Giveupriba

13 National Bank of Pakistan Appellant Versus 1. 2. 3. M/s Alcos (Pak), Lahore Nasir Ahmed Qureshi Mr.Pervaiz Qureshi Respondents Civil Shariat Appeal No.45 of 1992 National Bank of Pakistan Appellant Versus 1. 2. 3. M/s Alcos (Pak), Lahore Nasir Ahmed Qureshi Mr.Pervaiz Qureshi Respondents Civil Shariat Appeal No.46 of 1992 National Bank of Pakistan Appellant Versus 1. 2. 3. M/s M.A.Qureshi and Sons through its proprietor Muhammad Ashraf Muhammad Ashraf Mr.Pervaiz Afzal Respondents Civil Shariat Appeal No.47 of 1992 National Bank of Pakistan Appellant Versus 1. 2. 3. M/s M.A.Qureshi and Sons through its proprietor Muhammad Ashraf Muhammad Ashraf Mr.Pervaiz Afzal Respondents Civil Shariat Appeal No.48 of 1992 National Bank of Pakistan Appellant

14 Versus 1. 2. 3. M/s M.A.Qureshi and Sons through its proprietor Muhammad Ashraf Muhammad Ashraf Mr.Pervaiz Afzal Respondents Civil Shariat Appeal No.49 of 1992 National Bank of Pakistan Appellant Versus 1. 2. 3. M/s M.A.Qureshi and Sons through its proprietor Muhammad Ashraf Muhammad Ashraf Mr.Pervaiz Afzal Respondents Civil Shariat Appeal No.50 of 1992 National Bank of Pakistan Appellant Versus 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. Allied Paper Industries Ltd. M.Rafiq Saigol S.I.H. Zaidi Zia Sheikh K.A. Ghafoor N.G.Currim Bhoy A.Qayyum A.N.Zubairi Shaukat H.Qureshi S.H.Gardezi Muhammad Abdul Moid Riffat Ali Respondents Civil Shariat Appeal No.51 of 1992 National Bank of Pakistan Appellant Versus Muhammad Hashim Respondent

15 Civil Shariat Appeal No.52 of 1992 National Bank of Pakistan Appellant Versus Respondent Muhammad Hashim Civil Shariat Appeal No.53 of 1992 National Bank of Pakistan Appellant Versus 1. 2. 3. 4. 5. Mian Saleemuddin Maqsooda Bano Saleem Raza Qureshi Shehr Yar Iqbal Qazi Federation of Pakistan Respondents Civil Shariat Appeal No.54 of 1992 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. Messrs. ABN Amro Bank through its authorised officer. Messrs. American Express Bank through its authorised officer. Messrs ANZ Grindlays Bank PLC, through its authorised officer Messrs Bank of America through its authorised officer. Messrs Bank of Oman Ltd., through its authorised officer. Messrs Banque Indosuez through its authorised officer. Messrs Bank of Tokyo Ltd., through its authorised officer. Messrs Chase Manhattan Bank N.A., through its authorised officer. Messrs Citibank N.A., through its authorised officer. Messrs Deutsche Bank A.G., through its authorised officer. Messrs Doha Bank Ltd., through its authorised officer. Messrs Emirates Bank International Ltd., through its authorised officer. Messrs Habib Bank A.G.Zurich, through its authorised officer. Messrs Hong Kong & Shanghai Banking Corporation, through its authorised officer. Messrs International Finance Investment and Commerce Bank Ltd., through its authorised officer. Messrs Middle East Bank Ltd., through its authorised officer. Messrs Pan African Bank Ltd., through its authorised officer. Messrs Rupali Bank Ltd., through its authorised officer.

16 19. Messrs Societe Generale, through its authorized officer 20. Messrs Standard Chartered Bank, through its authorised officer. Appellants Versus 1. 2. 3. 4. 5. The Federation of Pakistan through the Secretary Ministry of Finance, Islamabad. National Bank of Pakistan. M/s Alcos (Pak), Lahore Nasir Ahmed Qureshi Mr.Pervaiz Afzal Civil Shariat Appeal No.55 of 1992 National Bank of Pakistan Appellant Versus 1. 2. 3. 4. 5. 6. 7. 8. Allied Paper Industries Ltd. M.Rafiq Saigol Afsar M.Khan S.I.H. Zaidi K.A. Ghafoor S.H.Gardezi N.G.Currim Bhoy A.Qayyum Respondents Civil Shariat Appeal No.56 of 1992 National Bank of Pakistan Appellant Versus 1. 2. 3. 4. 5. 6. 7. 8. 9. Allied Paper Industries Ltd. M.Rafiq Saigol Afsar M.Khan S.I.H. Zaidi K.A. Ghafoor S.H.Gardezi N.G.Currim Bhoy A.Qayyum Pakistan through Secretary Secretariat, Islamabad Ministry of Finance, Respondents Central

17 Civil Shariat Appeal No.57 of 1992 National Bank of Pakistan Appellant Versus 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. Allied Paper Industries Ltd. M.Rafiq Saigol S.I.H. Zaidi Zia Sheikh K.A. Ghafoor N.G.Currim Bhoy A.Qayyum A.N.Zubairi Shaukat H.Qureshi S.H.Gardezi Muhammad Abdul Moid Riffat Ali Respondents Civil Shariat Appeal No.58 of 1992 National Bank of Pakistan Appellant Versus 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. Allied Paper Industries Ltd. M.Rafiq Saigol S.I.H. Zaidi Zia Sheikh K.A. Ghafoor N.G.Currim Bhoy A.Qayyum A.N.Zubairi Shaukat H.Qureshi S.H.Gardezi Muhammad Abdul Moid Riffat Ali Respondents Civil Shariat Appeal No.73 of 1992 Federation of Pakistan Appellant

18 Versus Dr.Mahmood-ur-Rehman Faisal Respondent Civil Shariat Appeal No.96 of 1992 1. 2. Province of Punjab, through Secretary Co-operative, Government of Punjab, Lahore. The Deputy Registrar, Co-operative Societies, Lahore Region. Appellants Versus 1. 2. Ch.Sarwar Hayat National Industrial Co-operative Finance Corporation Ltd. through Chairman Co-operative Board for Liquidation, Punjab, Lahore. Respondents Civil Shariat Appeal No.97 of 1992 1. 2. 3. Province of Punjab, through Secretary Co-operative, Government of Punjab, Lahore. The Deputy Registrar, Co-operative Societies, Lahore Region. The Advocate-General, Punjab, Lahore. Appellants Versus 1. 2. Mst.Mumtaz Begum. National Industrial Co-operative Finance Corporation Ltd. through Chairman Co-operative Board for Liquidation, Punjab, Lahore. Respondents Civil Shariat Appeal No.98 of 1992 1. 2. Province of Punjab, through Secretary Co-operative, Government of Punjab, Lahore. The Deputy Registrar, Co-operative Societies, Lahore Region. Appellants Versus 1. Gulzar Ahmad Khan Senator.

19 2. National Industrial Co-operative Finance Corporation Ltd. through Chairman Co-operative Board for Liquidation, Punjab, Lahore. Respondents Civil Shariat Appeal No.99 of 1992 1. 2. Province of Punjab, through Secretary Co-operative, Government of Punjab, Lahore. The Deputy Registrar, Co-operative Societies, Lahore Region. Appellants Versus 1. 2. Gulzar Ahmad Khan Senator. National Industrial Co-operative Finance Corporation Ltd. through Chairman Co-operative Board for Liquidation, Punjab, Lahore. Respondents Civil Shariat Appeal No.100 of 1992 1. 2. Province of Punjab, through Secretary Co-operative, Government of Punjab, Lahore. The Deputy Registrar, Co-operative Societies, Lahore Region. Appellants Versus 1. 2. Gulzar Ahmad Khan Senator. National Industrial Co-operative Finance Corporation Ltd. through Chairman Co-operative Board for Liquidation, Punjab, Lahore. Respondents Civil Shariat Appeal No.101 of 1992 1. 2. Province of Punjab, through Secretary Co-operative, Government of Punjab, Lahore. The Deputy Registrar, Co-operative Societies, Lahore Region. Appellants Versus 1. Ch.Sarwar Hayat.

20 2. National Industrial Co-operative Finance Corporation Ltd. through Chairman Co-operative Board for Liquidation, Punjab, Lahore. Respondents Civil Shariat Appeal No.102 of 1992 1. 2. Province of Punjab, through Secretary Co-operative, Government of Punjab, Lahore. The Deputy Registrar, Co-operative Societies, Lahore Region. Appellants Versus 1. 2. Ch.Sarwar Hayat. National Industrial Co-operative Finance Corporation Ltd. through Chairman Co-operative Board for Liquidation, Punjab, Lahore. Respondents ---------- For the Appellants In C.Sh.Appeal No.1/92: Dr.M.Aslam Khaki, In Person. For ADBP Hafiz S.A.Rahman, Sr.ASC., Mr.Ejaz Muhammad Khan,AOR. For ABL Syed Riazul Hasan Gilani, ASC. Kh.Mushtaq Ahmad,AOR. For UBL Mr.Noorul Arfin ASC & Mr.Mansoorul Arfin,ASC Mr.Abdul Saeed Khan Ghauri, AOR. For MCB, National Bank of Pak.,& State Life Insurance Corporation of Pakistan. For HBL Mr.Khalid M. Ishaque , Sr.ASC. Mr.Abu Bakar Chundrigar,ASC Mr.M.S.Ghauri, AOR. For Federation of Pakistan Ch.Muhammad Farooq, Attorney General for Pakistan (On notice, but did not argue);

21 Maulvi Anwarul Haq, Deputy Attorney General (at initial stage); Syed Riazul Hassan Gilani, ASC, (appeared from 28-6-1999 to 2-71999 and thereafter did not appear despite notice to him); Ch.Zafar Iqbal, ASC appeared on behalf of the Federal Government but not argued. Ch.Akhtar Ali, AOR. Mr.Mehr Khan Malik,AOR. For State/NWFP Govt. Mr.Ejaz Muhammad Khan, Additional Advocate General, Mr.M.A.Qayyum Mazhar,AOR. For State/Punjab Govt. Mr.Altaf Elahi Sheikh, Addl. Advocate General Punjab, Rao Muhammad Yousaf Khan, AOR. For Nawab Industries etc. Mr.Muhammad Iqbal Vehniwal, Ch.Mehdi Khan Mehtab, AOR. Respondent No.1 Muhammad Hashim (in SA.1/92) In Person. Muhammad Ismail Qureshy In Person, with Syed Abul Aasim Jaferi,AOR. In SA 96 to 102/92 Syed Afzal Haider,ASC. ASC; Experts on Court notice: Dr.Waqar Masood Khan Director General (Planning), International Islamic University, Islamabad; Dr.Syed Muhammad Tahir, International Islamic University; Mr.Abdul Jabbar Khan, former President National Bank of Pakistan; Dr.Umar Chapra, Mr.Ibrahim Sidat, Dr.S.Muhammad Hussain, Dr.Irshad Zaman, Chartered Accountants/Economists; Mr.

22 Maqbool Soomroo, Dr.Shahid Hussain and Mr.Abdul Wadood Khan, Hafiz Abdur Rehman Madni Chairman Islamic Research Council, Dr.Aslam Khaki, Prof.Khurshid Ahmad, Mr.H.U.Beg (Retired Finance Secretary, Government of Pakistan), Prof. Syed Nawaz Haider Naqvi, Mr. Muhammad Yahya (Deputy Secretary General, Mutahida Ulema Council of Pakistan), Maulana Gauhar Rehman, Mr. Iqbal Khan (Foreign Expert – Managing Director Global Islamic Finance; HSBC Investment Bank Plc, United Kingdom), Dr.Ahmad Muhammad Ali (President, Islamic Development Bank, Jeddah) alongwith his delegation namely, Mr.Muad Ali Umar (Vice President, IDB) Dr.M.Alfatah (Legal Adviser IDB) Mr.D.M.Qureshi (Adviser Treasury, IDB) Mr.Muhaad Al- Jehri (Director, IDB) Dr.Hussain Hassan (Head of Shariah Board, Dubai Islamic Bank) and Mr.Adnan Al Bahr, Managing Director and Chairman, International Investment Company Kawet); Mr.Ismail Qureshi, ASC, Mr.Faheem Ahmad (Marketing Coordinator, Financial Research & Analysis , Credit Rating Company Ltd., Pakistan, Karachi), Maulana Abdul Sattar Niazi, Dates of hearing : 22-2-1999 to 26-2-1999, 1-3-1999 to 5-3-1999, 8-3-1999, 9-3-1999 ( Islamabad); 17-3-1999 to 19-3-1999, 22-3-1999 to 26-3-1999(Karachi) 3-5-1999 to 7-5-1999; 17-5-1999 to 21-51999; 24-5-1999 to 28-5-1999; 14-6-1999 to 18-6-1999; 28-6-1999, 29-6-1999, 1-7-1999, 2-7-1999, 5-7-1999 and 6-7-1999. JUDGMENT

23 KHALIL-UR-REHMAN KHAN, J.- This judgment will dispose of 55 appeals filed as of right under Article 203-F of the Constitution of the Islamic Republic of Pakistan, 1973 against a number of judgments of the Federal Shariat Court, detail of which is given in the title of this judgment, whereby certain provisions relating to “interest” as contained in various laws, have been declared to be repugnant to the injunctions of Islam as contained in the Holy Quran and Sunnah of the Holy Prophet (Peace be upon him), with direction to delete the said provisions by amending the said laws. The first of these judgments rendered on 14-11-1991, reported as PLD 1992 FSC 1, has been assailed in Shariat Appeals Nos.1/92 to 23/92, 36/92 to 58/92 and 91/92 whereby findings with regard to some of the impugned Acts/Rules have been particularly challenged while in Shariat Appeal No.73/92, the appeal filed by Federation of Pakistan, all the findings on all the laws recorded by the learned Judges of the Federal Shariat Court have been brought under challenge. The laws containing provisions as to “interest”, “return” or “mark up” subject matter of the impugned judgment are as under:1. The Interest Act, 1839. 2. The Government Savings Banks Act, 1873. 3. The Negotiable Instruments Act, 1881. 4. The Land Acquisition Act, 1894.

24 5. The Code of Civil Procedure, 1908. 6. The Co-operative Societies Act, 1925. 7. The Co-operative Societies Rules, 1927. 8. The Insurance Act, 1938. 9. The State Bank of Pakistan Act, 1956. 10. The West Pakistan Money Lenders Ordinance, 1960. 11. The West Pakistan Money Lenders Rules, 1965. 12. The Punjab Money Lenders Ordinance, 1960. 13. The Sind Money Lenders Ordinance, 1960. 14. The N.W.F.P. Money Lenders Ordinance, 1960. 15. The Baluchistan Money Lenders Ordinance, 1960. 16. The Agricultural Development Bank of Pakistan, Rules, 1961. 17. The Banking Companies Ordinance, 1962. 18. The Banking Companies Rules, 1963. 19. The Banks (Nationalization) (Payment of Compensation) Rules, 1974. 20. The Banking Companies (Recovery of Loans) Ordinance, 1979.

25 Shariat Appeal No.96/92 and 100/92. In these Shariat Appeals, judgments dated 22-6-1992 of the Federal Shariat Court (PLD 1992 FSC 538), whereby two circulars bearing Nos.603-22-RCS dated 31-2-1969 and RCS/B&C/4869-5018 dated 5-12-1979 issued by the Registrar Cooperative Societies, Punjab Lahore, Punjab Lahore, to the extent they provide for charging interest have been declared repugnant to the Injunctions of Islam, have been challenged. Shariat Appeals No. 99/92 and 101/92. In these Shariat Appeals judgments dated 22-6-1992 of the Federal Shariat Court (PLD 1992 FSC 537), whereby clause (ee) of sub-section (2) of section 71 of the Co-operative Societies Act, 1925 in so far as it relates to the provision of “interest” was declared repugnant to the Injunctions of Islam, has been challenged. Shariat Appeals No.97/92, 98/92 and 102/92. In these Shariat Appeals judgment of Federal Shariat Court dated 30-6-1992 (PLD 1992 FSC 535), whereby sub-bye-law (6) of Bye-Law 3 of the National Industrial Cooperative Finance Corporation Limited, to the extent that it provides for “interest” was declared repugnant to the injunctions of Islam, has been challenged.

26 It is pertinent to note that the Federal Shariat Court with a view to elicit views/opinions of the distinguished Ulema, Scholars and Economists issued a Questionnaire relating to the impugned fiscal laws and the issues arising for consideration. The Questionnaire reads as under:“1. What is the definition of Riba ( ) ربا according to the Holy Qur’an and Sunnah of the Holy Prophet (PBUH). Does it cover the simple and compound interest existing in the present day financial transactions? 2. If banking is based on interest-free transactions, what would be its basic practical shape in conformity with the injunctions of Islam? 3. (i) Does the interest on loans floated by the Government to meet national requirements come under Riba ( ?) ربا (ii) What alternatives can be suggested for the banks in case they grant loans without interest for various requirements? 4. Can, in the light of the Injunctions of Islam, any differentiation be made between private and public banking in respect of charging of interest on banking facilities or services rendered? 5. (i) Can the capital, according to the Injunctions of Islam, be regarded as an agent of production thus requiring remuneration for its use? (ii) Does devaluation of the currency affect the payment of loans taken before such devaluation? (iii) Can inflation causing rise in the cost/value of gold and consumer goods in terms of currency have any effect on the sum borrowed? 6. What would be the alternatives in the context of present day economic conditions to carry on domestic and foreign trade efficiently without availing of banking facilities based on interest?

27 7. Is interest permissible or otherwise on the transactions between two Muslim States or a Muslim and nonMuslim State? 8. Is it possible to carry on insurance business otherwise that on the basis of interest? 9. Does interest accruing on Provident Fund come under Riba ( ?) ربا 10. Can the payment of prize money on Prize Bond or Saving Bank Account or other similar Schemes be regarded as Riba ( ?) ربا 11. Would it be lawful under Islamic Law to differentiate between business loans on which interest may be charged and consumption loans which should be free of interest? 12. If interest is fully abolished, what would be the inducements in an Islamic Economic System to provide incentives for saving and for economising the use of capital? 13. Can an Islamic State impose any tax on its subjects other than Zakat and Ushr?” A consolidated statement of the question-wise opinion prepared and compiled by Research Section of the Federal Shariat Court has been appended as Appendix ‘A’ to the main impugned judgment delivered by the Federal Shariat Court. The Scholars, Ulema, Economists and Bankers, who had submitted replies to the Questionnaire have been listed in paragraph 19 of the impugned judgment. This Court also prepared a Questionnaire highlighting the issues requiring determination and sent it to distinguished Ulema,

28 Scholars, Bankers, and Economists of the country and abroad for their opinions. The Questionnaire reads as under:“Q.1. The Holy Quran has prohibited ‘Riba’. What is meant by this term? What is its true definition and connotation in the light of the Holy Quran and Sunnah of the Holy Prophet (PBUH)? Q.2. What is the true scope of the transactions to which the bar of Riba is applicable? Can the term Riba be also applied to the commercial or productive loans advanced by the banking and financial institutions and to the interest charged thereon? Q.3. The Pakistani banks and some financial institution finance their clients on the basis of buy back on mark up agreements. According to this method the client of the Bank purports to sell a particular commodity to the bank, and simultaneously buys it back on a high price on deferred payment basis. A certain rate of mark-up (percent per annum) is applied to the second sale. Does this arrangement fall within the ambit of Riba? Q.4. Is there any difference between a Muslim and a nonMuslim in the matter of prohibition of Riba? Can the prohibition o

1 IN THE SUPREME COURT OF PAKISTAN (Shariat Appellate Jurisdiction) Present: Mr.Justice Khalil-ur-Rehman Khan, Mr.Justice Munir A. Sheikh, Mr.Justice Wajihuddin Ahmed, Mr.Justice