Pakistan, Islamabad and others v. United Sugar Mill Limited, Karachi PLD 1977 SC 397; Wasi Ahmed Rizvi v. Federation of Pakistan PLD 1982 SC 20; Hakim Khan and 3 others v. Government of Pakistan through Secretary Interior and others PLD 1992 SC 595: The State v. Syed Qaim Ali Shah 1992 SCMR 2192; Zaheeruddin and others v. The Stag: and others 1993 SCMR 1718; Mushtaq Ahmad Mohal and others v. The Honourable Lahore High Court, Lahore and others 1997 SCMR 1043; Dr. Mahmood-ur-Rehman Faisal v. Government of Pakistan through Secretary, Ministry of Justice, Law and Parliamentary Affairs, Islamabad PLD 1994 SC 607; Al-Qur’an Majid: Verses 4:160-161; Surah al-Baqarah, Verses 6:57; 7:54; 278-279; Surh Al-i-Imran 111:130; 2:188; 4:29; 4:161; 9:34; 30:39; 4:161; Tafsir and Hadith by Qatadah ibn Di’amah; Islam Ke Ma’ashi Nazariyyea by Dr. Yusufuddin, VoI.II, Karachi, 1984; Unlawful Gain and Legitimate Profit in Islamic Law by Dr. Nabil A. Saleh; Flam-alMawaqqrin, VoI.II, p.154ff;”COMMERCIAL INTEREST KI FIKHI HAISIAT” by Maulana Muhammad Jaafar Shah and Syed Yaqoob Shah; English Arabic Dictionary by Stiengass, Lahore, 1’979; A Dictionary of Islam by Thomas Patrick Hughes, Lahore, 1964, p.544; Exold, xxii, 25, .Lev. XXV. 36 (Usuri); Tafsir Tabari by Imam Tabari, Vo1.III, p.64; Kitab al-Nihayah fi-Gharib alHadith wa’-Athor by Ibn al-Athir, Cairo 1322 AH, VOIAI, p.66; Ahkam alQur,’an by Ibn ‘Arabi, Cairo, 1957, Vol.I, p.242; AI-Haidayah by Allama Burhanuddin al-Maghinani; Book XIV on Sale, Chap. VIII on Riba; Hidayah (English Translation by Hamilton), Lahore, p.289; Tafsir al-Kabir by Imam Fakhar Al-Din Al-Razi; Ahkam al-Qur’an by Allama Jassas,. Istanbul, 1335, AH, Vo1.I, p.469; AIR 1944 Mad.243; Halsbury’s Laws of Fngland. 4th Edn., vol.32, para.l0o: Futuha al-Buldan by al-Baladhuri, Cairo, 1932, p.67; al-Bahr al-Muhit by Abu al-Abdulasi Vol.Ii, p.335; Commentary of the Qur’an by Tabari, Vol.IV, p.55; Futuh al-Buldan by al. Baladhuri, Leiden, p.56, Tayef; Kitab al-Amwal by Abu Ubaid al-Qasim ibn Sallam, paras.5.06-507; Kitab al-Amwal by Abu Ubaid, para.502; Book Islam Ke Muashi Nazariyyea, Karachi, 1984, pp.44--50; Tijarati Sud: Tarikhi Awr Fiqhi Nuqtah-i-Nazar Se, Aligarh, 1967, pp. 1-5 and Shorter Encyclopaedia of Islam, 1953, p:471 ref.