ISLAMABAD: The Federal Shariat Court (FSC) declared, the prohibition of Riba is complete and absolute in all its forms and manifestations according to the injunctions of Islam; therefore, asked the government to implement its decision by 31st December 2027.
The full bench of the FSC comprising Chief Justice Muhammad Noor Meskanzai, Justice Dr Syed Muhammad Anwer, and Justice Khadim Hussain M Shaikh on Thursday, in exercise of power under Article 203-D of the Constitution announced its reserved judgment.
Riba case was remanded by Shariat Appellate bench Supreme Court of Pakistan in 2002. The FSC existing bench conducted 34 hearings, wherein, the petitioners, their counsels, jurisconsults, amicus curiae, economists, experts, scholars, chartered accountants, attorney general for Pakistan and the advocate generals of the provinces advanced their arguments.
The judgment said five-year period is reasonably enough time for the implementation of its decision completely i.e. convert economy of Pakistan into, equitable, asset based, risk sharing and interest-free economy. Therefore, it said by 31st December 2027, the decision shall take effect by way of complete elimination of Riba from Pakistan.
The federal as well as provincial governments are directed to complete the necessary legislative amendments in the impugned laws in order to bring such laws or provisions of the laws into conformity with the injunctions of Islam by 31st December 2022.
It said all such laws will take effect prospectively.
The speedy proliferation and exponential growth of Interest-free Banking not only in Pakistan but in the whole Islamic World and even worldwide is a reality that has established that interest-free banking system is not only practicable but feasible too. It did not agree with the federal government’s apprehensions that introduction of interest-free banking in the economic system of Pakistan may have a negative impact on the overall economic system of Pakistan.
The judgment noted that legal and statutory framework backed by the State Bank of Pakistan (SBP) for embracing the interest-free banking in Pakistan is already available, in furtherance of which the existence of Section 25 (2)(b) of the Banking Companies Ordinance, 1962 and Section 22 of the State Bank of Pakistan Act, 1956 pave the way for complete elimination of Riba from the economy.
“One of the basic goals of an Islamic State like Pakistan is to have an equitable economic system free from exploitations and speculations.” “The Islamic economic system is an equitable, asset based and risk sharing economic system. It promotes and encourages the circulation of money in a society. It sternly discourages the accumulation of wealth in a few hands.”
Islamic economic and finance system is based on real economic activities which prohibits Riba, al-Gharar (uncertainty), al-Qimar (gambling) and al-Maysir (unearned income) as per Injunctions of Quran and Sunnah of the Holy Prophet (SAW). The prohibition of Riba is the corner stone of the Islamic economic system. “Therefore, we have decided that every loan which extracts any additional amount upon the principal from the debtor is Riba, hence, any transaction that contains Riba even at a slightest level, falls within the category of Riba thus prohibited,” said the judgment.
It maintained that all the prevailing forms of interest, either in the banking transactions or in private transactions fall within the definition of Riba. Therefore, it declared that the prohibition of Riba is complete and absolute in all its forms and manifestations according to the Injunctions of Islam in accordance with the Holy Quran and Sunnah. The charging of any amount in any manner over the principal amount of a loan or debt is Riba which is completely prohibited according to the Quran and Sunnah of the Holy Prophet (SAW), said the judgment.
It, therefore, decided that: i. The banking interest in all its forms is Riba, thus, the complete and absolute prohibition of interest does not change: a) with the change in the purpose of taking loan, whether the loan is taken for commercial, productive or industrial purpose etc. or is taken for personal needs; or with any change in the percentage at which the interest is charged on a loan whether it is low or high; and with any change in the method of calculating the amount of interest upon a loan whether it is calculated as simple interest or doubled or multiplied interest upon a loan.
ii. Any transaction of money for money of the same denomination and value where the quantity on both sides is not equal, either in a spot transaction or in a transaction based on deferred payment is Riba.
A barter transaction between two weighable or measurable commodities of the same kind, where the quantity on both sided is not equal, or where the delivery from one side is deferred is Riba. A barter transaction between two different weighable or measurable commodities where delivery from one side is deferred is Riba. Any change in the status of the borrower or lender does not affect the absolute prohibition of Riba. Riba remains prohibited absolutely, irrespective of the fact of what so ever name it is called.
The Court held that any interest stipulated in the government borrowings acquired from domestic or foreign sources is Riba and clearly prohibited by the Holy Quran and Sunnah; therefore, for future the Government is directed to adopt Shariah-Compliant Modes while borrowing either from domestic or from foreign sources.
The judgment referred the constructive, encouraging and positive approach of the International Financial Institutions like the IMF, Asian Development Bank and the World Bank to utilize Shariah Compliant, Riba free financing Modes for their financing modes being more productive and economically feasible.
It said the Peoples’ Republic of China is also willing to utilise the Islamic mode of financing for the CPEC projects, needless to mention that we are already utilising Riba-Free Shariah-Compliant mode of financing while dealing with Islamic Development Bank and with some of the Islamic Countries.
The judgment said all those laws or the provisions of laws, which are under challenge before the Court, which contain the word ‘interest’ within the meaning of banking interest is Riba, hence prohibited and any payment of extra amount in addition to due payment due to a delay, which is considered and calculated as interest over that amount also falls within the category of Riba, hence prohibited being repugnant to the injunctions of Islam according to the principles as laid down in the Quran and Sunnah.
Copyright Business Recorder, 2022