Commercial Papers - Appendix B (The Shariah Basis for the Standard)

Transcription

1. Shari ’ah Standard No. (16): Commercial Papers Appendix (B) The Shari’ah Basis for the Standard Dealings in Commercial Papers ■ The basis for the permissibility of dealing in a bill of exchange is that it is in the meaning of Hawalah or Qard (loan) contract, which are agreed upon by Ijma’ (consensus of Fuqaha), or in the meaning of Suftajah (demand note), which is valid according to the preponderant opinion. The evidence for this is the report from a number of Companions (may Allah be pleased with them) who dealt in these instruments. It is reported from Abdullah Ibn Abbas (may Allah be pleased with him) that he used to take silver from traders at Mecca and write down a demand note for them to be paid at Kufa. It is related from Abdullah Ibn Al-Zubayr that he used to take dirhams from traders at Mecca and then write a note drawn upon his brother Mus’ab in Iraq. When Ibn Abbas was asked about this, he saw no harm in the transaction.(3) Al-Muwaffaq Ibn Qudamah,(4) may Allah confer mercy upon him, has related from Ali (may Allah be pleased with him) that he was asked about a similar transaction and he saw no harm in it. Further, in the Suftajah is the interest of both the lender and the borrower without harm being caused to either one of them. The lender is secure against the danger of the highway in transporting his dirhams to the destined town, while the borrower benefits from the loan and is also secure against the dangers of the highway being under an obligation to pay in the said town. The Shari’ah does not lay down a prohibition for interests that do no invoke harm. (3) This has been related by Al-Bayhaqi in “Al-Sunan Al-Kubra” [5: 352]; and see Muhammad Nasir Al-Albani, “Irwa` Al-Ghalil Fi Takhrij Ahadith Manar Al-Sabil” [5: 328]. (4) “Al-Mughni” [6: 436]. 452
2. Shari ’ah Standard No. (16): Commercial Papers ■ Shaykh Al-Islam Ibn Taymiyyah(5) (may Allah confer mercy upon him) has said: “The correct view is that of permissibility, because both the lender and the borrower benefit from such raising of a loan, and the Shari’ah does not proscribe what benefits them and is in their interest; it proscribes what is harmful for them.” In addition to this, there is no text that prohibits a Suftajah nor is such meaning implied by the texts. It is, therefore, necessary to maintain its permissibility, especially when there is a general need for it.(6) ■ The basis for the permissibility of a promissory note is that it is considered a document acknowledging a debt, and Allah, the AlMighty, has commanded the securing of debts, as He, the Al-Mighty, says: {“O you who believe! When you contract a debt for a fixed period, write it down. Let a scribe write it down in justice between you...”}(7) ■ The permissibility of a cheque drawn by the client upon a bank, with which he has a balance is that it is in the nature of Hawalah. The Muhil (transferor) is the accountholder, the Muhal is the beneficiary and the Muhal Alayh (transferee) is the drawee bank. ■ The permissibility of a cheque drawn by the client upon a bank with which he does not have a balance is that it is Hawalah. This view is held by those who do not stipulate for the permissibility of Hawalah that the transferee be indebted to the Muhal (transferor) with Hawalah (transfer) being valid for a person who does not owe a prior debt. Some jurists call this absolute Hawalah or Hawalah upon one with no liability. The second view is that it is an agency for borrowing, and both are (independently) valid. This rule, however, is contingent upon the cheque no invoking Riba by way of an overdraft, for banks usually do not lend without interest. Banks will not accept cheques drawn upon them by clients with no balance except by charging Riba-bearing profits that are due from the client along with the value of the cheque. Consequently, if the cheque drawn by the client upon the bank, where he does not (5) “Majmu’ Al-Fatawa” [29: 531]. (6) See: “Al-Mughni” [6: 437]; “Majmu’ Al-Fatawa” [20: 515] and [29: 531]; and Ibn Qayyim Al-Jawziyyah, “Tahdhib Sunan Abu Dawud” [5: 152]. (7) [Al-Baqarah (The Cow): 282]. 453
3. Shari ’ah Standard No. (16): Commercial Papers have a balance, includes Riba-bearing profits it is prohibited; it is not permissible to write such a cheque nor to undertake transactions in it. ■ The basis for the permissibility of dealing in crossed and account payee cheques, and the obligation of the payee bank to abide by the conditions stipulated by the accountholder for the two types of cheque, is the generality of the Hadith stating: “Muslims abide by the conditions they stipulate”.(8) The reason is that such a condition promotes the inherent interest of the contract. Further, the primary principle for conditions and contracts is that of permissibility. Endorsement The basis for the permissibility of endorsement is that it does not go beyond the meaning of either Hawalah (transfer) or Wakalah (agency), and both are permissible. Discounting of Commercial Papers ■ The basis for not permitting discounting of commercial paper is that in reality the discounting of commercial paper amounts to a loan with interest. What affirms this is that the interest charged through discounting varies according to the value of the commercial paper and its date of maturity, and loan with interest is prohibited by agreement. ■ The permissibility of paying less than the value of the paper, when the transaction is between the holder and the first beneficiary, is that it belongs to the category of the issue known as “negotiating a deferred debt for part of it paid promptly.” This is what is known as Da’ Wa Ta’ajjal (reduce the amount for hastening payment), and according to one opinion it is permissible to undertake such a transaction. The evidence that supports permissibility is the Hadith of Ibn Abbas (may Allah be pleased with him), stating: “When the Prophet (peace be upon him) decided to expell Banu Al-Nadir, they said, ‘O Messenger of Allah, (8) This Hadith has been related by a number of reporters of Hadith. See: “Sunan AlTirmidhi” [4: 584]; Al-Hakim, “Al-Mustadrak” [4: 101]; and “SunanAl-Daraqutni” [3: 27]. The Hadith has been narrated by Amr Ibn Awf and is connected to the Prophet (peace be upon him). It has a number of different Isnad (chains of transmission) to the Prophet. This is why Al-Bukhari related it in his “Sahih” [4: 451] as a Mu’allaq (Suspended) Hadith. Muhammad Nasir Al-Albani has investigated the chains of transmission of this Hadith “Irwa` Al-Ghalil” [5: 142-146] and concluded that the Hadith is generally authentic in view of the number of its Isnads. 454
4. Shari ’ah Standard No. (16): Commercial Papers you have ordered our expulsion when we have against people debt claims that are not yet due.’ The Prophet (peace be upon him) said, ‘Reduce the amounts to hasten payments’.”(9) Ibn Abbas (may Allah be pleased with him), was asked about the issue of a person who has a deferred claim against another, and he says to the debtor, “Hasten the payment and I will reduce the amount for you”, so Ibn Abbas responded saying, “There is no harm in it”. Ibn Abbas (may Allah be pleased with him), was the narrator of the previous Hadith. Further, this issue is the opposite of the issue of Riba.. That is, Riba involves an excess in both the period and the amount, Riba which is entirely harmful for the debtor, whereas this issue involves the absolving of the liability of the debtor with respect to the debt with a benefit coming to the creditor through prompt payment. Each one of them benefits without being subjected to harm. This is different from Riba,, the prohibition of which is agreed upon and that causes injury to Riba the debtor. The benefit in Riba is exclusively for the creditor (owner of capital). Thus, this case differs from Riba in both form and meaning. The reason is that the excess in Riba as a counter-value for the period leads to a grave hardship, for a single dirham is doubled and multiplied keeping the Dhimmah (liability) engaged without any corresponding benefit. In the case of reduction of the amount and hastening of payment, the liability of the debtor is removed and the prompt payment benefits the creditor. The Law-giver encourages the discharging of debt liabilities. The debtor has been called a person imprisoned by difficulties, and thus in the discharging his liability is a release from these shackles. This is different from his remaining patiently burdened with an excess.(10) (9) This Hadith has been related by a number of Hadith reporters. See: Al-Tahawi, “Sharh Mushkil Al-Athar” [11: 56]; Al-Bayhaqi, “Al-Sunan Al-Kubra” [6: 28]; “Sunan Al-Daraqutni” [3: 46]; and Al-Hakim, “Al-Mustadrak” [2: 52]. Ibn Al-Qayyim said in “Ighathat Al-Lahfan” [2: 11]: This Hadith has been related as per relation conditions of “Al-Sunan Al-Kubra” Al-Kubra”.. Al-Bayhaqi has classified the Hadith as weak but the men in the chain of transmission of the Hadith are trustworthy. However, the Hadith has been classified as weak due to Muslim Ibn Khalid who is a narrator in the chain of transmission of the Hadith. Nevertheless, he is a trustworthy and reliable jurist as Imam Shafi’i has related Hadiths through him and regard his view as authoritative. (10) ““Ighathat Ighathat Al-Lahfan” [2: 11]; and “I’lam Al-Muwaqqi’in” [3: 313]. 455
5. Shari ’ah Standard No. (16): Commercial Papers ■ The basis for treating commercial paper as a price for ascertained goods is that it amounts to the sale of a debt, to a person other than the one who owes it, for ascertained goods. This is permitted according to the Maliki school if it takes place after possession so that it does not turn into the delaying of the two counter-values. A resolution pertaining to this has been issued by the Islamic Fiqh Academy of the Organization of Islamic Conference.(11) Taking Possession of Commercial Papers ■ The basis for considering a cheque, whether certified or one of the same type, as possession of the amount mentioned in it, is that a cheque is secured by a large number of guarantees that make the possessor the owner of its contents. The beneficiary in this case is able to undertake transactions in it by selling, buying or by making a gift. Further, there is a strong protection provided by state governments to support confidence in cheques. In addition to this, relying upon a cheque means the existence of sufficient funds to cover its amount with the certifier undertaking to retain the funds until the end of the period fixed for payment. It is for this reason that people in general prefer certified cheques over cash for large transactions. ■ The basis for not considering an uncertified cheque, or one that is similar to it as far as the possession of its amount is concerned, is the probability that there is no balance to cover it or there is an insufficient balance. The basis for possession is customary practice, and a resolution has been passed by the Islamic Fiqh Academy deeming the receipt of a certified cheque as possession. ■ The basis for the permissibility of dealing in cheques for bank transfers, when the intention is to transfer the same currency in which payment is to be made, is that it belongs to the category of Suftajah Suftajah,, which is permissible according to one out of two opinions of the jurists. Payment Guarantees for the Value of Commercial Paper ■ The basis for considering a guarantee for acceptance as an undertaking and an obligation on the part of the drawee to pay to the legal holder, on (11) In its 16th session held in Mecca on 21-26 Shawwal 1422 A.H. 456
6. Shari ’ah Standard No. (16): Commercial Papers the date of maturity, the amount of debt stated on the bill of exchange, is that this undertaking and obligation is to be fulfilled according to the Shari’ah. This requirement is due to the generality of the words of Allah, the Exalted, saying: {“O you who believe! Fulfil (your) obligations”},(12) as well as due to the generality of the saying of the Prophet (peace be upon him): “Muslims abide by the conditions they stipulate”.(13) ■ The conditions a person stipulates for himself, and by which he is bound, are included in this meaning. There is also the Hadith of Jabir Ibn Abdullah (may Allah be pleased with him), who said: “The Messenger of Allah (peace be upon him) did not pray over (the funeral of) a person who died while owing a debt. debt A dead person was brought to him (for prayers) and he said, said, ‘Does he owe a debt?’ The people replied, ‘Yes, he owes two dinars.’ At this Abu Qatadah Al-Ansari said, ‘The two dinars are on me, O Messenger of Allah.’ The Messenger of Allah (peace be upon him) then offered the funeral prayers for him” him”.(14) In this Hadith, we notice that Abu Qatadah Al-Ansari (may Allah be pleased with him) offers an undertaking and accepts the obligation to pay the debt owed by the deceased, and this is accepted by the Prophet (peace be upon him). In fact, this undertaking and obligation given by Abu Qatadah were deemed sufficient to absolve the deceased from all liability for the debt. In some different texts of the Hadith, it has been reported that after the statement of Abu Qatadah (The two dinars are on me), “The Prophet (peace be upon him) said, ‘The right of the creditor is due and the deceased is absolved of it.’ Abu Qatadah responded in the affirmative, so the Prophet (peace be upon him) prayed over him”.’(15) The removal of all liability for the debt from the deceased was due to the undertaking and obligation given by Abu Qatadah (may Allah be pleased with him), to pay the debt due form this person and because of which he became indebted to the extent (12) [Al-Ma`idah (The Table): 1]. (13) The source of the Hadith is stated earlier. (14) This text of the Hadith has been related by Abu Dawud in his “Sunan” [9: 193]. However, the Hadith has origin in the two authentic books of Hadith. See: “Sahih Al-Bukhari” [2: 467]; and “Sahih Muslim” [3: 1237] (H: 1619). (15) This narration has been related by Imam Ahmad in his “Musnad” [3: 330]. 457
7. Shari ’ah Standard No. (16): Commercial Papers of two dinars. Al-Muwaffaq Ibn Qudamah (may Allah confer mercy upon him) said: “The words of the Prophet (peace be upon him): ‘The deceased is absolved of it’ mean that ‘you have now become subject to the claim for two dinars.’ This is by way of emphasis for establishing the claim against him as well as the obligation to pay”.(16) ■ The basis for permitting the holder of commercial paper to have recourse to all persons who have signed the paper is that by doing so they bind themselves to the extent of the value of the paper in case of non-payment. The Ulama arrived at a consensus on the permissibility of guarantees on the whole. ■ The basis for the permissibility of guarantees through tangible assets is that these are treated as Rahn (mortgage) and are governed by the same rules that apply to Rahn. The Ulema arrived at a consensus for the permissibility of Rahn (Mortgage). (16) “Al-Mughni” [7: 85]. 458