Commercial Papers - Scope of the Standard

Transcription

1. Shari ’ah Standard No. (16): Commercial Papers Statement of the Standard 1. Scope of the Standard This standard covers commercial papers to which the Geneva Uniform Convention on the Law of Commercial Papers,(2) confined itself. These are bill of exchange, promissory note and cheque. This standard covers dealings in such commercial papers insofar as they conform to the rules and principles of the Shari’ah. The standard does not cover anything that may possess the attributes of commercial paper other than the three types named above. 2. Definition and Shari’ah Characterisation of Commercial Papers 2/1 Bill of exchange: A written, signed, and unconditional order from a person to another person to pay a certain sum of money at sight or at a particular or determinable date to a third person or to the order of that third person or to the bearer of that order. 2/2 Promissory note: A certificate whereby by the issuer (a debtor) promises to pay a certain amount of money at sight or at a particular or determinable date to another person (a beneficiary/creditor). In Shari’ah characterisation, it is considered a certificate of debt. 2/3 Cheque: A certificate that is issued to a particular person, containing an order issued by a person (the drawer) to another person (the drawee) to pay a certain sum of money to a third person (the beneficiary) at sight. In Shari’ah characterisation, it is considered a restricted Hawalah if the drawer is a debtor to the drawee. Otherwise, it is considered an unrestricted Hawalah with respect to the drawer. (2) Issued on 1349/1350 A.H., corresponding to 1930/1931 A.D., and adopted by a large number of countries. 444
2. Shari ’ah Standard No. (16): Commercial Papers 3. Rules for Dealing in Commercial Papers 3/1 It is permissible to undertake transactions in commercial paper of the three types (bill of exchange, promissory note and cheque) on the condition that it does not amount to the contravention of the Shari’ah, like Riba or delay that is legally prohibited in accordance with the details provided in the following paragraphs. 3/2 It is not permissible to use a bill of exchange or promissory note in transactions that require possession (of the counter-values), like deeming the two types of commercial paper as counter-values in the contract of Sarf (currency exchange) or as the counter-value for the capital (Ras (Ras al-Mal al-Mal)) in the contract of Salam. 3/3 It is permitted to use a cheque in the following types of transactions and situations: a) A cheque, where the owner has a balance, when drawn by the client against the bank or by the bank against another bank or against itself or against one of its branches. b) A cheque, where the owner has no balance, when drawn by the client against a bank or is drawn by the bank against another bank or against itself or against one of its branches (the so-called overdraft). From Shari’ah perspective, it is a loan (Qard) which is permissible if it is void of Riba. c) A crossed cheque that binds the payee bank to fulfil its conditions. d) An account payee cheque that binds payee bank to fulfil its conditions by crediting the amount of the cheque to the beneficiary’s account. e) Travellers’ cheques. It is permissible for the institution issuing it to take commission in lieu of intermediation in such issuance or at the time of its payment provided this does not include Riba. 4. Endorsement All forms of endorsements are binding with respect to their legal effects provided that the endorsements fulfil the legal conditions and regulations determined for them. 445
3. Shari ’ah Standard No. (16): Commercial Papers 5. Collection of the Amount of Commercial Papers The collection of the amount of commercial papers is considered an agency with the client appointing the institution as an agent to collect the value of the paper on his behalf. The institution is entitled to commission that is agreed upon between the client and the institution. In the absence of an agreement between them, the practice prevalent among institutions is to be acted upon. 6. Discounting of Commercial Papers 6/1 It is not permissible to discount commercial papers, but it is permitted to pay an amount that is less than the value of the paper to the first beneficiary prior to the date of maturity. 6/2 It is not permissible to sell commercial paper that has not become due for an amount similar to its value (Riba (Riba al-Nasi`ah al-Nasi`ah)) nor for an amount that is more than its value (Riba (Riba al-Nasi`ah plus Riba al-Fadl). al-Fadl). 6/3 It is permissible to the beneficiary to treat commercial paper that is not yet due as price for ascertained goods or usufruct, but not those that are sold by description as a liability with the condition of actual or legal delivery of goods or usufructuary asset (commodity-based discounting of debts). 6/4 The holder of commercial paper is permitted to purchase goods to be delivered later (on the date of maturity of the paper), and after the debt is established as a liability. The holder of the paper transfers the claim of his creditor to his debtor through this paper. In such a case, the transaction amounts to Hawalah. 7. Taking Possession of Commercial Papers 7/1 The receipt of a cheque requiring prompt payment, if it is a banker’s cheque or a certified cheque or one that is legally deemed a certified cheques whereby a certain amount is mandatorily maintained in the drawer’s account, being drawn among banks or among banks and their branches, constitutes constructive possession of the amount written on it, and it is on this basis that it is permissible to use the 446
4. Shari ’ah Standard No. (16): Commercial Papers cheque in transactions that stipulate possession such as the exchange of currencies, the purchase of gold or silver with the cheque as well as treating the cheque as capital ((Ras Ras al-Mal al-Mal)) of Salam. 7/2 The receipt of a cheque that is to be paid promptly, if it is not a banker’s cheque or a certified cheque or one that is legally deemed a certified cheque, cannot be considered constructive possession of its amount, and in such a case, it is not permitted to use it for transactions for which possession is stipulated. 7/3 It is permitted to use cheques of bank transfers for transactions when the amount intended to be transferred is in the same currency in which payment is to be made, however, where the currency is different from that in which payment is to be made, it is necessary to first apply the process of conversion between the two currencies, deeming constructive possession to be sufficient, and then undertake the transfer. It is a form combining currency exchange (Sarf (Sarf)) and Hawalah. 8. Acceptance for Payment of the Value of Commercial Papers 8/1 Acceptance for paying the value of commercial paper on the part of the drawee is considered an undertaking and an obligation to pay the debt represented by the commercial paper to the holder on the date of maturity. This undertaking and obligation must be fulfilled according to the Shari’ah. 8/2 All parties whose signatures appear on the commercial paper including the drawer, the endorser and the guarantor are jointly responsible to pay to the holder the value of the paper in accordance with rules of liability, thus, the holder is entitled to have recourse to them severally or jointly after the refusal of the drawer (or the issuer in case of a promissory note) to pay. 8/3 Tangible security stipulated by the holder of commercial paper to ensure the securing of his right will be deemed a Mortgage (Rahn) and will be governed by the rules of Mortgage (Rahn). 447
5. Shari ’ah Standard No. (16): Commercial Papers 9. Date of Issuance of the Standard This Shari’ah Standard was issued on 7 Rabi’ I, 1424 A.H., corresponding to 8 May 2003 A.D. 448