Review of Pakistan Federal Shari’ah Court Judgement on Riba

The Federal Shari‘ah Court (FSC) of Pakistan announced a historic judgement in December 1991 on the legality of interest on financial transactions. The court, presided over by Mr Justice Dr Tanzilur Rahman, decreed that the provisions of interest in a number of fiscal laws came under the definition of riba and thus these legal provisions were repugnant to the Shari'ah. The court fixed June 30, 1992, as the day when this decision would come into effect and these legal provisions would be null and void after that date. It has built a pressure on the Government of Pakistan (GOP) to take appropriate action to amend or substitute these laws in the light of the Shari‘ah by that date.

The FSC disposed of 115 petitions challenging the legality of “interest” in 20 fiscal laws besides three suo moto Shari‘ah notices. The FSC got the mandate to admit petitions challenging Fiscal laws on June 25, 1990, before which the fiscal laws were out of its jurisdiction. The GOP, by making successive amendments in the constitution, kept these laws out of the jurisdiction of the court for over 10 years. The FSC admitted the first petition challenging “interest” on December 11, 1990, after which a number of other petitions were filed. The hearing concluded on October 24, 1991. The FSC announced the judgement on December 7, 1991.

The FSC judgement is a voluminous document. It consists of 564 foolscap pages (triple-spaced). The text of the judgement consists of 298 pages. It has two appendices. Appendix A contains replies to the questionnaire issued by the FSC to 12 distinguished scholars, economists, bankers and jurists both within Pakistan and abroad. Appendix B gives extracts from the report of the Council of Islamic Ideology of Pakistan on Elimination of Interest from the Economy, published in 1980.

The objective of the present paper is to give a brief resumed of the judgement and to highlight its distinctive features. Since the judgement has raised and exhaustively discussed several vital issues, we shall give a brief review of the conclusions of the FSC and mention the evidence on which it based these conclusions. We shall also discuss some of the replies of the scholars to the FSC questionnaire.

Distinctive Features

In a number of ways, the judgement is epoch-making. It will be remembered in the history of Islamic economics as a landmark of intellectual integrity, an example of analytical acumen and a piece of unmatched scholarship. It has several distinctive features.

First, it has declared all the fiscal laws containing provisions on interest as null and void and has fixed a date (i.e. June 30, 1992) beyond which these laws will become ineffective. There is no example of such a decree in the history of Pakistan.

Second, the judgement did not mince any words nor did it try to avoid the contentious issues pertaining to interest. Instead, the court, on its own initiative, raised all the issues so that the matter is decided once and for all. In this way the judgement is, perhaps, the most comprehensive legal document to discuss all the questions at one place.

Third, it is a unique document in the sense that it combines evidence from primary sources, history of the Muslim people, juridical texts, opinions of the renowned scholars and economists, all at one place.

Fourth, although it was not the responsibility of the court to discuss the question of alternative system, yet it raised this question and provided a lot of valuable material which can become basis of an interest-free economic system.

Fifth, the judgement has taken note of the dissenting opinions of the counsels of some respondents and discussed them threadbare. The discussion of the dissenting opinions is exhaustive and leaves little room for their plausibility.

Muhammad Akram Khan

Source: Elimination of Riba, Khurshid Ahmad, Khalid Rahman and Zahed A. Valie. Republished with permission.