Hawalah - Appendix B (The Shariah Basis for the Standard)

Transcription

1. Shari ’ah Standard No. (7): Hawalah Appendix (B) The Shari’ah Basis for the Standard Permissibility of Hawalah The contract of Hawalah derives its permissibility from the Qur`an, the Sunnah, Ijma’ (consensus of Fuqaha) and reasoning. Abu Hurayrah (may Allah be pleased with him) narrated that the Prophet (peace be upon him) said: “Default on payment by a solvent debtor is unjust, and if anyone of you is transferred to a solvent person, he must accept the transfer.”(2) In another text of the Hadith, related by Ahmad and Al-Bayhaqi, the Prophet (peace be upon him) said: “If one is referred to a solvent person for the recovery of his right, such a person must accept the transfer”. The Prophet’s order that the creditor must accept the transfer means transfer of debt is legal, otherwise he would not give that order. The permissibility of Hawalah has enjoyed unanimity in Muslim societies and communities from time immemorial and there is no report that anyone has disapproved of it.(3) The acceptance of a Hawalah contract is recommended for the transferee if the potential payer is known to be solvent and keeps his promises in respect to payments because it benefits the creditor and gives relief to the debtor from liability by the transfer. The basis that a Hawalah transaction is also Mubah (permissible) for the transferee if the financial status and creditworthiness of the potential payer are unknown is that the order in the above-mentioned Hadith does not make it a condition that the payer be solvent for the permissibility of Hawalah. If (2) “Sahih Al-Bukhari” [3: 123]; and “Sahih Muslim” [3: 119]. (3) Ibn Qudamah, “Al-Mughni” [4: 336]; Al-Buhuti, “Kashshaf Al-Qina’” [3: 382]; AlBuhuti, “Sharh Muntaha Al-Iradat” [2: 134]; Ibn Nujaym, “Al-Bahr Al-ra`iq” [6: 269]; and Al-Zayla’i, “Tabyin Al-Haqa`iq” [4: 171]. 187
2. Shari ’ah Standard No. (7): Hawalah the payer is not solvent then the acceptance of the Hawalah by the transferee remains permissible. A Hawalah Contract is Binding If all its conditions are met, a Hawalah contract becomes binding without any difference of opinion among the scholars. Form of a Hawalah Contract The contract of Hawalah cannot be concluded on a deferred basis or subject to the happening of a particular event, as it has the character of a contract of (immediate) exchange. This is because by virtue of the Hawalah contract both the transferee (the payee) and the payer have immediately entered into a new contractual relationship. Also, a Hawalah cannot be concluded on a temporary basis nor can it be contingent on future events, because this conflicts with the nature of Hawalah which is the immediate transfer of the debt to the payer.(4) Types and Rulings of a Hawalah Contract ■ The scholars have unanimously endorsed the permissibility of restricted Hawalah, whether it is restricted to a debt owed to the transferor by the payer or it is restricted to the value of a tangible good belonging to the transferor in the possession of the payer. The unrestricted Hawalah is permitted by the Hanafis only. They based this permissibility on the Prophet’s order that a Hawalah deal must be accepted, without indicating that the payer must be a debtor to the transferor or not. This shows the permissibility of both the unrestricted and restricted Hawalah.(5) ■ The basis for the permissibility of a deferred Hawalah contract is that the payer is liable to make payment to the payee (transferee) by virtue of Hawalah. This permissibility is analogous to the permissibility of a deferred guarantee contract. As a matter of principle, a right that is due by virtue of Hawalah is similar to a right that is due by virtue of a guarantee (4) Ibn Abidin, “Radd Al-Muhtar” [5: 349]; “Durar Al-Hukkam Fi Sharh Majallat AlAhkam” [2: 52]; and “Al-Mawsu’ah Al-Fiqhiyyah Al-Kuwaytiyyah” [18: 191-192]. (5) Al-Kasani, “Bada`i’ Al-Sana`i’” [6: 16]; Al-’Ibadi, “Al-Jawharah Al-Nayyirah” [1: 316]; AlZayla’i, “Tabyin Al-Haqa`iq” [4: 174]; and “Majallat Al-Ahkam Al-’Adliyyah” dliyyah”,, article (686). 188
3. Shari ’ah Standard No. (7): Hawalah contract. Since the latter can be concluded on a deferred basis, so a Hawalah transaction.(6) ■ The basis for the permissibility of Hawalat al-Haqq (transfer of a right) as advocated by the Hanafis is that its essence is similar to suretyship which is permitted by all four schools of Islamic law, regardless of the name of the contract in this regard.(7) Again, Hawalat al-Haqq does not significantly differ from restricted transfer of debt. If one looks at the change of creditor, then the transaction is one of transfer of rights, and if one looks at the change of debtor, it is a restricted transfer of debt. The differences between transfer of debt and transfer of right are evident in some forms, such as when the creditor makes a gift of the amount of his debt claim against the payer to a person who is not a debtor to the transferor. Here, there are not two debts, hence there is a transfer of right and not a restricted Hawalah because of the lack of two debtors, as the transferor here is not a creditor of the beneficiary from the gift. Conditions of Hawalah ■ The basis for the necessity of the consent of all the three parties in a Hawalah contract is as follows: a)The transferor is required to consent because he might not want a third party to pay the debt on his behalf. Therefore, his consent is necessary for the permissibility of the Hawalah contract. b) The transferee must also consent to the Hawalah contract because the Hawalah contract necessitates a transfer of his right to payment from the transferor as debtor to another person (the payer), and people differ in various aspects when it comes to payment of debts. c) The payer must also consent in the unrestricted Hawalah because the effect of the Hawalah contract is to make the payer liable for payment and, as a principle; there is no liability without there first being an acceptance of such liability.(8) (6) Al-Sarakhsi, “Al-Mabsut” [20: 71-72]; Ibn Nujaym, “Al-Bahr Al-Ra`iq” [6: 270]; “Durar Al-Hukkam” [2: 52]; and Al-Balkhi, “Al-Fatawa Al-Hindiyyah” [3: 298]. (7) Wahabah Al-Zuhayli, “Al-Fiqh Al-Islami Wa Adillatuhu” [5: 171]. (8) Ibn Abidin, “Radd Al-Muhtar” [5: 341]; and Mullah Khasru, “Durar Al-Hukkam” [2: 308]. 189
4. Shari ’ah Standard No. (7): Hawalah ■ The basis for the requirement that the transferred debt or the transferred part of a debt be equal to the payable debt in kind, type, quality or amount is to avoid Riba. However, this condition does not mean that the liability of the transferor must be similar in quantity to the liability of the payer towards the transferor in order to make a Hawalah contract valid. In other words, a Hawalah contract is permissible even if the amount of one of the two liabilities is either greater or lesser than the other liability provided that the transferee will be paid only an amount equivalent to his debt. For example, one can transfer the right to his creditor to collect 10 dinars, the equivalent amount of his debt, out of the 20 dinars he is owed. The transferor may also direct the transferee to collect five dinars being his right against the payer out of the ten the transferor owes the transferee. Therefore, the similarity in amount that is required here is that the transferee must not take more than the actual amount of his debt. The intention of this is to avoid Riba.(9) Effect of Hawalah on the Relationship Between the Transferor and the Transferee ■ The reason for saying that the transferor is discharged from liability after the conclusion of a Hawalah transaction is because this is the legal effect of Hawalah. Hawalah means that the other party (the transferee) is deemed to have received his right to payment by the payer outright, which connotes its obligatory nature. Therefore, the transaction cannot be reversed for the simple reason that if something is transferred then it cannot be argued that it remains in the same place. This means the transferee is not entitled to ask the transferor for payment and the payer, on the other hand, becomes liable for payment.(10) ■ The right of the transferee to have recourse, in the event of non-performance by the payer, to the transferor as advocated by the Hanafis is based on a Hadith. It is reported that Uthman Ibn Affan was asked about a situation in which a transfer of debt is concluded and the transferee (9) Al-Ruhaybani, “Matalib Uli Al-Nuha” [3: 325]; Al-Buhuti, “Kashshaf Al-Qina’” [3: 308]; “Hashiyat Al-Dusuqi ’Ala Al-Sharh Al-Kabir” [3: 327]; and Al-Sawi, “Hashiyat Al-Sawi ’Ala Al-Sharh Al-Saghir” [3: 426]. (10) Ibn Qudamah, “Al-Mughni” [4: 338]. 190
5. Shari ’ah Standard No. (7): Hawalah found the payer had died in a state of bankruptcy. The answer was that the transferee is entitled to return to the transferor for payment, as the right of a Muslim cannot go unfulfilled.(11) This report reveals that the transferor has a right of recourse to the original debtor if the payment is not attained due to bankruptcy or death of the payer. ■ The Hadith that says, Muslims are bound by the conditions they made(12) is the basis for the view of the majority of jurists that the transferee has a right of recourse to the transferor if he had stipulated that he accepts the transfer on the basis that the payer is solvent and is capable of paying the amount of the debt. Moreover, this stipulation serves the purpose of the contract; hence, termination of the contract takes place if such a condition is not met.(13) The Effect of Hawalah on the Relationship Between the Transferor and the Payer The basis for the rule that the transferor loses his claim over the amount of the debt against the payer after the Hawalah transaction is that the right to this claim has shifted to the transferee by virtue of the contract of Hawalah. The Effect of Hawalah on the Relationship Between the Transferee and the Payer The basis for the rule that the transferee no longer has a financial claim against the transferor is that the contract of Hawalah transfers the liability to pay to the payer.(14) The right of the payer to be entitled to all rights associated with the securities that were available to the debtor (the transferor) is based on the fact that these securities are associated with the debt of the transfer or, which are the subject matter of the Hawalah contract. These rights are (11) Ibn Qudamah, “Al-Mughni” [4: 339]. (12) This Hadith has been related by Al-Bayhaqi in “Al-Sunan Al-Kubra” [6: 79] and [7: 249], Maktabat Dar Al-Baz; and Al-Daraqutni in his “Sunan Al-Daraqutni” [10: 27], Dar Al-Ma’rifah. (13) Ibn Qudamah, “Al-Mughni” [4: 339]; Al-Buhuti, “Kashshaf Al-Qina’” [3: 387]; and Al-Buhuti, “Sharh Muntaha Al-Iradat” [2: 136]. (14) Al-Balkhi, “Al-Fatawa Al-Hindiyyah” [3: 297], “Durar Al-Hukkam Fi Sharh Majallat Al-Ahkam” [2: 36]; and Al-Kasani, “Bada`i’ Al-Sana`i’” [6: 18]. 191
6. Shari ’ah Standard No. (7): Hawalah therefore transferable with the transfer of the debt liability. Hence, the payer is entitled to all these rights as well.(15) Effect of Death and Bankruptcy on a Hawalah Contract The basis that the death of the transferor will not affect the Hawalah contract is that the transferor, after the Hawalah contract, is not entitled to the transferred debt.(16) In addition, the reason why the death of the payer will not affect the Hawalah contract is that the heirs or the guarantor of the payer, if any, will be liable for payment.(17) The practices of overdrafts, negotiable instruments and endorsing cheques and bills of exchange are valid because they are practical applications of the concept of Hawalah. Transfer of Money (Remittances) The International Islamic Fiqh Academy has issued a resolution in respect to the permissible solutions for the combination of transfer of money (banking remittances) and currency exchange.(18) (15) “Al-Mawsuah Al-Fiqhiyyah Al-Kuwaytiyyah” [18: 225]; “Qanun Al-Mu’amalat AlSudani”,, article (510); and Jordanian Civil code, Article (1005). Sudani” (16) Al-Babarti, “Al-’Inayah Sharh Al-Hidayah” [7: 249]; Al-Zaylai, “Tabyin Al-Haqa`iq” [4: 174]; Ibn Abidin, “Tanqih Al-Fatawa Al-Hamidiyyah” [1: 293]; Malik, “AlMudawwanah” [4: 126-127]; Ibn Nujaym, “Al-Bahr Al-Ra`iq”, Al-Ra`iq”, [6: 274]; and Al-Kasani, “Bada`i’ Al-Sana`i’” [6: 17]. (17) “Durar Al-Hukkam Fi Sharh Majallat Al-Ahkam” [2: 36]; and “Al-Mabsut” [20: 72]. (18) International Islamic Fiqh Academy Resolution No. 8 (1/9). 192