The Riba Case And The Interest Based Financial System of Pakistan

The Riba Case And The Interest Based Financial System of Pakistan

Article 2 of the Constitution of Islamic Republic of Pakistan 1973, stipulates that all existing laws shall be brought in conformity with Injunctions of Islam as laid down in Holy Quran and Sunnah and no law shall be enacted which is repugnant to such injunctions. Section 3 of Shari’ah Act 1991, declares Islam as the supreme law of the land and section 8 of the said Act stipulates that the State shall take steps to ensure that the economic system of Pakistan is constructed on the basis of Islamic economic objectives, principles, and priorities.

The Federal Shariat Court, while exercising its power of declaring any law repugnant to the injunctions of Islam, declared interest equivalent to “riba”, thus un-Islamic and illegal. After declaring its verdict in 1991, the Federal Shariat Court directed that all kinds of transactions, whether national or international and whether governmental or private, had to take place on a non-interest basis. The government and certain banks and financial institutions filed 67 appeals against this judgment in the Shariah Appellate Bench of the Supreme Court, as a result of which the execution of the judgment was stayed. In 1999, the Shariat Appellate Bench of the Supreme Court of Pakistan consisted of Mr. Justice Khalil-ur-Rahman, Mr. Justice Munir A Shaikh, Mr. Justice Wajeehuddin Ahmad, and Maulana Justice Muhammad Taqi Usmani took up this matter and on 23.12.99, upheld the Federal Shariat Court ruling and declared interest illegal. The Court held (in its detailed judgment consisting of more than 1,000 pages) that any increase or gain over and above the principal amount of loan is riba, thus un-Islamic. As a consequence of this judgement, certain laws were to be ceased to take effect from 31 March 2000, some other laws from 31 July 2000, and all other laws permitting or condoning interest from 30 June 2001. Thus, Pakistan became the first Muslim country to officially declare modern (and rampant) bank interest system as un-islamic and illegal.

Although, the said judgments were the first formal step and initiative for putting the Islamic finance into practice and many scholars from all over the Muslim world given their feedback that commercially viable interest-free Islamic banking model can provide all modern banking services including interest-free loans on a wide scale and as such it can replace interest-based banking system imminently without any disruption , however, on 24th June 2002, in Civil Shariat Review Petition No. 1 of 2000 filed by the United Bank Ltd was allowed by the then Chief Justice of Pakistan, the judgment dated 23rd December, 1999 passed by the Shariat Appellate Bench of Supreme Court in Shariat Appeals No. 11 to 19 of 1992 and the judgment dated 14th November, 1991 of the Federal Shariat Court passed in Shariat Petitions No. 42-I + 45-I of 1991 etc. were set aside and the cases were remitted to the Federal Shariat Court which are still pending adjudication.

It is pertinent to mention that Article 37 (d) of the Constitution requires the state to ensure expeditious justice. In the first part of National Judicial Policy, 2009 Chief Justice of Pakistan, in his introductory note, said;

“ People have very high expectations of the courts to settle their disputes, restore their rights/entitlements and maintain peace in society by sending the guilty behind bars. I thank the people for believing on us! We must strive to meet their expectation. This is time to repay our debt to the nation. We could do so by addressing the perennial twin-problems of ‘backlog’ and ‘delays’ in the system of administration of justice”.

Article X of Code of Conduct for Judges of the Supreme Court and the High Courts, 2009 says;

In this judicial work a judge shall take all steps to decide cases within the shortest time, controlling effectively efforts made to prevent early disposal of cases and make every endeavor to minimize suffering of litigants by deciding cases expeditiously through proper written judgments. A judge who is unmindful or indifferent towards this aspect of his duty is not faithful to his work, which is a grave fault ’.

As Islam is the supreme law of the land and the judiciary is duty bound to ensure that no law be repugnant to Islam, therefore, against the failure of the Federal Shariat Court to fix the riba case for hearing and against the unjustified delay in hearing the case, a resolution was moved by me and many other lawyers before the Islamabad Bar demanding that the Federal Shariat Court fix the case on expeditious basis, and hear it on day to day basis. This resolution was passed and forwarded to the Court but in vain.

A wise man said;

When freedom does not have a purpose, when it does not wish to know anything about the rule of law engraved in the hearts of men and women, when it does not listen to the voice of conscience, it turns against humanity and society.

The views expressed in this article are those of the author and do not necessarily represent the views of any organization with which he might be associated.

Farrukh Dall

Author: Farrukh Dall

The writer is a politician, lawyer and partner at Trek Law, an Islamabad based law firm. He is also the Chairperson at Read Pakistan and tweets as @farrukhdall


Mr. Dahl needs to file a Contempt of Court Application against the Federal Shariat Court’s Registrar before the Federal Shariat Court Bench at Islamabad for attempting to sabotage and hinder the dispensation of justice.

When Riba injunction ordained there were no banks or other financial institutions. The bankers, the industrialists, the investors etc entirely depend upon the amounts of the general masses kept with the banks solely for safe custody and some increase. The dilemma is that the bankers, industrialists etc are fully benefited from the deposited amount but in return give them nothing. 6 percent or above up to 15 or 16 percent increase is nothing when this increase is viewed in relation to the benefits which these bankers and industrialists obtain from the deposited amounts.
The Riba injunctions had been ordained to prevent individuals to get the original amount along with increase from other individuals. Bank is not an individual but is a place where the collected amounts are kept for safe custody from where the big industrialists and investors get these amounts of the people and enrich both themselves and the bankers.
After the introduction of the concept of banks and other financial institutions the benefited class is either bankers or their brethren investors. These classes have seized the Parliament and Government are making such financial policies which go against the original owners of the money in the banks.
The bankers, the investors and people in the government are collectively looting the people within the frame work of the rules and laws.
If the Riba law is limited only to the the human beings getting loans for meeting their daily necessities then the issue can be easily resolved.
Depositing amount in the bank is investment and after investment increase in the amount is naturally expected.
The bankers and industrialists and traders make more money from the amounts of those who had deposited the amounts.
My point is that the owners of money benefited the bankers and others but who will benefit the real owners?

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