Settlement of Debts by Set-Off : Appendix B - The Shariah Basis for the Standard

Transcription

1. Shari ’ah Standard No. (4): Settlement of Debts by Set-Off Appendix (B) The Shari’ah Basis for the Standard The basis for debt settlements by way of set-off is that it has been practised from time immemorial without any report of disapproval. Moreover, setoff is in line with the objectives of the Shari’ah as it encourages discharging individuals from liability of debt and set-off is one way of discharging debt liabilities without involving futile processes of debt recovery. In addition, there is no Shari’ah objection to a set-off taking place on demand. The authority for this permissibility is that the person entitled to the superior debt has agreed to forgo the advantage attached to his debt and the Shari’ah will not object to such a gesture. If set-off is executed contractually, it is then based on the prophetic Hadith stating; “Muslims are bound by the conditions and agreements they have made, except a condition that has rendered the unlawful lawful or rendered the lawful unlawful.”(3) (3) The Hadith has been related by Al-Tirmidhi in his “Sunan Al-Tirmidhi” [3: 634] edited by Ahmad Muhammad Shakir and others, Beirut: Dar Ihya` Al-Turath Al-’Arabi. Also, it has been related by Al-Bayhaqi in his “Sunan Al-Bayhaqi” [7: 248]; and Al-Manawi, “Fayd Al-Qadir” [6: 272], Egypt: Al-Maktabah Al-Kubra, 1356 A.H.. 116