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

 

 

 

We have gone through all this material. It is evident from perusing this bulky literature that a lot of time, resources and energy has been exhausted by these scholars in exploring and determining the meaning and interpretation of Riba as used in the Holy Qur’an to determine whether interest and profit in vogue in our present day economic and financial system fall under the purview of Riba. It is contended that Islam being a progressive religion and a way of life for the `Muslims’, the question of Riba should be resolved with a progressive approach so that the progress brought about by the modern economic system does not halt and the journey to progress is not disturbed. In such-like arguments reference is always made to the Jews. It is said that since ages Jews have been particularly reputed to be experts in usurious business i.e. charging exorbitant rates of interest by employing all sorts of harsh, coercive and treacherous methods for extracting interest with a pound of flesh. After narrating the details of the harsh attitude of Jewish money-lenders, it is claimed that the position about interest (as used in our day-to-day transactions) is entirely different from usury or Riba. In the case of interest it is claimed that there is no compulsion or coercion but it is a simple agreement for levy of a small sum to be paid by the borrower for the use of money. It is contended that the payment of interest is justified because the principal money is used for financing public welfare projects and enterprises in public and private sectors. On the basis of this difference between usury and interest, it is asserted that the bank interest is not Riba and that the misconception has been created by those who do not differentiate between usury and interest.

 

 

 

Following are main grounds on which bank interest is claimed to be different from Riba:-----

 

 

 

(i) The prohibition of Riba as laid down in the Holy Qur’an should not be interpreted in isolation without considering the context or background in which these verses were revealed as well as the situation in which this prohibition was applied. This neglect or disregard of the context is bound to result in misconception.            

 

 

 

(ii) That Riba has a relationship with economic and financial  system of Islam and unless there is an ideal Islamic society,   free from want, corruption and avarice in the true sense of the  terms it is not proper to enforce any of the Qur’anic Injunction in isolation.      

 

 

 

(iii) Some people also contend that the traditional sources of Government income in an Islamic system are restricted to only four sources, i.e. Zakat, Ushr, Jizyah and Ghanimah. In view of the pitiable condition of Zakat and Ushr collection, the Government cannot rely on these sources alone and has to resort to borrowings which, according to this view, cannot be ensured without the payment of interest. Reference is made to the deplorable situation of the distribution of Zakat in which mismanagement and embezzlement is known to all and sundry, There being no question of the levy of Jizvah and Ghanimah in the present days, no alternative is left except borrowing on interest. It is asserted that under the Islamic system no taxes, duties, cesses can be levied as they are all un-Islamic. But the Government has to undertake development work for the welfare of people for which resources are needed which can only be obtained through taxation and borrowings from local as well as foreign lenders.

 

 

 

(iv) Government also borrows and inculcates the habit of savings among people. The money thus collected is used for welfare projects whereas some profit or interest is given to the persons who contribute to these savings schemes.

 

 

 

(v) In the absence of any dependable system of welfare for the old and the needy, people want to keep something for the rainy day. If investment is made in a savings scheme both the Government and the people enjoy its benefit. Such people can neither work or toil nor can they incur the risk and face the ordeals caused to them by the so-called finance companies in the early eighties. For such people, it is argued, there is no other viable option except to deposit their savings in banks and receive the interest accruing from such investment. The interest accruing on such savings, therefore, should not be equated with Riba.

 

 

 

(vi) There are various methods of deceiving oneself through change of nomenclature. One may call it PLS account or mark-up, yet, this is that very old system which is prevalent since last century. This experience shows that the present system based on interest cannot be changed.

 

 

 

(vii) The spirit of Islam is the welfare of the people and should remain a predominant factor.’ The present interest has provided welfare to the people. There is no exploitation in this system; exploitation has been committed by the vested interest and not by the present day banking system.

 

 

 

These are some of the grounds or arguments advanced by the advocates of bank interest at the popular level in support of their plea. During the hearing of this case quite a good number of newspaper articles have appeared in some of which the views summarized above were expressed. A number of letters, notes and memoranda were sent to us reflecting the wishes and sentiments of the writers concerned. Of these, some supported the view that batik interest was not Riba. They based their opinion by and large on these very grounds summarised above. These arguments will be dealt with in the course of this judgment at a proper place. Let us first examine the views of the scholars whose writings have been referred to by some experts as well as learned counsel of some of the parties:

 

 

 

First of all we take up the views of Sayyid Rashid Rida, being the oldest and the most widely respected among the advocates of this view, and also for the fact that Mr. Khalid M. Ishaque who had relied mostly on these views, complained that the learned Federal Sharait Court neither allowed him to elaborate these views nor dealt with those aspects, nor considered them in the impugned judgment.

 

 

 

The views of Rashid Rida are found in a booklet presented to us along with an English translation by Mr. Khalid M. Ishaque. The English translation being extremely poor, if not altogether faulty, we have discarded it and confined our examination to the original Arabic text entitled “Riba and Commercial Dealings in Islam” (published in Cairo, 1960 along with a Foreword by Shaikh Muhammad Bahjah-al-Baitar). This booklet is, in fact, the writer’s response to a set of questions put to him by some people from Hyderabad Deccan, India, in early thirties or late twenties of this century. The booklet includes a lengthy Istifta (a request seeking legal ruling by a Mufti) covering 39 pages (pages 10--48) of the booklet followed by the detailed answers given by Rashid Rida and reproduced at pages 49--103. The long Introduction to the Istifta gives the four questions sent to him from Hyderabad Deccan. It also summarizes the discussion prevailing on the question of Riba in the sub-continent. The Introduction is well-researched and contains a fund of references to the wide range of books of Tafsir, Iladith and Fiqh. References to Fiqh books are overwhelmingly from Hanafi books with the exception of very few. This Introduction is followed by the following four questions--

 

 

 

(1) Whether the term Riba as used in the Qur’anic verse: “Allah has permitted trading and prohibited Riba” requires any explanation or not, particularly according to the Hanafi Jurists? What is briefly the explanation of this term given by the Law-Giver in the Qur’an and the sound (or Sahih) Ahadith?

 

 

 

(2) Kindly explain the meaning of Riba as used in the Qur’an and the sound Ahadith.

 

 

 

(3) Whether the stipulated and definite amount of profit to be paid on the loan is Riba according to the Nass or not?

 

 

 

(4) If it is held that the stipulated profit on the loan is Riba then what is the argument in support of this view from the sources recognized among the Jurists.

 

 

 

These questions were answered by some Indian scholar(s) whose name(s) have not been mentioned in the booklet. However, the answers given may be summarized as follows:--

 

 

 

(1) The Riba as mentioned -in the Qur’anic verse (2:275) needs explanation and elaboration according to the Hanafis as well as according to other Jurists. It may well be said that the Ummah has unanimously held this view and the Ahadith reported by Ubadah ibn Samit furnish the required explanation and elaboration to this term according to the majority of the Jurists. (Elaborate discussion on the Ahadith reported by Ubadah and other companions will come later in this judgment.)

 

 

 

(2) Riba is the increase which has no corresponding consideration in an exchange of property for property. Thus, there is no discrepancy or difference between the meaning of term Riba as used in the Qur’an and the meaning of the term as used in the Hadith because the Riba mentioned in the Hadith is only an elaboration and explanation of the Riba mentioned in the Qur’an.

 

 

 

(3) The stipulated profit on a loan is not Riba according to the Nass because it has no proof from the Qur’an or from a sound Hadith.

 

 

 

(4) The view that the stipulated profit on a loan is Riba is not supported by the Qur’an or the Hadith. Sometimes it is substantiated by Qiyas (analogical reasoning) and sometime by the Hadith which says: “every loan which entails any benefit or profit is Riba”. Both these arguments require reconsideration. The argument based on analogical reasoning is not sound because there is no common ground or illah between the original case and the present case. As to the second argument it is also inadmissible because it is based on a weak Hadith which cannot be accepted as a basis of argument. Even if we accept the argument that analogical reasoning is sound it is subject to change with the passage of time; because rulings and views based on analogical reasoning are subject to change with the change of environment and circumstances.

 

 

 

The istifta containing the long introductory Note along with the above brief answers to the four questions was referred to Sayyid Rashid Rida for an authoritative ruling and/or confirmation of the above answers. Rashid Rida praised the Note along with the answers and spoke highly about the author of the Note. He pointed out at the very outset that the Indian author, despite of the depth of his knowledge and the mastery over the subject, had confined himself to the views of the Hanafi jurists while the subject required that it should have been studied in the larger perspective of Fiqh in general without adopting a certain ruling or abiding by the rules of Ijtihad followed in any particular legal school. However, Rashid Rida did not confine himself to subscribing to the views of the Indian scholar but also gave his own opinion. However, he did not agree with the definition of Riba as given by the Indian author in his response to the second question and insisted that Riba was always in a debt and was not confined to a loan or to a deferred price. According to him, the original Qur’anic Riba was different from the Riba of the Hadith. The latter, namely the Riba of the Hadith had been prohibited because it might have led to the perpetration of the Qur’anic Riba. Otherwise, he maintains, the Riba of the Hadith does not directly fall under the Qur’anic prohibition and condemnation of Riba since it does not involve that enormous evil which is represented by the Qur’anic Riba. Rashid Rida had spoken at length on the answer to the fourth question as, according to him, this constituted the basis of the whole discussion.

 

 

 

The nutshell of the views of Rashid Rida is that it is only the Riba al-Nasi’ah (also called Riba al-Qur’an and Riba al-Jahiliyyah) which is prohibited in the Qur’an. All other kinds of Riba prohibited by the Prophet (p.b.u.h.) are only by way of preventive measures. He expresses his disagreement with those who consider both kinds of Riba to fall under one and the same category, He contends that most of the opinions and rulings given by the jurists in respect of Riba have no support from the Shariah directly or indirectly. According to him, this extended meaning of Riba is neither in consonance with the fundamentals of Islam nor any principle of legislation nor is based on any ratio decidandi drawn from the divine revelation dealing with the prohibition of Riba. He disagrees with the views of Imam Abu Hanifah who says that the exchange of two fungibfe (i.e. countable, measurable or weighable) commodities with an excess is Riba.

 

 

 

The large body of legal rulings developed by the jurists on the basis of this understanding of Riba, according to Rashid Rida, is irrational and unsubstantiated by the scriptural authorities. In this context, Rashid Rida comes out with vehement criticism against the Jurists and considers it to be an intervention in the divine prerogative to determine what is lawful and what is unlawful. He goes on citing examples where a Hanafi jurist considered something to be unlawful and which should not have been held unlawful in the opinion of Rashid Rida or any other jurist.

 

 

 

Although Rashid Rida claims to take up the question of defining the contours of Riba al-Jahiliyyah prohibited by the Qur’an, yet his treatment of this subject is self-contradictory. On the one hand, he establishes that the term Riba as used in the Qur’an was clear and express and was fully understood by the addressees of the Qur’an, namely, the Companions. On the other hand, he tries to develop a definition on the basis of some illustrative reports found in the Hadith literature about the nature of Riba and Riba-based transactions prevalent in pre-Islamic Arabia. He picks up one such report recorded by several authorities and concludes that Riba is only that increase which is agreed upon by the parties at the stage of maturity of the initial loan if the borrower is not in a position to pay. Any increase, irrespective of its weight, measure or quantity agreed upon between the two parties at the time of the initial taking of the loan is not Riba according to the Egyptian scholar. To put it in more clearly and elaborately, following illustrations will explain the position taken by Rashid Rida: “‘A’ takes Rs.1,00,000 as loan from ‘B’ to be paid after one year with an increase of 20% . This initial increase of twenty per cent., according to Rashid Rida is not Riba. However, if ‘A’ is not in position to pay Rs.1,20,000 to ‘B’ at the stipulated time and ‘B’ demands that in order to get more time ‘B’ should extend the period of maturity and, in turn, ‘A’ increases the payable amount from Rs.1,20,000 to Rs.1,50,000, only this additional amount of Rs.30,000 will be Riba”. In order to get support for this strange and queer interpretation, Rashid Rida has collected a host of references from different texts of Tafisr, Hadith and Fiqh. However, even a cursory look over this large number of passages and quotations shows that no single quotation or passage supports the position taken by Rashid Rida. Moreover, the general discussion made by him about the nature of Riba and the rationale of its prohibition not only does not support his contention but also ultimately goes against him. The literal meaning of the word Nasa and Nasi’ah, the illustrative example quoted by the early authorities as well as the rationale of the prohibition of Riba al-Fadl as discussed by Rashid Rida himself, all go against the interpretation advanced by him. It is strange that while he expressly and unequivocally considers Riba al-Nasi’ah to be the prohibited Qur’anic Riba, he tries to apply all the relevant passages where Riba al-Nasi’ah has been discussed to his own understanding of Riba and insists in a sheer arbitrary manner that all earlier scholars also meant by Riba al-Nasi’ah what he. himself means. He has simply ignored the very pertinent question why the increase on the first Nasi’ah (deferred payment) should not be considered Riba and why only the increase or increases on the second or subsequent Nasi’ah(s) (deferred payments) should be considered Riba. Even if this strange interpretation is taken to be correct for a moment for the sake of argument even then many forms of bank interest will fall under the category of Riba prohibited even by Rashid Rida. Under no logic or argument can the interest accruing as a result of the first delay be excluded from tile Riba as defined by Rashid Rida. Nor the subsequent increases in case of further delays and defaults be considered to be the only increase included in the Riba. All such subsequent increases will have to be counted as second or third increase over and above the principal amount plus the first increase. Neither Rashid Rida nor Mr. Khalid M. Ishaque addressed this question. In short, the views of Rashid Rida are Islamically untenable, logically inconsistent and practically inconsequential in so far as these latter forms of increase or increases are concerned. In spite of academic value of the material contained in the booklet it fails to serve any useful purpose in offering a viable and practical solution to the question of Riba. .

 

 

 

Following this argument, Mr. Khalid M. Ishaque has also highlighted the report found in the celebrated commentary of the Qur’an by Imam Abu Bakr Jassas Razi, entitled Ahkam al-Qur’an in an effort to develop a working definition of Riba. According to him, only that kind and brand of Riba is prohibited by the Qur’an which was prevalent in pre-Islamic Arabia. Any definition of Riba, therefore, should confine itself only to that brand and must of necessity be exclusive of any other increase. According to this report when a person (a debtor) failed to pay his debt by the stipulated time, he was given the option by the creditor either to pay then and there or to increase the payable amount (in consideration for further time). Mr. Khalid M. Ishaque considered only this kind of increase as Riba to the exclusion of all other forms of increase over and above the principal amount. To him, this is the Riba of pre-Islamic days which was prohibited by the Qur’an. On a closer and deeper examination, however, .it transpires that even this solitary example of one of the prevalent forms of Riba has all the elements of Riba as defined by Muslim jurists. The nutshell of this deal is the increase over and above the principal amount payable in a contractual obligation against nothing but time. Moreover, if the debtor failed to pay even after the extension of period and increase on the principal amount, he was again to seek further time and to agree to further increase both on the principal and the first increase put together, making the Riba doubled and redoubled. Today, when a person borrows from a bank, a financial institution or a credit company and fails to pay the debt at .the stipulated time, he has to accept the increase according to the prevalent rate; and if he fails to pay the amount (principal plus the first increase) at the second stipulated time he has to pay further increase or increases calculated exclusively in terms of time. Therefore, even if we accept the contention that this was the only form of Riba prohibited by the Qur’an, it would fail to exclude bank interest from its ambit.

 

 

 

Counsel for several appellants and some experts, including Mr. Khalid M. Ishaque and Mr. Abu Bakr Chundrigar, also referred to the view of late Mr. Justice Qadeeruddin Ahmed on the permissibility of bank interest. It was again and again complained that the learned Federal Shariat Court did neither properly examine the views of the late jurist nor assessed his arguments. It was contended that if the learned Court below had thoroughly and impartially examined his views on the subject, it would possibly have reached a different conclusion. Mr. Abu Bakr Chundrigar presented before us the views of late Mr. Justice Qadeeruddin Ahmed and submitted that he fully endorses his views and adopted his arguments. Copies of the articles written by Mr. Justice Qadeeruddin Ahmed were also supplied to us by Mr. Chundrigar. We intend to examine here the views of the late savant in detail. Following are the main points discussed by Mr. Qadeetuddin Ahmed: --

 

 

 

(i) Only one kind of Riba out of several kinds, Riba al-Nasi’ah has been prohibited by the Qur’an. The learned jurist here refers to the book of Mr. Nabil A. Saleh, entitled, Unlawful Gain and Legitimate Profit in Islamic Law where various kinds of Riba have been discussed. According to Justice Qadeeruddin Ahmed, the expression (Riba) refers for the form of loan which was in vogue in Arab Society before the advent of Islam. Only this kind of Riba (Riba of the Jahiliyyah) is directly forbidden by the Qur’an.to the exclusion of any other form of Riba.

 

 

 

(ii) The Qur’an has condemned Riba al-Jahiliyyah but has neither described it nor explained its modus operandi. The Holy Prophet (peace be upon him) too has provided no guidance in this respect. The Qur’an does not tell us what was the mechanism of Riba al Jahiliyyah and how that mechanism functioned. The learned jurist says that the detail of the manner in which a debt increased has not been explained. He does not know whether it was simply an amount added to the payable due or the capital amount itself was inflated, The language of the verses, nevertheless, indicates that the increase was enormous. It also tells us that there was wickedness, serious injustice and iniquity in these transactions. But we are not told clearly as to what amount was doubled and redoubled. Was it the amount that was increased by reason of a default, namely interest or was it the capital amount itself was doubled and redoubled?

 

 

 

(iii)       The same language (i.e. threat of war with Allah and His Prophet) was used by the Prophet (peace be upon him) for those who would lease out their land to tillers on the condition that they would share the income with the tillers. The Prophet (peace be upon him) pronounced: “One who does not give up lease of land (Mukhabarah) for a share of its produce must be prepared for war with Allah and His Messenger (peace be upon him).” This ban on leasing has been treated very differently and lightly by the Muslims as compared to the ban of Riba on loans.

 

 

 

(iv)       The alternative methods suggested for the enforcement of interest free banking system in Pakistan do not adequately, meet the requirements of the existing system and do not respond to the needs of international commerce because of the involvement of foreign countries and non-Muslims in this complex exercise.

 

 

 

(v)        The Islamic juristic science has by virtue of interpretation played a controlling role by telling the mankind what Allah and His Prophet (peace be upon him), have conveyed to humanity.

 

 

 

(vi)       The second caliph, Umar said: “The verse of Riba (i.e. the verse which forbids Riba) is among those which were revealed during the last days of the Prophet (peace be upon him). He passed away before explaining its implications to us”. Justice Qadeeruddin Ahmed says that the observation of Umar refers to the verse of the Qur’an which prohibits Riba and not to an act or observation of the Prophet (peace be upon him). The Prophet (peace be upon him) was not able to explain the implication of the Divine command since he did not live long enough to do so. The Prophetic prohibition of Riba as contained in his Farewell Address anticipated the prohibition of Riba al-Jahiliyyah which came a few months later in the form of the Qur’anic revelations. The Second Caliph Umar ,appears to have noted that our knowledge of the subject was inadequate but he did not attempt to augment it because obviously the issue was of too serious and delicate a nature for any Muslim to assume the responsibility of playing that vital role. The actual situation therefore remains that neither the Qur’an nor the Prophet (peace be upon him) has explicitly told us as to what precisely the prohibited transactions were which are referred to as Riba in the Qur’an and are referred to as Riba al-Jahiliyyah by the jurists. Caliph Umar was ratable to solve the problem of discovering what exactly Riba or Riba al-Jahiliyyah was. Umar’s simple and practical advice was, “therefore you should shun all those transactions which clearly involve Riba as well as those regarding which there may be doubt that Riba is involved in them”. This was a stern decision which neither explained Riba nor removed doubts. Secondly, the lament of Umar over the absence of Prophetic guidance has been amply justified by a voluminous growth of literature on this subject which is the creation of juristic predilections.