BANK ISLAM MALAYSIA BHD v. LIM KOK HOE & ANOR AND OTHER APPEALS

 

[2009] 6 CLJ 22    

 


BANK ISLAM MALAYSIA BHD v. LIM KOK HOE & ANOR AND OTHER APPEALS
COURT OF APPEAL, PUTRAJAYA
RAUS SHARIF JCA, ABDULL HAMID EMBONG JCA, AHMAD MAAROP JCA
[CIVIL APPEALS NOS: W-02-918-2008, W-02-954-2008, W-02-955-2008, W-02-957-2008, W-02-958-2008, W-02-959-2008, W-02-960-2008, W-02-961-2008 & W-02-962-2008]
26 AUGUST 2009

[2009] CLJ JT(4)

BANKING: Islamic banking – Loan facility – Bai Bithaman Ajil – Validity and enforceability of – Whether far more onerous than the conventional loan with riba (interest) – Comparison between BBA contract and conventional loan agreement – Whether appropriate – Whether law applicable in BBA contract no different from law applicable in conventional loan agreement – Whether the court had a duty to defend, protect and uphold the sanctity of the contract entered into between parties 

BANKING: Islamic banking – Loan facility – Bai Bithaman Ajil – Validity and enforceability of – Whether there was a misinterpretation of the meaning ‘do not involve any element which is not approved by the Religion of Islam – Islamic Banking Act 1983, s. 2 – Whether Judges in Civil Court could rule that a matter was contrary to the religion of Islam 

WORDS & PHRASES: ‘do not involve any element which is not approved by the Religion of Islam’ – Meaning and purpose – Section 2, Islamic Banking Act 1983

On 18 July 2008, the Kuala Lumpur High Court had delivered a common judgment for 12 cases concerning Islamic financing whereby the learned judge declared that the Bai Bithaman Ajil (‘BBA’) contract, a financial instrument in Islamic financing, was contrary to the religion of Islam. The plaintiff in the respective cases was Bank Islam Malaysia Berhad (‘BIMB’) and the defendants were BIMB’s customers. In the common judgment, the learned judge did not deal with the particular facts of the individual cases; what the learned judge did was to discuss and make decisions regarding, in the learned judge’s own words, “the basic principles concerning Islamic financing.” In the event, the learned judge questioned the validity and enforceability of the BBA contract on two main grounds, namely: (i) that the BBA contract was ”far more onerous than the conventional loan with riba (interest)” which was prohibited and unequivocally condemned in Islam and (ii) that the BBA contract practiced in this country was not acceptable by all the four Mazhabs in Islam. The learned judge ruled that the BBA contract was only acceptable to one Mazhab, and that was not sufficient to say that it was approved by the religion of Islam which was a requirement under s. 2 of the Islamic Banking Act 1983. BIMB, being adversely affected by the above rulings, filed 12 separate appeals to this court.

had delivered a common judgment menyampaikan satu penghakiman bersama
declared that mengisytiharkan bahawa
was contrary to the religion of Islam adalah bertentangan dengan agama Islam
the basic principles concerning Islamic financing prinsip-prinsip asas berkenaan dengan kewangan Islam
the validity and enforceability of the BBA contract keesahan dan keboleh kuatkuasaan kontrak BBA
two main grounds dua alasan utama
”far more onerous than the conventional loan with riba (interest) “jauh lebih membebankan dari pinjaman biasa dengan riba (bunga)”
prohibited and unequivocally condemned yang dilarang dan jelas dikutuk
not acceptable tidak boleh diterima
not sufficient tidak mencukupi
a requirement satu keperluan
being adversely affected yang dijejaskan dengan teruk

 

Held (allowing the appeals; setting aside High Court judgment)

Per Raus Sharif JCA:

(1) The comparison between a BBA contract and a conventional loan agreement was not appropriate. The two instruments of financing are not alike and have different characteristics. BBA contract is a sale agreement whereas a conventional loan agreement is a money lending transaction. The profit in BBA contract is different from interest arising in a conventional loan transaction. The two transactions were diversely different and indeed diametrically opposed. Thus, the learned judge was wrong when he equated the profit earned by BIMB as being similar to ‘riba’ or interest. Further, the comparison between a BBA contract and a conventional loan agreement was of no relevance. It served no purpose as the law applicable in BBA contract was no different from the law applicable in a conventional loan agreement. The law is the law of contract and the same principle should be applied in deciding the cases herein. Thus, if the contract was not vitiated by any vitiating factor recognised in law such as fraud, coercion, undue influence, etc, the court had a duty to defend, protect and uphold the sanctity of the contract entered into between the parties. (paras 24, 25, 26 & 27)

comparison Perbandingan
not appropriate tidak berpatutan
instruments of financing suratcara kewangan
are not alike tidak serupa
different characteristics ciri-ciri berlainan
loan transaction transaksi pinjaman wang
diametrically opposed bertentangan sama sekali
equated menyamakan
of no relevance tidak relevan langsung
It served no purpose Ia tidak berguna
applicable dapat digunakan
no different tiada perbezaan
should be applied sepatutnya digunakan
deciding menentukan
vitiated dijadikan tak sah
vitiating factor faktor ketaksahan
recognised in law diiktirafkan dalam undang-undang
coercion paksaan
undue influence pengaruh tak berpatutan
uphold the sanctity of the contract menegaskan kesucian kontrak
entered into between the parties yang dibuat di antara pihak-pihak

2) The learned judge had misinterpreted the meaning of “do not involve any element which is not approved by the Religion of Islam.” First, under s. 2 of the Islamic Banking Act 1983, “Islamic Banking Business” does not mean banking business whose aims and operations are approved by all the four Mazhabs. Secondly, the religion of Islam is not confined to the four Mazhabs alone as the sources of Islamic law are not limited to the opinions of the four Imams and the schools of jurisprudence named after them. Islamic Law is derived from the primary sources ie, the Holy Quran and the Hadith and secondary sources. There are other secondary sources of Islamic law in addition to the jurisprudence of the four Mazhabs. Judges in civil courts should not take upon themselves to declare whether a matter was in accordance with the religion of Islam or otherwise. (paras 31 & 32)

misinterpreted menyalahtafsirkan
do not involve tidak melibatkan
element unsur
not approved by the Religion of Islam tidak dibenarkan oleh agama Islam
not confined tidak terbatas
derived from Diperolehi/diambil daripada
primary sources Sumber-sumber utama
should not take upon themselves tidak seharusnya bertindak sendiri
to declare untuk mengisytiharkan
in accordance with the religion of Islam Menurut/berlandaskan agama Islam
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