I.   BACKGROUND

1.   This refers to the related Important QC in trail, blue, italic and double line (a) BFQC152 of 28.6.22 about Petitions against RIBA? and Recommended Actions (b) BFIC289= PAFO Free Online Seminar against Riba, Conventional Banks, etc

2.   We also refer to earlier BFQC including 150 of 23.12.22 about Summary of Shariat Court Decision against Interest, etc. (b) Related Booklet with proper content (Attachment 322.1), which are being issued verbatim again, owing to link issue therein. 

3. Alhamdolillah, this is and will be Talk of Town owing to Federal Shariat Court and Constitutional deadline of Full Implementation is Islamic Economy by 31.12.27. Hence, Gradual Stepwise Deadlines are being stated by SECP and SBP, which deadlines were partly earlier covered and more deadlines will be covered shortly.

4. Please forward this email for Sadqa e Jaria, as it empasses Answers to several Questions being raised by Professionals (including by Conventional Bank / UnIslamic Banks). 

5. It is worthwhile to note that one of the authors of the Order has been assassinated - U can guess who could have been killed. We will share FRIC about the same shortly, as several Professionals and Public at large do not know about the same.

II.   COMMENTARY Earlier issued - Now in Verbatim again, as explained above in para I, with proper Order link 

We would inform you about Farooq Brothers VS UBL, etc - SP 30-L/1991 & all other 81 connected matters relating to Riba/Interest - Federal Shariat Court SCP (Attachment 322.2) in the ensuing paragraph, with emphasis in bold & Underline for quick reading 

III.   EXECUTIVE SUMMARY

The Federal Shariat Court (FSC) declares interest against Sharia. The FSC on 28.4.22 announced a verdict in a long-pending case on Riba (interest), declaring the prevailing interest-based banking system as against the Sharia and directed the government to facilitate all loans under an interest-free system.

Background, Views on Media, Government Comments, Current Order Background & Decision in 2002 Review Petition & Decision matter are covered in Para 1 to 5 of our Commentary. Most important 13 questions formulated and well then decision are covered in para 6. Twenty One laws affected due to Para 6 are covered in Para 7. While Suo Moto Insurance vs Takaful is covered in Para 8.

Different types of ineffective / repeal / deadlines of 30.6.22, 31.12.22 and 30.6.27 are covered in para 9; while Appreciation matter is given in Para 10.

IV.   DETAILS

1.   BACKGROUND

The first petition for the abolition of the interest-based banking system in the country was filed in the FSC on 30.6.1990.

The then Chief Justice of the FSC, Dr Tanzeel ur Rehman, had constituted a three-member bench that delivered judgment in the case on 14.11.1991 (PLD 1992 FSC 1), and sought its implementation by 30.4.1992. The then PML-N Government had challenged the decision in the SCP. Several years later on 23.12.1999, the SCP upheld the decision of the FSC and directed authorities to ensure its implementation by 30.6.2000.

Subsequently, a Review Appeal was filed in 2002 with the top court, and on 24.6.2002, the decision of the FSC was suspended and the case was referred back to the FSC for interpretation of Riba. The case against the interest rate system had been pending in the Shariat Court for the last 19 years. Around nine chief justices of the FSC have completed their terms since then, but the case remained undecided until its verdict was announced on 28.4.22.

The FSC ruled on 28.4.22 that elimination of interest from the economic system was a religious and legal responsibility, ordering the government to end the interest-based banking system by the end of 2027 with certain matters having deadlines earlier.

The decision was made on petitions against Riba (usury) after the SCP referred the case back to the FSC in 2002 following appeals against the decision of the FSC.

The case was decided by a three-person bench after 19 years and 34 hearings. The FSC had earlier reserved the verdict of the case on 12.4.22.

2.   VIEWS ON MEDIA

Following are the Video Clippings related to the FSC Judgment:

(a)   Press Conference in favour of Decision against Riba - Janab Siraj ul Haq Saheb

(b)   Press Conference in favour of Decision against Riba - Tanzeem e Islami Ameer

(c)   Decision against Riba - Geo News

3.   GOVERNMENT COMMENTS

Finance Minister Miftah Ismail welcomed the FSC’s decision. He said the Government and the SBP would "carefully study this important decision and then seek guidance and clarification from the FSC about the process, steps and timeframe" for its implementation. Following is his tweet dated 28.4.22:

We welcome the Federal Shariat Court (FSC) decision in the Riba case. The government and SBP will carefully study this important decision and then seek guidance and clarification from the FSC about the process, steps and timeframe to implement this decision.

4.   BACKGROUND & DECISION OF 2002

The relevant paragraphs are reproduced below:

2. The background of the case is that the United Bank Limited filed a Civil Shariat Review Petition No.01 of 2000 under Article 188 of the Constitution of the Islamic Republic of Pakistan, seeking review of the judgment dated 23.12.1999 passed by the Shariat Appellate Bench of the Supreme Court in Shariat Appeals Nos.11 to 19 of 1992, whereby the judgment dated 14.11.1991 of the Federal Shariat Court was affirmed and it was declared that Riba in all its forms and manifestations was prohibited by the Holy Qu‘ran and Sunnah of the Holy Prophet (SAW) in addition to that many laws were declared as repugnant to Islamic Injunctions.

3. The Federal Shariat Court after in-depth discussion and hearing the view point of subject specialists and scholars declared the laws and provisions of laws, as repugnant to the injunctions of Islam through its judgment (PLD 1992 FSC 1). An appeal was filed in the Shariat Appellate Bench of the Supreme Court and the impugned judgment of the Federal Shariat Court was up held by the Shariat Appellant Bench of the Supreme Court vide its judgment titled Muhammad Aslam Khaki Versus Muhammad Hashim (PLD 2000 SC 225); consequently following laws were declared repugnant to the injunction Islam with the direction that these law will cease to have effect from 31st March, 2000:

1. The Interest Act, 1839.

2. The West Pakistan Money-Lenders‘ Ordinance 1960

3. The West Pakistan Money-Lenders Rules, 1965.

4. The Punjab Money-Lenders‘ Ordinance, 1960

5. The Sindh Monery-Lenders Ordinance, 1960.

6. The N.W.F.P. Money-Lenders‘ Ordinance, 1960.

7. The Balochistan Money-Landers, Ordinance, 1960.

8. Section 9 of the Banking Companies Ordinance, 1962.

The provisions of the following laws which contained the term  ̳interest‘ within the meaning of Riba were declared repugnant to the injunction of Islam.

1. Section 10 of the Government Saving Banks Act (V of 1893).

2. Sections 79 and 80 of the Negotiable Instruments Act. (XXVI of 1881) in respect of interest on money claims,

"Mark-up), "Services charges", etc.

3. Sections 114 and 117 (c) of Negotiable Instruments Act of 1881).

4. Sections 28,32,33 and 34 Land Acquisition Act (1 of 1894).

5. Sections 34, 34-A, 34-B and O.XXXVII, R.2(a) of Civil Procedure Code (V of 1908) relating to interest, Mark-

up, lease, hire purchase and service charges.

6. Sections 2(12), 35(3), 144(1), O.XXI, R.11(2)(g), O.XXI, R.38, O.XXI, R.79(3), O.XXI, R.80(3), O.XXI, R.93,

O.XXXIV, R.2(1),(a)(i)&(iii),(c); O.XXXIV, R.11, O.XXXIV, R.4(1) & (2), O.XXXIV, R.7(a)(c)&(2), O.XXXIV, R.11, O.XXXIV, R.13(1) & (2) O.XXXIX, R.9 of Civil Procedure Code regarding interest.

7. Section 59 of the Cooperative Societies Act(VII of 1925), provision relation to interest.

8. Rules 14(1) (b), 22 and 41 of Cooperative Societies Rules, 1927, provision of interest.

9. Section 3-BB (1) (b), 27(3), 29(8)(b), C(iii),47-B and 81(2) (d) of Insurance Act, 1938, provisions for a range

of rates of interest etc.

10. Section 22(1) of the state Bank of Pakistan Act (XXXII of 1956) relating to purchase of Bills, Debenture, bonds etc, on the basis of interest.

11. Rule 17(1)(1)(3) of Agricultural Development Bank Rules, 1961.

12. Section 25(2)(a) &(b) of the Banking Companies Ordinance (LVII of 1962) regarding giving of directions by State Bank regarding rates of interest or Mark-up.

13. Rule 9(2) &(a) of the Baking companies Rules, 1963.

14.Rule 9 of the Banks (Nationalization) payment of Compensation Rules, 1974.

15. Section 8(2)(a)&(b) of the Banking Companies (Recovery of Loans) Ordinance (XIX of 1979) relating to interest and Mark-up.

16. Banks (Nationalization) payment of Compensation Rules 1974.

17. Banking Companies (Recovery of Loans) Ordinance, 1979.

4. In addition to that the Shariat Appellate Bench of the Supreme Court also held as follows:-

a. Any amount big or small, over the principal, in a contract of loan or debt in " riba " prohibited by the Holy Quran, regardless of whether the loan is taken for the purpose of consumption or for some production activity; there is no difference between different types of loans so far as the prohibition of Riba is concerned. The prohibition of Riba is absolute irrespective of the fact whether the additional amount stipulated over the principal loan or debt is small or large.

b. All the prevailing forms of interest either in the banking transactions or in private transactions do fall within the definition of Riba.

c. Similarly any interest stipulated in the Government borrowings acquired from domestic or foreign sources is Riba and clearly prohibited by the Holy Quran.

5. In addition to that the Shariat Appellate Bench of the Supreme Court directed the Federal Government to take certain steps which according to the court were necessary to transform the economy of Pakistan like, the Government should take strict austerity measures to drastically curtail the Government expenditure, and deficit financing should be controlled. It also suggested certain laws to be framed like, an Act to regulate the Federal consolidated Fund and Public Account, Provincial Consolidated Fund and Public Account requires to be enacted by the parliament and the Provincial Assemblies for their proper regulations; and laws similar to the freedom of information Act, the Privacy Act and Ethics Regulations of United States, Financial Services Act of Britain be enacted. Shariat Appellate Bench of the Supreme Court suggested certain offices to be established like, Serious Fraud Office (SFO) to control white collar and economic crimes, Credit rating agencies in the public sector etc.

6. The Shariat Appellate Bench of the Supreme Court directed certain special departments to be established within the State Bank. In addition to that for transformation of the existing financial system to the one conforming to Shariah certain time lines were also given by the Shariat Appellate Bench. The Government was directed to convert the domestic inter Government borrowings as well as the borrowings of the Federal Government from State Bank of Pakistan on interest free basis.

7. The Shariat Appellate Bench of the Supreme Court vide its judgment (PLD 2002SC 801) in the Review Order held: ―we are of the considered view that the issues involved in these cases require to be re-determined after thorough and elaborate research and comparative study of the financial systems which are prevalent in the contemporary Muslim countries of the world. Since the Federal Shariat Court did not give a definite finding on all the issues involved determination whereof was essential to the resolution of the controversy involved in these cases. It would be in the fitness of things if the matter is remanded to the Federal Shariat Court which under the Constitution is enjoined upon to give a definite finding on all the issues within its jurisdiction.

5.   REVIEW PETITION OF 2002 & DECISION

The relevant paragraphs are reproduced below:

8. Resultantly, Civil Shariat Review Petition No. 1 of 2000 filed by the United Bank Ltd is allowed, the judgment dated 23th December, 1999 passed by the Shariat Appellate Bench of this Court in Shariat Appeals Nos.11 to 19 of 1992 and the judgment dated 14th November, 1991 of the Federal Shariat Court passed in Shariat Petitions No.42-1+45-1 of 1991 etc, are set aside and the cases are remitted to the Federal Shariat Court for determination afresh in the light of the contentions of the parties noted above and the observations made which are germane to the controversy. Besides the points raised before this Court, the parties would be at liberty to raise any other issue relevant to these cases and the Federal Shariat Court may also, on its own motions, take into consideration any other aspect which may arise or may be found relevant for determination of the issue involved herein.

9. The Review Petition was decided in 24.06.2002, whereby the judgment dated 23.12.1999 passed by Shariat Appellate Bench of the Supreme Court and judgment dated 14.11.1991 of the Federal Shariat Court were set aside and the cases were remanded to this Court for re-determination afresh in the light of contentions of the parties as noted in the said judgment and observation made upon them, which were germane to the controversy. Two decades have passed since the announcement of the judgment in the Review Petition, and ever since the matter kept pending adjudication which is not at all an appreciable state of affairs. Although, this delay happened due to one or the other practical and procedural hindrances but still no excuse can be made acceptable. Nevertheless; this dark cloud of delay has a silver lining too. The delay has brought certain positive changes in the matter in issue of this case, i.e., the introduction and promotion of Islamic Banking or Interest-Free Banking in Pakistan at an exponential level took place during this period. During this period of last 20 years Islamic Banking has become a reality in Pakistan. Many topics which were considered as mere academic debate have become real and practical issues, like different modes of Islamic financing their practicality and operations at individual as well as at corporate level. Both the judgments which were set aside by the Remand Order of the Hon‘ble Sharit Appellate Bench of the Supreme Court contained a very thorough and elaborative juristic literature on a very sound academic footing, which was appreciated and praised not only in Pakistan but all over the world in the relevant circles attached to the field of Islamic financing or Islamic Banking. Academically both the judgments are considered as master piece and land mark judgments for laying the foundation of Islamic Banking in the contemporary world. During the past 20 years both the judgments provided practical help and guideline for the development of Islamic Banking in Pakistan. At present, Islamic Banking, i.e., Interest Free Banking is a reality not only in Pakistan but all across the world. Resultantly, the significance of so many questions are changed, which were debated and agitated upon by the parties previously, while arguing those petitions in the Federal Shariat Court and in the Shariat Appellate Bench of the Supreme Court as well as in the review petition. For example, the question whether Islamic Banking is practical, viable and feasible or not in Pakistan or whether the implementation of Islamic Banking in Pakistan will impose any risk to the stability and security of Pakistan or not. All such questions perhaps have lost their significance which were previously relevant when the case was pending and was argued in the Hon‘ble Shariat Appellate Bench of the Supreme Court. As a consequence of this change, the gravity of the importance of some academic questions have changed with Islamic Banking being regulated by the State Bank of Pakistan with the able and appropriate advice and guidance of its Shariah Board. In light of this background, we have divided the questions for our determinations in the following categories to dilate upon them accordingly:

i) Firstly, questions or points raised by the petitioner in the Review Petition before the Supreme Court were almost the same, which were earlier raised by them either before the Federal Shariat Court or Shariat Appellate Bench of Supreme Court and most of these questions were dilated upon elaborately. Some of these questions are repetition of one or two points in different ways. For instance some of these points which were raised by the petitioners, in the Review Petition, and were noted down by Shariat Appellate Bench of the Supreme Court in para 6 can be summed up in the following manner:

a. Does the Holy Quran only prohibit Riba which is doubled and multiplied interest and it does not prohibit what is reasonable and fair?

b. The Riba has not been defined in the Holy Quran and all that has been held in the judgment under review is

based on Qiyas.

c. The definitions and differentiation between usury, Riba and interest have not been properly distinguished.

d. Charging of Riba on personal loans is prohibited while it is not prohibited on productive, industrial or commercial loans.

e. Banking is a kind of business and business is permissible in Islam. (reference para 11)

f. Banking interest is not Riba. (reference para 16 of the Remand Order)

6.   THIRTEEN (13) QUESTIONS OF LAW FORMULATED AND THEIR VERDICT

The relevant and important para are reproduced below:

16. After hearing the parties at length and reviewing the voluminous material provided by the parties, amicus curiae, jurist-consults and other experts from general public, who were keen and interested in providing their input in the case. We have formulated certain points of determination. We gave serious thought to every point raised before us through verbal or written arguments. In addition, we conducted elaborate and thorough research to understand all the points raised by the petitioners in Civil Review Petition before Shariat Appellate Bench of the Supreme Court.

Moreover, we have thorough consideration to all the fundamental points involved in this case. After undertaking all this exercise, we are of the view that following are some basic points which need our determination.

Determination Point-I: Whether the Federal Shariat Court has jurisdiction to adjudicate upon the matter as prayed for in different Shariat Petitions pending adjudication before it.

Answer-I: The Federal Shariat Court has jurisdiction to adjudicate upon the matter as prayed for in different Shariat Petitions pending adjudication before it.

Determination Point-II: What is Riba according to injunctions of Islam in the light of Holy Quran and Sunnah of the Holy Prophet and how it is defined by the Muslim jurists and scholars in the light of Holy Quran and Sunnah?

42. According to above mentioned definitions of Riba any amount taken or given in a loan transaction in excess to the actual loan amount is Riba. Refer Pages 131 & 132

43. Another type of transaction known as Riba al-fadl is also prohibited which was explained by Prophet (PBUH) himself. Refer Page 132

44. The prohibition of Riba al-fadl is in fact a precautionary measures introduced by Islam to implement the complete prohibition of Riba in any manner and all its forms. Refer Pages 133 to 135

For Hadith, refer Para 45.

For The Urdu Encyclopedia of Islam, refer Pages 139 to 141.

46. After going through all the verses of the Quran, ahadith, saying of Companions / Sahabah (RA) of the Prophet (PBUH), the opinion of the Muslim Jurists, muhaddithin, lexicographers and mufassirin especially the opinion of Hazrat Umer (RA). We hold that Riba should be defined inclusively not exclusively. It means that in the light of the Verses of the Quran, saying of the Prophet (PBUH) and the practice of Sehabah Karam (RA), any transaction which has the slightest doubt of being included in any type or category of Riba must be included in the definition of Riba. There is a consensus among the Jurists that the Riba is completely and absolutely prohibited according to the Injunctions of Islam as laid down in the Quran and Sunnah of the Prophet (PBUH). In addition to this in the light of all the verses related to the prohibition of Quran, ahadith of the Prophet (PBUH) narrating Riba, explanations of all the jurists, scholars and mufassirin of Quran related to Riba we have concluded that:

i. According to the Injunctions of Islam, „Riba‟ exists in a loan or a financial transaction in which increase in principal amount of the lender of the money occurs.

ii. That increase in a transaction occurs according to the wishes of loan lending party (lender) at a predetermined rate or without any predetermined rate.

(It is irrelevant whether the increased amount upon a loan is fixed at the initiation of the loan contract or charged after the lapses of certain stipulated time period).

iii. The transaction occurs in the absence of any exchange of a counter-value or recompense or Iwid

iv. Riba is prohibited absolutely in all of its forms and manifestations.

47. Shariah strictly prohibit all types of Riba therefore any kind of socio-economic, legal or religious change in the borrower or the lender of a loan transaction involving Riba does not change the nature of prohibition. Riba is equally forbidden for the poor and the rich and even for the Muslims and the Non-Muslims in an Islamic State. Similarly, nature of its prohibition does not change with the change in the purpose of taking loan; which mean that the loan taken on Riba for commercial, productive of industrial purpose is as prohibited as the charging of Riba upon a loan which is taken to fulfil personal need. Likewise, change in the ratio of percentage at which Riba is charged on a loan in a transaction does not change legal effect of prohibition of Riba in a transaction. This means that no limit of percentage can be fixed for the purpose that up till that limit charging of interest upon a loan is legal or permissible and more than that is forbidden or prohibited. Similarly, change in legal status of any party involved in a Riba transaction, for example if one of the parties or both the parties in a transaction are legal persons, does not change the legal or Sharai effect of the Riba transaction it will remain prohibited.

Determination Point-III: Whether the term Riba is confined to compound interest only, hence in the light of Islamic injunctions only charging of compound interest on loans is prohibited and not the charging of simple interest.

52. After going through a voluminous scholarly work of the Muslim scholars of every era and of every background we are of the considered view that Riba is haram or prohibited in every form and quantity. Its prohibition is not at all dependent on its percentag or the mathematical style in which it is calculated. It is evident from the phraseology or expression of the Quran itself that here only doubled or multiplied interest is not meant or intended but it also includes even the smallest percentage of interest in it. Riba or interest is absolutely prohibited and forbidden.

Determination Point-IV: Whether the prohibition of Riba in Islam changes with the change in the percentage of interest charged upon a loan and is there any difference between usury and interest?

67. Hence we are of the considered view that usury and interest are synonyms of the English language used to translate the meaning of the term Riba and there is no difference in them. If we call Riba as usury or we call it interest it does not make any difference, it is prohibited according to Islamic Injunctions in the light of Holy Quran and Sunnah. The prohibition of Riba is absolute. Moreover, according to the Injunctions of Islam the effect of prohibition of Riba does not change with the rate at which interest is charged upon a loan.

Determination Point-V: Whether only the charging of interest upon consumption loans is prohibited and the charging of interest upon commercial or productive loan is not prohibited in Islam.

77. After going through all these books and relevant sources, we are of the view that any such personal opinion of any person has no legal binding, irrespective of whether that opinion was given by anybody from the sub-continent or from Egypt, especially when that opinion is in opposition to the overwhelming scholarly opinion of the Muslim world from every era and from every corner of the world. In addition to that it is also a relevant fact in our consideration that such an opinion was normally given when the majority of Muslim states were under colonial rule and they had no concept of Islamic Banking. Hence those scholars were living under specific socio-economic and political conditions where it was almost impossible for them to imagine the concept of Islamic Finance at the national level let alone at an international level. Hence they obviously ignored and rather erred in making an opinion which was against the principles of Islamic Jurisprudence and even against the Injunctions of Islam. In Islam a rule does not change with the change in appearance of that thing upon which it is applicable. For example, Liquor is prohibited in Islam so it will remain prohibited in Islam irrespective of the fact that the style of its brewing, manufacturing and packing are totally different from the era when it was declared prohibited. Similarly, the quantity in which it is used or the manner in which it is used or the name or brand to which it is called does not have any impact on the basic ruling of Islam about it, that it is prohibited under all conditions and all its manifestations and forms. Same is the case of Riba or interest be it on personal loan or on commercial loan it is haram and prohibited. By giving consent no illegal act can be made legal like fornication, gambling or selling wine etc. under Islamic Jurisprudence.

78. Now coming to the point of determination, whether only the charging of interest upon consumption loans is prohibited and the charging of interest upon commercial or productive loans is not prohibited in Islam. For all the reasons discussed herein above we have decided this point of determination as, that the prohibition of Riba is absolute, irrespective of the fact as to whatever purpose the loan is taken on interest. The purpose of taking loan does not change the status of prohibition of Riba.

Determination Point-VI: Whether the Islamic Banking model is practical or not and is the Islamic Banking a kind of heela?

79. While arguing the review petition, the petitioners forwarded two nebulous types of arguments:

Firstly, Islamic Banking is not practical, and

Secondly, whatever is being done in the name of the Islamic Banking is just a heela i.e. devices to avoid what is otherwise Riba.

80. In para-10, of the review order the argument of a counsel Dr. Syed Riaz ul Hasan Gilani ASC representing the Federation were reproduced wherein he stressed upon the fact vehemently that the alternate banking Islamic Banking and financial system i.e. Islamic Financial system as proposed in the impugned judgment under review was not at all workable and the Government has found it incapable of being implemented. The para-11 of the Review Order, contains the arguments of Mr. Gilani that all the Islamic banking system suggested in the judgment under review is a misnomer and according to him except Musharika other modes of finance are nothing but heela, i.e. devices to avoid what is otherwise Riba which are in fact more harsh and oppressive having the element of Zulm and are worst in consequences as compared to the various forms of interest prevalent in the present day banking system which have wrongly been termed as Riba al-Nasiah in the judgment under review. According to him the judgment under review omitted to take into consideration the fact that the alternate system is not a consensus oriented system and had been bitterly opposed by many eminent jurists.

81. As we have already taken notice of the fact that the ground reality regarding Islamic Banking is completely changed from the time when the review petition was being heard and now. Therefore; to get the actual data we asked relevant and specific questions from the State Bank of Pakistan to explain the steps so far taken by the State Bank of Pakistan regarding promotion of Islamic banking in Pakistan. Answers to these questions, helped us in assessing the actual state of affairs of Islamic Banking in Pakistan. Whether the model of Islamic Banking and Islamic Finance are actually applicable in Pakistan or not.

82. The question we asked from the State Bank of Pakistan and its answer are as follows:

Determination Point-VII: What is the status of Islamic banking worldwide especially in the Islamic world and in Pakistan?

104. We have examined the above mentioned facts provided by the experts and we have concluded that now in Pakistan a comprehensive framework exists for Sukuk and regular issuance of Sukuk can be used to convert the financial system to Shariah compliant and interest free mode at the Government Level. A gradual target can be set by Govt to convert the entire borrowing to Islamic modes in next few years and stop issuance of interest-based instruments. Therefore, to eliminate Riba completely we direct that all Public Sector entities to start dealing only in Interest-free Shariah-compliant modes which are approved by the State Bank of Pakistan.

Determination Point-VIII: Whether the interest or Riba becomes permissible if the transaction are undertaken or made in the name of business

107. Those who eat Riba (usury) will not stand (on the Day of Resurrection) except like the standing of a person beaten by Shaitan (Satan) leading him to insanity. That is because they say: "Trading is only like Riba (usury) ," whereas Allah has permitted trading and forbidden Riba (usury) . So whosoever receives an admonition from his Lord and stops eating Riba (usury) shall not be punished for the past; his case is for Allah (to judge); but whoever returns to Riba (usury), such are the dwellers of the Fire - they will abide therein.

The opening sentence of the verse contains the argument of those people who indulged or involved in taking Riba. They used to equate Riba with trade or business (Bay). (refer Page 219)

Same arguments were forwarded by the counsel of a bank after almost fifteen hundred years. The answer to this argument is unequivocally stated in the Holy Quran as: (refer Page 219)

108. The bare reading of the verse tells us that (غ١ث (sale is permissible and Riba is prohibited, one is permitted (Halal) and other is prohibited (Haram). This is one of the basic Ayah or Hukam upon which all or any banking transaction is analyzed separately and individually, by the Islamic jurists on the analogy (Qiyas) of permissible and non-permissible sale غ١ث transactions according to injunctions of Islam, i.e., Quran and Sunnah. Therefore, we have decided this point against the respondents. All or any transaction undertaken by a bank if it involves interest or Riba at any percentage less or more , in any form simple or multiplied or compound is prohibited and haram. Banking itself per se is neither permissible nor impermissible according to the Injunctions of Islam in the light of the Quran and Sunnah, it is actually the nature of transaction which it undertakes that makes it permissible or impermissible according to the Injunctions of Islam. If its transactions are Shariah compliant then it is permissible and if they are not Shariah compliant or have doubts in them of being Shariah compliant then such transactions are impermissible and against the Injunctions of Islam.

109. At the time of the advent of Islamic Banking, the basic presumption about the banking system which was then prevalent was fundamentally wrong, that it is not manageable without interest based transactions. The Interest-free banking or the Islamic banking is an evident proof of the reality to be otherwise.

Determination Point-IX: Whether mechanism of indexation and inflation should be adopted by the banking sector in Pakistan to balance the inherent imbalance in the economic transactions.

111. Hence, we are of the considered view that at the moment these questions do not come under the precinct of jurisdiction of this Court because presently there does not exist any law which contains this issue therefore discussing this issue is irrelevant and outside the scope of this court. It is a matter to be decided by the relevant authorities like the regulator of the banking sector, i.e., Sate Bank of Pakistan or the Government or the Parliament. So far as our jurisdiction is concerned, it is subject to Article 203-D of the Constitution to review and decide the repugnancy of any law in relation to injunctions of Islam as contained in Quran and Sunnah. At present, there does not exist any law, regulation or SRO of State Bank, etc., which deals with the question of indexation; therefore, we consciously refrain to answer the question of indexation and all the related questions in this regard, which are connected to the effect of inflation of money over the borrowed amount during the period of borrowing. This is outside the scope of the jurisdiction of this Court at the moment.

112. The Federal Shariat Court while deciding a Shariat Petition as is in the case which is pending before us, is required to decide the question, i.e., whether or not the law or provision of law impugned before it is repugnant to the injunctions of Islam as laid down in the Holy Quran and Sunnah. For clarity the relevant Articles of the Constitution which define the term law and contemplate the power, jurisdiction and function of Federal Shariat Court are covered in more detail on page _ to _ of the Order are reproduced herein below:

The term law given in clause (c) of Article 203B in Chapter 3-A of Part-VII of the Constitution reads as follow:

(c) law includes any custom or usage having the force of law but does not include the Constitution, Muslim personal law, any law relating to the procedure of any court or tribunal or, until the expiration of [ten] years from the commencement of this Chapter, any fiscal law or any law relating to the levy and collection of taxes and fees or banking or insurance practice and procedure; and