Insolvency - Appendix B (The Shariah Basis For The Standard)

Transcription

1. Shari ’ah Standard No (43): Insolvency Appendix (B) The Shari’ah Basis for the Standard ■ The basis for prohibiting a person overwhelmed by debts from disposals that harm the creditors is the Hadith, “Allah will pay (the debts of) a person who takes the wealth of others with the intention of repaying it. But the one who takes it with the intention of destroying it, Allah will destroy him” him”. ■ The basis for the obligatory ruling of insolvency and interdiction against the one who has more debts than he can pay is the act of the Prophet (peace be upon him), who interdicted Mu’adh Ibn Jabal (may Allah be pleased with him) and sold his property for the debts against him and distributed it among his creditors.(2) This is the stance of the majority, who include Abu Yusuf and Muhammad. This is also the formal legal opinion of the Hanafis as against Abu Hanifah. ■ The multiplicity of three stages is the Maliki opinion, and this is what the (modern) legal codes also uphold. In insolvency, it is essential to consult these rules and the ruling of the court. ■ The basis for the requirement that the insolvency should be demanded by the owners of due debts is that there is no demand (warranted) for undue debt. Even if such a demand is made of the debtor, he does not have to pay it because the deferred period has a share in the price. ■ The basis for the right of a debtor to request a declaration of his own insolvency is the Shafi’i opinion and the fact that it is in his interest to stabilize his financial situation. The Standard excludes fraudulent insolvency according to the satisfaction of the court. ■ The basis for the requirement of a judicial ruling for insolvency is the act of the Prophet (peace be upon him) in the case of Mu’adh. Also, in(2) This has been related by Al-Bayhaqi by both muttasil (fully connected) and mursal (incomplete) chains of transmission, but the mursal narrations are more correct:“Sunan correct:“Sunan Al-Bayhaqi” [6: 48]; and “Talkhis Al- Habir” Habir” [3: 37], as in “Al-Mawsu’ah” [5: 301]. 1077
2. Shari ’ah Standard No (43): Insolvency solvency needs consideration and Ijtihad; therefore, a judicial decision is required for it. ■ The basis for non-enforcement of an insolvent’s confession regarding the right of others to his property -except with the approval of the creditorsand the non-enforcement of his dispositions that transfer ownership is that they prevent harm to the creditors, as per the Hadith: “No harm and no reciprocal harm”. harm” ■ The basis for the attachment of new dispositions to the liability of the insolvent is that the right of the creditor is attached to the property existing at the time of insolvency. Thus there is no harm in the attachment of new dispositions to the liability of the debtor because his liability is fit for such a commitment. ■ The basis for the view that gives the creditor the right to reclamation -a view accepted by the Malikis, Shafi’is, Hanbalis and some of the earliest scholars (the Salaf) as well as the majority of (modern legal) systems- is the Hadith related by Al-Bukhari and Muslim(3) that affirms the right to recourse for the seller when he finds the exact commodity with the insolvent buyer. He has the option to take it or to leave it and become a partner of the creditors in the distribution of the price. It is subject to the following conditions: a) The insolvent should be alive at the time of recourse. In the case of an institution or company, it should remain existent. b) The insolvent remains liable for all of the compensation due. If the seller has received part of it, he will be given an option regarding the remainder. c) The whole asset should remain in the ownership of the insolvent. If all or part of it has been destroyed, or if it has left his ownership through sale, or gift, or endowment, the right to reclamation will be cancelled regarding the remaining part except when the transaction involves multiple parties. d) The asset should not be in a condition where it is mingled with something from which it cannot be distinguished, nor can its characteristics have changed to the point that the original name for it no longer applies or that its value has been reduced. (3) See: “Fath Al-Bari” [5: 66]; and “Sahih Muslim” [3: 1193]. 1078
3. Shari ’ah Standard No (43): Insolvency e) The right of another person should not relate to it, e.g., when the insolvent has pledged it as security, except when the owner of the right (the mortgagee) renounces his right to the mortgage. The right to reclamation is the cancellation of the sale. It can take place verbally or by a substitute means. It takes place immediately and does not need the decision of a judge, or the knowledge of the competent authority, or the ability to deliver. Besides that, if the asset or its value or its feature decreased, or an inseparable increase occurred in it, like an increase in the weight of livestock, and he chose reclamation, he will only have that. But if the increase is separate, it would belong to the insolvent. The right to reclaim land is not precluded by any building built on it by the insolvent nor by any trees he planted on it. The creditor will be given an option between having the insolvent remove the building and the trees, with the creditor bearing liability for any damage (to what is moved), or taking the building and trees and paying their price. In case of cultivated land, the crop will remain until harvest, free of any charge. ■ The basis for the other view, which does not recognize the right to reclamation, is that the Hadith related by Al-Bukhari and Muslim contravenes the implication of a Shari’ah principle; i.e., the liability of the insolvent remains operative and the creditor’s right regarding that liability remains stable. This group cited the Hadith: “Anyone who died or went insolvent, and some of his creditors found exactly their property, they are on a par with the other creditors”. creditors” (4) Mursal Hadiths are valid evidence according to those who take this view. They are Hanafis and some of the Salaf.(5) ■ The basis for non-inclusion of all types of deposits of safekeeping in the insolvency assets is that they are not the property of the insolvent; inter(4) This has been related by Al-Daraqutni by a mursal chain of transmission. See also “AlMawsu’ah Al-Fiqhiyyah” [5: 311]. (5) See: “Al-Mawsu’ah Al-Fiqhiyah” [5: 311], for the documentation of the reference works of the madhhabs that affirm the right of reclamation and for the details related to the right of reclamation. 1079
4. Shari ’ah Standard No (43): Insolvency diction only occurs regarding his property, not the property of others entrusted to him. ■ The basis for the requirement of a court ruling to rescind the interdiction of an insolvent is that it demands due consideration and Ijtihad, just as with a declaration of insolvency. 1080