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



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P L D 2000 S C 225                                                    (Riba prohibition stayed)

 

[Shariat Appellate Jurisdiction]



 

Present: Justice Khalil-ur-Rehman Khan, Chairman, Justice Munir A. Sheikh, Justice Wajihuddin Ahmed and Justice Maulana Muhammad Taqi Usmani, Members

 

Civil Shariat Appeal No. l of 1992



 

Dr. M. ASLAM KHAKI---Appellant

 

versus


 

Syed MUHAMMAD HASHIM and 2 others---Respondents

 

Civil Shariat Appeal No.2 of 1992



 

THE AGRICULTURAL DEVELOPMENT BANK OF PAKISTAN, ISLAMABAD---Appellant

 

versus


 

FEDERAL GOVERNMENT OF PAKISTAN

 

through Secretary, Ministry of Finance, Islamabad and 53 others---Respondents



 

Civil Shariat Anneal No.3 of 1992

 

THE MANAGER, ALLIED.BANK LIMITED, B/O BAGHBANPURA, LAHORE and 2 others---Appellants



 

versus


 

Malik MUNIR AHMED and 2 others---Respondents

 

Civil Shariat Appeal No.4 of 1992



 

ALLIED BANK OF PAKISTAN LIMITED---Appellant

 

versus


 

NAVEED ASIF and another---Respondents

 

 

Civil Shariat Appeal No.5 of 1992



 

ALLIED BANK OF PAKISTAN LIMITED---Appellant

 

versus


 

NAVEED ASIF and another---Respondents

 

Civil Shariat Appeal No.6 of 1992 ‘



 

ALLIED BANK OF PAKISTAN LIMITED---Appellant

 

versus


 

NAVEED ASIF and another---Respondent

 

Civil Shariat Appeal No.7 of 1992



 

ALLIED BANK OF PAKISTAN LIMITED---Appellant

 

versus


 

NAVEED ASIF and another---Respondents

 

Civil Shariat Appeal No.8 of 1992



 

ALLIED BANK OF PAKISTAN LIMITED

 

through President, Head Office, Jubilee Insurance House, Karachi---Appellant



 

versus


 

NOOR AHMED and another---Respondents

 

Civil Shariat Appeal No.9 of 1992



 

ALLIED BANK OF PAKISTAN LIMITED

 

through President, Head Office, Jubilee Insurance House, Karachi --- Appellant



 

versus


 

FEDERATION OF PAKISTAN through Secretary, Ministry of Finance, Government of Pakistan, Islamabad---Respondent

 

Civil Shariat Appeal No. 10 of 1992



 

ALLIED BANK OF PAKISTAN LIMITED---Appellant

 

versus


 

GOVERNMENT OF PUNJAB

 

through Secretary, Finance Department, Government of Punjab, Lahore and 4 others---Respondents



 

Civil Shariat Appeal No. l l of 1992

 

UNITED BANK LIMITED---Appellant



 

versus


 

Messrs FAROOQ BROTHERS

 

through Sole Proprietor Zafar Alam Chaudhry and 5 others---Respondents



 

Civil Shariat Appeal No. 12 of 1992

 

UNITED BANK LIMITED---Appellant



 

versus


 

Chaudhry SHARIF AHMED and another---Respondents

 

Civil Shariat Appeal No. 13 of 1992



 

UNITED BANK LIMITED---Appellant

 

versus


 

MUHAMMAD AMIN and another---Respondents

 

Civil Shariat Appeal No. 14 of 1992



 

UNITED BANK LIMITED---Appellant

 

versus


 

Messrs KAMRAN ICE FACTORY and 5 others----Respondents

 

Civil Shariat Appeal No. 15 of 1992



 

UNITED BANK LIMITED---Appellant

 

versus


 

MUHAMMAD IQBAL ZAHID and 3 others---Respondents

 

Civil Shariat Appeal No. 16 of 1992



 

UNITED BANK LIMITED---Appellant

 

versus


 

Messrs HAJISONS ANGOLO CINEMA

 

through Ch.Talib Hussain, Managing Partner and 8 others- --Respondents



 

Civil Shariat Appeal No. 17 of 1992

 

UNITED BANK LIMITED---Appellant



 

versus


 

ABDUL QAYYUM QURESHI and another---Respondents

 

Civil Shariat Appeal No. 18 of 1992



 

UNITED BANK LIMITED---Appellant

 

versus


 

ABDUL RASHID and 2 others---Respondents

 

Civil Shariat Appeal No. 19 of 1992



 

UNITED BANK LIMITED---Appellant

 

versus


 

Shaikh MASOOD ELLAHI and another---Respondents

 

Civil Shariat Appeal No.20 of 1992



 

MUSLIM COMMERCIAL BANK---Appellant

 

versus


 

ALLIED PAPER INDUSTRIES LTD. and 8 others---Respondents

 

Civil Shariat Appeal No.21 of 1992



 

NATIONAL BANK OF PAKISTAN---Appellant

 

versus


 

ALLIED PAPER INDUSTRIES LTD. and 13 others---Respondents

 

Civil Shariat Anneal No.22 of 1992



 

NATIONAL BANK OF PAKISTAN---Appellant

 

versus


 

ALLIED PAPER INDUSTRIES LTD. and 8 others---Respondents

 

Civil Shariat Appeal No.23 of 1992



 

NATIONAL BANK OF PAKISTAN---Appellant

 

versus


 

ALLIED PAPER INDUSTRIES LTD and 8 others---Respondents

 

Civil Shariat Appeal No.36 of 1992



 

Messrs HABIB BANK LIMITED---Appellant

 

versus


 

Syed MUSHARAF ALAM and 4 others---Respondents

 

Civil Shariat Appeal No.37 of 1992



 

Messrs HABIB BANK LIMITIED---Appellant

 

versus


 

FAIZ AHMAD and 11 others---Respondents

 

Civil Shariat Appeal No.38 of 1992



 

Messrs HABIB BANK LIMITED---Appellant

 

versus


 

Messrs KASHMIR FABRICS through Haji Sh.Karamat Ali, Managing Partner and 2 others---Respondents

 

Civil Shariat Appeal No.39 of 1992



 

Messrs HABIB BANK LIMITED---Appellant

 

versus


 

FAIZ AHMAD and 11 others---Respondents .

 

Civil Shariat Appeal No.40 of 1992



 

Messrs HABIB BANK LIMITED---Appellant

 

versus


 

FAIZ AHMAD and 11 others---Respondents

 

 

Civil Shariat Appeal No. 41 of 1992



 

Messrs HABIB BANK LIMITED---Appellant

 

versus


 

FAIZ AHMAD and 11 others---Respondents

 

 

Civil Shariat Appeal No.42 of 1992



 

NATIONAL BANK OF PAKISTAN---Appellant

 

versus


 

Messrs ALCOS (PAK), LAHORE and 2 others- --Respondents

 

Civil Shariat Appeal No.43 of 1992



 

NATIONAL BANK OF PAKISTAN---Appellant

 

versus


 

Messrs ALCOS (PAK), LAHORE and 2 others---Respondents

 

Civil Shariat Appeal No.44 of 1992



 

NATIONAL BANK OF PAKISTAN---Appellant

 

versus


 

Messrs ALCOS (PAK), LAHORE and 2 others---Respondents

 

Civil Shariat Appeal No.45 of 1992 .



 

NATIONAL BANK OF PAKISTAN---Appellant

 

versus


 

Messrs ALCOS (PAK), LAHORE and 2 others---Respondents

 

Civil Shariat Appeal No.46 of 1992



 

NATIONAL BANK OF PAKISTAN---Appellant

 

versus


 

Messrs M.A.QURESHI & SONS

 

through Proprietor Muhammad Ashraf and 2 others---Respondents



 

Civil Shariat Appeal No.47.of 1992

 

NATIONAL BANK OF PAKISTAN---Appellant



 

versus


 

Messrs M.A.QURESHI & SONS through Proprietor Muhammad Ashraf and 2 others---Respondents

 

Civil Shariat Appeal No.48 of 1992



 

NATIONAL BANK OF PAKISTAN---Appellant

 

versus


 

Messrs M.A.QURESHI & SONS through Proprietor

 

Muhammad Ashraf and 2 others---Respondents



 

Civil Shariat Appeal No.49 of 1992

 

NATIONAL BANK OF PAKISTAN---Appellant



 

versus


 

Messrs M.A.QURESHI & SONS through Proprietor Muhammad Ashraf and 2 others---Respondents

 

Civil Shariat Appeal No.50 of 1992



 

NATIONAL BANK OF PAKISTAN---Appellant

 

versus


 

ALLIED PAPER INDUSTRIES LTD. and 11 others---Respondents

 

Civil Shariat Appeal No.51 of 1992



 

NATIONAL BANK OF PAKISTAN---Appellant.

 

Versus


 

MUHAMMAD HASHIM --- Respondent

 

Civil Shariat Appeal No.52 of 1992 .



 

NATIONAL BANK OF PAKISTAN---Appellant ,

 

versus


 

MUHAMMAD HASH IM -Respondent

 

Civil Shariat Appeal No.53 of 1992



 

NATIONAL BANK OF PAKISTAN---Appellant

 

versus


 

Mian SALEEMUDDIN and 4 others---Respondents

 

Civil Shariat Appeal No.54 of 1992



 

Messrs ABN AMRO BANK through Authorised Officer and 19 others---Appellants

 

versus


 

The FEDERATION OF PAKISTAN through the Secretary, Ministry of Finance, Islamabad and 4 others---Respondents

 

Civil Shariat Appeal No.55 of 1992



 

NATIONAL BANK OF PAKISTAN---Appellant

 

versus


 

ALLIED PAPER INDUSTRIES LTD. and 7 others---Respondents

 

Civil Shariat Appeal No.56 of 1992



 

NATIONAL BANK OF PAKISTAN---Appellant

 

versus


 

ALLIED PAPER INDUSTRIES LTD. and 8 others---Respondents

 

Civil Shariat Appeal No.57 of 1992



 

NATIONAL BANK OF PAKISTAN---Appellant

 

versus


 

ALLIED PAPER INDUSTRIES LTD. and 11 others---Respondents

 

Civil Shariat Appeal No.58 of 1992



 

NATIONAL BANK OF PAKISTAN---Appellant

 

versus


 

ALLIED PAPER INDUSTRIES LTD. and 11 others---Respondents

 

Civil Shariat Appeal No.73 of 1992



 

FEDERATION OF PAKISTAN---Appellant

 

versus


 

Dr. MAHMOOD-UR-REHMAN FAISAL ---Respondent

 

Civil Shariat Appeal No.96 of 1992



 

PROVINCE OF PUNJAB

 

through Secretary Cooperative, Government of Punjab, Lahore and another---Appellants



 

versus


 

Ch. SARWAR HAYAT and another---Respondents .

 

Civil Shariat Appeal No.97 of 1992



 

PROVINCE OF PUNJAB

 

through Secretary Cooperative Government of Punjab, Lahore and 2 others---Appellants



 

versus


 

Mst. MUMTAZ BEGUM and another---Respondents

 

Civil Shariat Appeal No.98 of 1992



 

PROVINCE OF PUNJAB

 

through Secretary Cooperative, Government of Punjab, Lahore and another---Appellants



 

versus


 

GULZAR AHMAD KHAN, SENATOR and another---Respondents

 

Civil Shariat Appeal No.99 of 1992



 

PROVINCE OF PUNJAB

 

through Secretary Cooperative, Government of Punjab, Lahore and another---Appellants



 

versus


 

GULZAR AHMAD KHAN, SENATOR and another---Respondents

 

Civil Shariat Appeal No. 100 of 1992



 

PROVINCE OF PUNJAB

 

through Secretary Cooperative, Government of Punjab, Lahore and another---Appellants



 

versus


 

GULZAR AHMAD KHAN, SENATOR and another---Respondents

 

Civil Shariat Appeal No. 101 of 1992



 

PROVINCE OF PUNJAB

 

through Secretary Cooperative, Government of Punjab, Lahore and another---Appellants



 

versus


 

Ch. SARWAR HAYAT and another---Respondents

 

Civil Shariat Appeal No. 102 of 1992, ,



 

PROVINCE OF PUNJAB

 

through Secretary Cooperative, Government of Punjab, Lahore and another---Appellants



 

versus


 

Ch. SARWAR HAYAT and another---Respondents

 

 

Civil Shariat Appeals Nos. l to 23. 36 to 58,73 and 91 of 1992



 

(On appeal from the judgment of Federal Shariat Court dated 14-11-1991 passed in Shariat Petitions Nos. 42-1 + 45-I/91, 14-I/90, 42-L/91, 67-L/91, 74-L/91, 69-L/91, 68-L/91, 28-L/91, Suo Motu Case No.3-I/91, Shariat Petitions Nos.4-I/91, 30-L/91, 31-L/91, 32-L/91, 17L/91, 18-L/91, 49-L/91, 73-I/91, 76-L/91, 89-L/91, 30-1/90, 17-A/I/91, 16C/I/91, 16-A/I/91, 21-L/90, 29-L/91, 26-L/91, 31-1/91, 32-t/91, 33-I/91, 70-L/91, 71-L/91, 72-L/91, 73-L/91, 27-L/90 (in four cases), 16-1/91, 421/91, 45-1/91, 73-1/90, 72-L/91, 17-1/91, 16-B/I/91, 17-B/I/91, 17-C/I/91, 30-1/90 and 16-I/90 respectively).

 

Shariat Appeals Nos. 96 of 1992. 99 of 1992, 100 of 1992 and 101 of 1992



 

(On appeal from the judgment of Federal Shariat Court dated 22-61992 passed in Shariat Petitions Nos.84-1/91, 78-1/91, 79-1/91 and 83-I/91 respectively).

 

Civil Shariat Appeals Nos. 97 of 1992, 98 of 1992 and 102 of 1992



 

(On appeal from the judgment of Federal Shariat Court dated 30-61992 passed in Shariat Petitions Nos.l-I/92, 80-I/91 and 82-I/91 respectively).

 

(a) Islamic Jurisprudence-



 

---- Riba---Kinds---Any amount, big or small, over the principal, in a contract of loan or debt is Riba prohibited by Holy Qur’an, regardless of whether the loan is taken for the purpose of consumption or for some production activity- “Riba-al-Sunnah” and “Riba-al-Qur’an” are types of transactions termed as “Ribs” in Islamic Fiqh based on the Holy Qur’an and Sunnah.

 

Any amount, big or small, over the principal, in a contract of loan or debt is “Riba” prohibited by the Holy Qur’an, regardless of whether the loan is taken for the purpose of consumption or for some production activity. The ‘Holy Prophet (p.b.u.h.) has also termed the following transactions as Riba:



 

(i) A transaction of money for money of the same denomination where the quality on both sides is not equal, either in a spot transaction or in a transaction based on deferred payment.

 

(ii) A barter transaction between two weighable or measurable commodities of the same kind, where the quantity on both sides is not equal, or where the delivery from any one side is deferred.



 

(iii) A barter transaction between two different weighable or measurable commodities where delivery from one side is deferred.

 

These three categories are termed in the Islamic Jurisprudence as Riba-al-Sunnah because their prohibition is established by the Sunnah of the Holy Prophet (p.b.u.h.). Alongwith the Riba-al-Qur’an, these are four types of transactions termed as `Riba’ in the literature of Islamic Fiqha based on the Holy Qur’an and Sunnah.



 

Out of these four transactions, the last two ones, mentioned above as (ii) and (iii) have not much relevance to the context of modern business, the barter business being a rare phenomenon in the modern trade. However, the Riba-al-Qur’an and transaction of money mentioned above as (i) are more relevant to modern business.

 

(b) Islamic Jurisprudence---



 

----Riba---Loan---No difference between types of loan, so far as the prohibition of Riba is concerned---All the prevailing forms of interest, either in the banking transactions or in private transactions do fall within the definition of Riba---Any interest stipulated in the Government borrowings, acquired from domestic or foreign sources, is Riba and prohibited by the Holy Qur’an---Present financial system, based on interest, being against the Injunctions of Islam as laid down by the Holy Qur’an and Sunnah, and in order to bring the system in conformity with Shariah, Shariat Appellate Bench of Supreme Court directed that the system had to be subjected to radical changes---Alternatives to the present system being available, the transactions of interest could not be allowed to continue for ever on the basis of necessity.

 

There is no difference between types of loan, so far as the prohibition of Riba is concerned. It also does not make any difference whether the additional amount stipulated over the principal loan or debt is small or large. Therefore, all the prevailing forms of interest, either in the banking transactions or in private transactions do fall within the definition of Riba. Similarly, any interest stipulated in the Government borrowings, acquired from domestic or foreign sources, is Riba and clearly prohibited by the Holy Qur’an.



 

The present financial system, based on interest, is against the Injunctions of Islam as laid down by the Holy Qur’an and Sunnah, and in order to bring it in conformity with Shariah, it has to be subjected to radical changes.

 

A variety of Islamic modes of financing has been developed by Islamic scholars, economists and bankers that may’ serve as a better alternative to interest. These modes are being practised by about 200 Islamic financial institutions in different parts of the world.



 

These alternatives being available, the transactions of interest cannot be allowed to continue for ever on the basis of necessity.

 

There is ample evidence to prove that quite a substantial ground work has been done to suggest strategy for the transformation of the existing financial system to the Islamic one, and the present interest based system need not be retained for an indefinite period on the basis of necessity. However, the transformation may take some time which can be allowed on that basis.



 

(c) Interest Act (XXXII of 1839)---

 

----Preamble---Constitution of Pakistan (1973), Art.203-F---Repugnancy to Injunctions of Islam---Undefined, naked and generalised power to allow interest on a debt, as provided in Interest Act, 1839, being repugnant Injunctions of Islam, Shariat Bench of Supreme Court directed the repeal of Interest Act, 1839 and declared that the Act shall cease to have effect from 31st March, 2000.



 

The Interest Act, 1839, confers power on the Court to allow interest to the creditor upon all debts or ascertained sum payable which the Court gets recovered. The Council of Islamic Ideology had recommended its repeal in its Session held on 11th November. 1981.

 

The question of allowing interest by the Court while granting decree has been exhaustively dealt with by the Negotiable Instruments Act, 1881 and the Civil Procedure Code, 1908 as amended from time to time and as such there is no need to retain the Interest Act. 1839 on the Statute Book, so the same, for this reason alone, needs to be repealed. Even otherwise an undefined, naked and generalized power to allow interest on a debt is repugnant to Injunctions of Islam, therefore. Interest Act, 1839 being repugnant to Injunctions of Islam was directed to he repealed.



 

(d) Government Savings Banks Act (V of 1873)---

 

----S. 10---Constitution of Pakistan (1973), Art.203-F---Repugnancy to Injunctions of Islam---Provision of S.10, Government Savings Banks Act, 1873 on account -of the use of the word “interest” which was payable along with the amount of deposit was repugnant to Injunctions of Islam---If the accrual was caused through permissible mode of investment, no objection could be taken, for the emphasis had to be on adoption of Islamic modes of finance and conduct of business following Islamic principles--Word “interest” appearing in S.10 of the Government Savings Banks Act, 1873 being repugnant to the Injunctions of Islam, Shariat Bench of Supreme Court directed that word “interest” be substituted with the words “Shariah compliant return” and declared that the provision shall cease to have effect from 30th June, 2001.



 

The Government Savings Banks Act, 1873 provides for nomination and payment of deposit on death of the depositor and such payment to be a full discharge. However, it provides for the savings of rights of executor and creditor etc.

 

Section 10, as challenged, reads as under:---



 

“Any deposit made by, or on behalf of, any minor may be paid to him personally if he made the deposit, or to his guardian for his use if the deposit was made by any person other than the minor, together with the interest accrued thereon.”

 

The provision, on account of the use of the word “interest” which is payable alongwith the amount of deposit was repugnant to Injunctions of Islam. If the accrual is caused through permissible mode of investment, obviously no objection can be taken. The emphasis should be on adoption of Islamic modes of Finance and conduct of business following Islamic principles. The word `interest’ appearing in section 10 of the Act being repugnant to the Injunctions of Islam was directed to be substituted with the words ‘Shariah compliant return’.



 

(e) Negotiable Instruments Act (XXVI of 1881)--

 

----Ss. 79 & 80---Constitution of Pakistan (1973), Art,203-F---Repugnancy to Injunctions of Islam---Whole of Ss.79 & 80, Negotiable Instruments Act, 1881 are repugnant to the Injunctions of Islam---”Mark-up” system as in vogue in Banks in Pakistan was though repugnant to the Injunctions of Islam, yet transaction of Murabaha or Bai Mu’ajjal in itself was not prohibited---If the transaction fulfilled the specified conditions, same could not be held to be repugnant to Injunctions of Islam ---Shariat Appellate Bench of Supreme Court declared that the provision will cease to have effect from 30th June, 2001---Reasons and principles elucidated with illustrations.



 

Even though the transactions of mark-up, leasing, hire-purchase, service charges and Musharakah are permissible subject to certain conditions, yet the way a further `return’ on the pronote or a bill of exchange is provided in section 79, which contemplates a return over a debt is nothing but interest. Section 79 of the Negotiable Instruments Act, 1881, therefore, is repugnant to the Injunctions of Islam in its entirety. Although clause (ii) of the proviso of section 79 speaks of a Musharakah and a profit and loss sharing; this type of transaction does not normally require a promissory note or a bill of exchange, because the rate bf return in a Musharakah is unknown, and the pronote and a bill of exchange are basically designed for a specific amount payable by the debtor. Therefore, retention of this truncated clause will make it applicable to a’ situation about which it has been held that no further return is permissible in that situation. So far the amount of profit deserved by the financier remains in the business of the client, a further return on the basis of actual profits accrued to the business will be deserved by the financier, but the provisions of the agreement of Musharaka can take care of it, its mention in the present context is not called for. The whole of section 79 is, therefore, repugnant to the Injunctions of Islam.

 

Like section 79 the whole of section 80 is repugnant to the Injunctions of Islam.




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