' HAZIQUL KHAIRI, C. J.--The Federal Shariat Court way back in 1987, in exercise of its powers under Article 203-D of the Constitution of Islamic Republic of Pakistan took suo motu action to examine whether or not the following sections of Companies Ordinance, 1984 are repugnant to the injunctions of Islam as laid down in the Holy Quran and Sunnah of the Holy Prophet(P. B. U. H)
Sections Sub-Heading/marginal notes 2(7) Company 2(8) Company limited by shares 2(9) Company limited by guarantee 14 Obligation to register certain associations, partnerships etc., as companies 15 Mode of forming a company 16(iv) That the liability of the members is limited 18 Memorandum of unlimited company 20 Restriction on alteration of memorandum 21 Alteration of memorandum 37(1) Prohibition of certain names 42(4) Power to dispense with "Limited" in the name of charitable and other companies 44 Conversion of public company into private company 62 Offer of shares or debentures for sale by certain persons 68 Restriction as to allotment 80 Transfer to nominee of a deceased member 81 Transfer by nominee or legal representative 88 Deposits not to be invited without issuing an advertisement 90 Classes and kinds of share capital 95 Prohibition of purchase or grant of financial assistance by a company for purchase of its own or its holding company's shares 121 Certain mortgages and charges to be void if not registered 139 Disqualification for appointment as receiver or Manager 146 Restrictions on commencement of business 179 Circumstances in which election of Directors may be declared invalid 187 Ineligibility of certain persons to become Director 190 Ineligibility of bankrupt to act as director, etc. 195 Loans to directors, etc. 197 Prohibition regarding making of political contributions 201 Restriction on appointment of chief executive 203 Chief executive not to engage in business competing with company's business 306 Bar on appointment of managing agents, sole purchase, sales agents, etc. 208 Investment in associated companies and Undertaking 223 Prohibition of short-selling 231(1) Inspection of books of account by Registrar, etc. 248 Certain restrictions on declaration of dividends 261 Power of Registrar to call for information or Explanation 273 No compensation to be payable for annulment or modification of contract 274 No right to compensation for loss of office 275 Application for winding up of company or an order under section 290 295(1) Management by administrator 254 Saving of other proceedings 405 Preferential payments 415 Penalty for fraud by officers of companies which have gone into liquidation 420 Penal Provisions 462 Restriction on canvassing for sale of securities 464 Notice of appointment of receiver 481 Appeal against acquittal 482 Payment of compensation in case of frivolous or vexatious prosecution 482(2) Payment of compensation in cases of frivolous or vexatious prosecution 484 Revision and review 491 Protection of acts done in good faith 493 Penalty for wrongful withholding of property
2. Notices were issued to the Federal and Provincial Governments, Ministry of Finance, Government of Pakistan. The Banking Council of Pakistan, Corporate Law Authority (Redesignated as Securities and Exchange Commission of Pakistan). As per the Federal Shariat Court Rules 1981, notices were published in leading Urdu and English dailies of the country inviting comments of Ulema, Lawyers, Jurists and general public. Letters were also issued to the Heads of Department of Islamic Studies, Universities of Karachi, Punjab, International Islamic University and Islamic Research Institute and others to submit their views in writing.
3. The Full Bench took up the matter on various dates at its Principal seat as well as Provincial Headquarters. Indeed there had been inordinate delay for one reasons or the other in deciding the case, which was lying dormant for long.
4. Comments were filed by the Corporate Law Authority, the Securities and Exchange Commission of Pakistan, both under Ministry of Finance, Government of Pakistan, the Punjab and Sindh Governments, the State Bank of Pakistan (through its Shariah Board comprising (1) Dr. Mahmood Ahmad Ghazi (Chairman), Mr. Ibrahim Sidar, Syed Riazul Hassan Gilani, Deputy Attorney General, Imran Usmani and Mr. Pervez Saeed). Views of OIC Islamic Fiqh Academy, Council of Islamic Ideology, Juris Consults and Ulema etc. Were also brought on record and duly considered.
5. It is pertinent to note that during the course of examination of the Companies Ordinance 1984 questions arose as to the concept of a company, its entity and how it is different and distinguishable from Mudarba and Partnership. The concept of limited liability of its members was also addressed at length and duly considered by us.
6. Before we proceed to examine the Companies Ordinance, 1984, it will be advantageous to trace out the origin of "Company", its development till date, with particular IA reference to India and Pakistan.
7. In England, Corporations started appearing in sixteenth century. The best known of these companies were East India Company and Hudson Bay Company, which appeared in the year 1670.
The name used for these companies was "Joint Stock Companies". The word Stock meant the stock of goods delivered by the shareholder or member. This stock was considered to be the share of the shareholder for the purpose of sharing the profit. The word "Joint Stock" meant the capital of the Company. At that time the formation of these companies were very difficult, as it required special legislation by Parliament or royal decree. Because of this difficulty, companies were established without such approval, but in those days it was usually one person who was liable for the debt of corporation. Nevertheless, shares were traded and many such companies were established. This led to some financial disasters like the one of the "Bubble Companies" that would appear one day and disappear the next day.
' All this led to intervention by the State and the "Bubble Act was passed in the days of George I, in 1720, to prevent participation in such Companies. The ambiguous language of this law had adverse effects on genuine companies as well. A new law was passed in 1825 that acknowledged for the first time the transfer of share from one person to another. This was followed by the law of 1826 that gave the Corporation the right to sue and be sued in their own name. In 1844, the English law acknowledged the principle of 'limited liability'. This was called the Limited Liability Act of 1844. The same year another law was passed that permitted the formation of Companies through registration with the office of the Registrar of the Company. The only exception made was with respect to Banking Companies. This permission was also granted in 1862. During the period between 1862 and 1907, a number of laws were passed that permitted the alteration of capital, the amendment of the memorandum and articles, as well as registration of private Companies. The Companies Consolidation Act 1908 gathered all the previous laws- into single Act. The amendment of the law continued till the Act of 1907. In India, the company laws were introduced in 1850. This was followed by changes in 1857, 1866, 1887 till the law of 1913 was passed, which was based upon the English Law of 1908. Changes made in this law in 1946 and these were based upon changes in the law in England. In Pakistan the recommendation made by the report of Commission for Company Law Reform, 1961 were not implemented. Some changes were made in 1972, mostly pertaining to the managing agency system, which was abolished. A major revision of the law took place through the Companies Ordinance, 1.984. Changes pertaining to some of the Islamic Provisions like Mudarba companies have also been made." (Al-Sharikat fi al shariah al Islamiah by Dr. Abdul Aziz Al Khayyat Vol-1 Page, 25 published by Muassasa-tu-Alrisala Beirut); 2. (Islamic Law of Business Organization Corporation, by Imran Ahsan Niazi published by International Institute of Islamic Thought and Islamic Research Institute, 1998 P.75).
8. Reverting now to the comments of the Governments, Institutions and Agencies, Jurist Consults, Ulema, Scholars and Public, firstly, reference may be made to the comments filed by the Corporate Law Authority owned and adopted by its successor namely Securities and Exchange Commission of Pakistan as under:--
(i) The concept of a company as provided under section 2(7) of the Companies Ordinance, 1984 does not appear to be against the Injunctions of Islam. A company formed and registered under the Companies Ordinance, 1984 has a legal status of legal person and not a natural person with the following characteristics:--
(a) It can acquire any property in any capacity (i,e, as an Owner, Lessee, Pawnee and Mortgagee etc.)
(b) It can alienate its property to any person in any manner.
(c) It can sue and be sued on its own name.
(d) It can manage its property or affairs, subject to its Articles of Association.
(e) It can incur financial liabilities and acquire financial rights. In Islam there are three such Legal persons i,e, Baitul Mal, Waqf and Masjid having all the afore-mentioned characteristics.
(ii) The concept of Company limited by shares as given under section 2(8) of the Ordinance is not repugnant to the Injunctions of Islam. It possesses the status of an Institution, which is not against Islam. A company limited by share is formed by the Association of persons subscribing different number of shares of equal denomination. Their liability is limited to the extent of shares subscribed, but the liability of the Company as such is unlimited.
' The legal personality of a Company has unlimited liabilities to the creditors of the Company. It does not, therefore, offend the Injunctions of Islam, as laid down in the Holy Quran and Sunnah of the Holy Prophet. As far as the rules of Partnership contained in the books of Fiqh, are concerned, they were adopted by the early jurists according to the Commercial practices of their age.
(iii) The concept of company limited by guarantee as given under section 2(9) of the Ordinance, 1984 is not opposed to the Injunction of Islam.
(iv) Section 14 provides an obligation to register certain associations, partnerships etc. As companies, is also not in violation of any Injunction of Islam. This section is regulatory section which makes it incumbent that no association, partnership or company consisting of more than 20 persons shall be formed for the purpose of carrying on any business that has for its objects the acquisition of gain by the association, partnership and company or by the individual member can function unless it is registered as a company under this Ordinance.
(v) Section 15 provides a procedure and mode of forming a public company and a private company. The formation of a company is a practice not opposed to Shariah.
(vi) Section 16(TV) provides that the liability of the members shall be limited. It is submitted that the formation of a Company limited by shares or guarantee is a practice not opposed to the Injunction of Islam. Similar is the position of sections 18 and 20 and 21, 203, 206, 208, 223, 231(1), 248, 261 of the Companies Ordinance, 1984 which are designed to protect the shareholders and/or the Company.
Sections 20 and 21 envisage alteration of Memorandum of a limited company and is also not opposed to Islamic injunctions.
(vii) The object of section 37(i), sections 42(4), 44, 62, 68, 121 is to prevent injury and fraud.
(viii) Sections 68, 80, 81, 88, 90, 95, 121, 139, 146, 179, 195, 201, 208, 273, 274, 275, 290, 295(i), 354, 405, 415, 420, 462, 464, 481, 482(2), 484, 491, 493 do not appear to be against the Injunction of Islam.
9. It was submitted by Dr. Abdul Malik Irfani, Advocate for Corporate Law Authority/Securities and Exchange Commission of Pakistan in writing that the following principles of Islamic Jurisprudence were kept in view in filing these comments:---
(a) Every law, concept or provision clearly against the Holy Quran and Sunnah shall be rejected.
(b) Every condition made a part of any contract or suggested to be made as, such shall be considered and binding on the contracting parties provided it is not repugnant to any injunctions of the Holy Quran and Sunnah.
(c) Anything creating injury shall be avoided or removed, as the case may be.
(d) Anything creating hardship shall be avoided or removed, as the case may be.
(e) Any person facing some difficulty and hardship shall be provided a way out under the principle of "Istehsan".
(f) If_ the people, in general, are facing difficulties and hardship, they shall be provided a way out under the principles of "Umoomul Balwa".
(g) If any step, action, policy or matter is better or beneficial for the people it may be taken or adopted under the principle of "Muslahah".
(h) Anything leading to or seeming to lead to some difficulty, hardship or injury to the persons generally or to any offence, immorality or injustice shall be prohibited under the principle of "Saddul dhriah".
(i) Anything leading to prevent any offence, immorality or injustice, it shall be adopted under the principle of "Fathuldhriah".
(j) Anything not against the Holy Qur'an and Sunnah shall be adopted or avoided on its own merits or demerits on the principle of "Ibahah".
(k) Anything not against the Holy Quran and Sunnah shall be adopted if it is a practice "URF" of the people.
10. The Government of Punjab in its comments stated that:-
(a) It is a settled principle of Islamic Jurisprudence that an action, deed or thing which is not specifically prohibited by Injunctions of Islam (Quran and Sunnah) is considered to be permitted/allowed in Islam and this is also the universal principle of law. A company/company limited by shares is basically an association of persons incorporated under the Companies Ordinance, 1984, to do some business not prohibited by Islam and nothing exists in Quranic Injunctions or Sunnah which conflicts with the formation of an association of persons, company, etc. There is also a concept of Partnership in Islam. According to Ibn Nujaim in "Bahr al Raiq" Vol: 5, Page: 170, in partnership a few individuals join together for the purpose of doing business, with property, skills and goodwill. He also describes 3 kinds of partnership as "Shirkat al Amwal", "Shirkat al Mal" and "Shirkat al Wujuh" respectively. Therefore, section 2(7) and (8) of the Companies Ordinance, 1984, is not repugnant to the Injunctions of Islam.
(b) Section 14 says that an association, partnership or company of more than twenty persons is compulsorily registerable. This section, in fact, has been incorporated to bring such associations, partnerships and companies under the check of State. After its registration an association, partnership and the company, as the case may be, becomes a juristic person and there is a concept of juristic person in Islam as in the case of State treasury, Waqf, hospital, etc. As referred to by Abdal Qadir Audah in "Al Tashria al Janai". Vol: 1, Page: 292 and also by Mustafa Zarqa in Al- Madkhal al Fiqhi al Aam. This section is also not repugnant to the Injunctions of Islam.
(c) There is nothing in sections 15, 16(iv), 18, 20, 21, 37(1), 42(4), 44, 80, 81, 90, 95, 121, 139, 146, 179, 187, 190, 195, 201, 203, 206, 208, 223, 231(1), 248, 261, 273, 274, 275, 295, 354, 405, 420,.462, 464, 481, 482, 484, 491, 493 which is against the Injunctions of Islam.
11. The. State Bank of Pakistan in its comments filed on 28.04.2008, at the outset stated that their comments are "confined within the four corners of the Holy Quran and Sunnah of the Holy Prophet (P.B.U.H.) as defined in Article 203-B (c) of the Constitution of Islamic Republic of Pakistan, 1973 and the same yardstick may be kept in view."
The concept of a company as provided in section 2(7) of the Companies Ordinance 1984 does not appear to be against the Injunction of Qur'an and Sunnah.
(a) The formation of a Company and its registration under Companies Ordinance, 1984 is a legal person, not a natural person with the following characteristic:--
(i) It can acquire any property in any capacity i,e, as owner, lessee, Pawnee, mortgage etc.
(ii) It can alienate its property to any person in any manner.
(iii) It can sue and be sued, on its own manner.
(iv) It can manage its property or affairs in any manner subject to articles of association.
(v) It can incur financial liabilities and acquire financial rights.
(b) It is submitted that there are three clear legal persons i,e, Bait-ul-Mal, Waqaf and Masjid. Legal personality of Bait-ul-Mal developed in to the State through the ages. These three legal persons have all the aforementioned characteristics. It shows that Company formed and registered under the Companies Ordinance 1984 is not against the Holy Quran and Sunnah of the Holy Prophet (P.B.U.H.).
(c) The concept of a company limited by shares as given under section 2(8) of the Companies Ordinance, 1984 is not against the Injunctions of Islam. It is further submitted that company limited by shares is also an institution, which is not against the Injunctions of Islam. A company limited by shares is formed by association of persons subscribing different numbers of share of equal denotation. Their liability is limited to the shares subscribed but the liability of the company formed as such is unlimited.
(d) The legal personality of a company is unlimited by liability to the creditors of the company, it does not, therefore, offend any Injunction of Islam as laid down in the Holy Quran. As far as the Islamic rules of partnership contained in books of Fiqah are concerned, these were adopted by the early Jurists according to the commercial practice of their ages.
(e)(i) The concept of company limited by guarantee as given under section 2(9) of the Ordinance, 1984 does not appears to be against the Injunction of Islam.
(ii) Section 14 is regulatory section which makes it incumbent that no association, partnership or company consisting of more than 20 persons shall be formed for the purpose of carrying on any business that has for its objects the acquisition of gain by the association, partnership and company or by the individual member can function only after the registration of company under Ordinance, 1984.
(iii) Section 15 provides a procedure and mode of forming a company. According to this section, seven or more persons may form a public company and any two or more persons so associated may form a private company. The formation of the company is not against any Injunction of Islam.
This section provides that the liability of the members is limited. It is submitted that if the formation of a company limited by shares of guarantee is a practice not opposed to the Injunctions of Islam, then section 16(iv) is also not opposed to Islamic injunctions. Section 18 of the Companies Ordinance 1984 relating to memorandum of limited company is a procedural section and it provides that the memorandum, in case of unlimited company, shall state the particulars mentioned in the section to give a more clarity and transparency to each item. The formation of a company under section 18 of the Companies Ordinance, 1984, does not oppose any provision of Islam. Section 20 of the Companies Ordinance, 1984, relating to restriction on alteration of memorandum has been devised to protect and safeguard the interests of shareholders and their investment. Therefore, it is not opposed to the Injunctions of Islam.
(iv) Section 21 of the Companies Ordinance, 1984 relating to alteration of memorandum provides a mechanism to alter the memorandum if, at any time, need arises to do so. The interest of every shareholder and every creditor has been fully safeguarded. Thus, it is not opposed to the Injunctions of Islam.
Section 37 of the Companies Ordinance, 1984 protects the rights of the shareholders. This section saves the shareholders from fraud and injury. This section is also not against the Injunctions of Islam.
(v) After perusal of the contents of section 42, there appears nothing in it which is contrary to the Injunctions of Islam. The purpose of this section is to prevent injury and fraud. Moreover, its proviso provides that no adverse action shall be taken unless the association is provided an opportunity of a salutary representation and its viewpoint is also heard. This section is in accordance with the principles of Shariah, and not opposed to any Injunction of Quran and Surmah.
(vi) There appears to be nothing contrary to the injunctions of Shariah in Section 44. The purpose of this section is to prevent injury and fraud. According to this section conversion of public company into private company has been regulated with the prior approval of the authority.
(vii) Section 62 of the Ordinance prevents injury and fraud, it is a regulatory section and is not repugnant to injunctions of Islam. There is also nothing against Quran and Sunnah in section 68.
(viii) The provision of section 81 which provides transfer by a nominee or a legal representative does not appear to be against the Injunctions of Islam.
(ix) Section 88 provides regulation of deposit.
(x) Section 90 provides classes and kinds of share capital.
(xi) Section 95 imposes restrictions on sale and purchase of Companies shares and holdings.
Section 121 provides that certain mortgages and charges would be void if not registered. There is nothing therein which appears to be against the injunction of Islam. The restrictions imposed under section 121 safeguards the interest of members and creditors of a company.
(xii) Section 139 provides disqualification for appointment as receiver or manager. The disqualification as mentioned in this section are reasonable but point of reasonable qualification as mentioned in Article 62 of the Constitution can be incorporated for the purpose of improvement.
The present contents of Section 139 are not opposed to the injunction of Islam.
(xiii) Section 146 provides certain restriction on commencement of business so as to stabilize the financial position of the company and to avoid the speculator steps and is not against the injunction of Islam.
(xiv) Section 179 is a procedural section which empowered the courts to take action on illegal Elections of Directors whereas sections 187 and 190 provides the restrictions to save the company from unsafe hands i,e, persons having no financial interest in the company and the persons incapable to run the business, incompetent person and persons taking fiduciary behavior. There is nothing contrary to the Injunctions of Islam.
(xv) Section 195 is a procedural section. It relates with the loans to the Directors. This section does not appear against the Injunctions of Islam.
(xvi) Section 197 prohibits regarding making of political contribution by a company to any political party for any political purpose or to any individual or body. The powers under this section are salutary and designed to protect the company from political pressure. There is nothing contrary to the Injunction of Islam.
(xvii) Section 201 is procedural section. It imposes restrictions on ineligible persons to become director of the company. Sections 203, 206, 208, 223, 231(1) and 248 are salutary and designed to protect the company and the interest of the shareholder and are not against the Injunctions of Islam.
(xviii) Section 261 empowers the Registrar to collect information and explanations from any company. This section gives power to the Government to protect the interest of shareholders and is not against the Quran and Sunnah.
(xviv) Section 273 empowers the Court that no Director, Chief Executive, Manager, Agent or other officer of the company would be entitled to be paid any compensation for annulment or modification of a contract to which he is a party or he is a beneficiary. It does not appear to be against the Injunctions of Islam. Provision of section 274 does not appear to be against the Injunctions of Islam.
(xx) Section 275 is a regulatory section, which provides the procedure for winding up of a company under section 290. Perusal of the same shows that it does not appear to be against the Injunctions of Islam.
(xxi) Section 295(i) provides protection to a creditor or creditor having interest equal in amount. In case of mismanagement by a company, and in order to safeguard the interest, the authority, may, after giving the company an opportunity of being heard without prejudice, may appoint an Administrator to manage the affairs of the company. Perusal of the same does not appear to be against the Injunctions of Islam.
' WO Section 345 is also not against the Quran and Sunnah because it gives power to the courts to take action, if necessary so also section 405 of the Companies Ordinance 1984 which only provides the priorities to all other debts in case of winding up of a company.
(xxiii) Section 415 provides a penalty for fraud by officer of a company which has gone to liquidation by a Court of law. Section 420 is also penal provision to safeguard the interest of its shareholders, creditors etc. And not opposed to Injunctions of Islam
(xxiv) Section 464 provides procedure for the appointment of receiver and section 481 provides an appeal against acquittal by a company on the directions of the authority both of which not appear to be against the Injunctions of Islam.
(xxv) There is nothing in section 482(2), section 484, section 491 and section 493 of the Companies Ordinance 1984 which is against the Injunctions of Islam.
12. In dealing with the submissions made by the State Bank of Pakistan, it was contended that the Bank follows the Principles of Islamic jurisprudence as submitted by Dr. Abdul Malik Irfani as mentioned in para (9) above.
13. The Government of N.-W.F.P in its comments submitted as follows:--
(i) That the Islamic Economist like the Orthodox Ulema have also condemned Riba and Usury but have recommended that such profits may be replaced by Mudaraba (Profit sharing system).
(ii) That Mudaraba (Profit-sharing) was an antiquarian institution of pre-Islamic times which was suitable for distant trade journeys. This system was interpreted and projected by these Islamic Economists as a sacred religious institution to justify the maximization of profits under capitalism.
Therefore, according to them Islam is not a ritual but also an economic system.
(iii) That the aforesaid provisions of the Companies Ordinance, 1984, have been duly examined at length and the present economic requirements of the country are in need of the provisions of the Companies Ordinance, 1984, which are not repugnant to the Injunctions of Islam.
(iv) That the Islamic Jurists have not condemned the profits of Companies or Joint Business from the times of the Holy Prophet (peace be upon him) as in those days Trade was being carried out on barter system. In the present set up under the Companies Ordinance, the profits accrued from such business does not fall under the interpretation of Riba or Usury and as such is not part of any exploitative practice in production, trade and commerce. The modern economic capitalism of industrial capital, wage labour, land and entrepreneurship were presented by the new social classes of capitalism, labour, land owners, and entrepreneurs, whose returns or rewards, according to modern economics, were determined according to their real contributions to the national wealth.
(v) As such in the present Muslim Society there, economics have been integrated into, the global capitalist system. In the present economic environment the concept of Riba and Zakat etc.; necessitate to promote Industrial capitalism to render financial assistance and profits livelihood to the individuals to meet their daily requirements and feed their families. In this context transaction from feudalism to Industrial capitalism, it was thought that an enterprising class of industrialists, financers and bankers was needed to facilitate a rapid change of the rural and semi-feudal sector to an industrial/urban structure as such the industries installed for the promotion of socio set-up would not in any way be a hindrance to the Islamic Principles.
(vi) It will not be out of place to mention the extracts from "Albalagh" periodical published by Mufti Mohammad Shafi and written by Mohammad Taqi Usmani in Urdu on the subject as follows:-- {{URDU TEXT}} PREFERENCE SHARES {{URDU TEXT}} PREFERENCE SHARES 1.1 {{URDU TEXT}} {{URDU TEXST}} PROPORTIONATE {{URDU TEXT}} 14. Islamic Fiqh Academy of OIC in its seventh Session, held in the month of May, 1992 adopted Resolution No,7/1/65, the relevant provisions whereof are as under:-- I SHARES IN SHARIKAT
(a) As the original rule in Mua'milat is permissibility, The formation of Sharikat Musahimah having lawful objectives and activities, is lawful.
(b) There is no disagreement about the prohibition of the shares of Sharikat whose primary objective is prohibited, like transactions in Riba or which produces and deals in prohibited products.
(c) The rule of prohibition applies to the shares of Shrikat that deal at times in prohibited things like riba, even when their primary activity is permissible. II SHARES WITH RESPECT TO THEIR BEARER The share certificate is the instrument that is proof of his right in the share. There is, therefore, no legal obstacle to the issuance of shares in this way and to transactions in them. III SUBJECT MATTER OF THE CONTRACT IN THE SALE OF THE SHARE ' The subject-matter of the contract in sale of shares is the undivided share in assets of the Sharika.
The share certificate is the instrument of the right to this share.
15. The Arab scholars consider the Joint Stock Company business is akin to the contract of Shrikah in Islamic law and application of its principles. Therefore, all prominent Arab Scholars have declared the business of companies, its formation and legal personality, as permissible while the other scholars have dealt with this issue differently.
16. The Limited Liability of the master of a slave who carries on business on behalf of his master was also cited. In such a case the initial capital for the purpose of trade was provided by his master, but the slave was free to enter into all the commercial transactions. The income would also vest in him, and whatever the slave earned would go to the master as his exclusive property. If in the course of trade, the slave incurred debts, the same would be set off against cash and the stock in the hands of the slave. But if the amount of such cash and stock would not be sufficient to set off the debts, the creditors had a right to sell the slave and settle their claims out of his bid price. However, if their claims still remained due even after selling the slave, or the slave would die in that state of indebtedness, the creditors shall not approach his master for the rest of their claims. Here, the master was actually the owner of the whole business, the slave being merely an intermediary tool to carry out the business transactions. The slave owned nothing from the business. Still, the liability of the master was limited to the capital he invested including the value of the slave. After the death of the slave, the creditors could not have a claim over the personal assets of the master. This business practice was followed in the days of Holy Prophet (P.B.U.H).
17. During the course of hearing, most of the Juris consults, Ulema and Lawyers addressed us on the concept of company, its being an artificial person and limited liability of member vis-a-vis Injunctions of Islam and casually touched upon other provisions of Companies Ordinance, 1984 as to their repugnancy or otherwise of Quran and Sunnah of Prophet Muhammad (P.B.U.H). Reference was made firstly to J. A. Rahim's "Principles of Islamic Jurisprudence and to Josef Schacht, the author of An Introduction to Islamic law" (Oxford 1964, Page 125) on the question of legal entity of a fictitious person. Abdul Rahim writes that: "It may be doubted whether the earlier jurists would recognize an artificial or Juristic person. The state of community is regarded by them as holding and exercising the rights of God on His behalf through the Imam. Similarly the deceased is spoken of as having rights and obligations on his estate, for the law deals both with a man's spiritual and worldly rights and obligations and even the worldly rights and obligation of a person cannot be said to be altogether lost on his death, in as much as he is entitled to have his funeral expenses and his debt and other obligation discharged out of his estate. But later jurists seem inclined to recognize an artificial person, for instance, they would allow a gift to be made directly to a Mosque, while the ancient doctors would require intervention of a trustee". According to Josef Schacht, Islamic law does not acknowledge the concept of a Juristic person. He denied that a Waqf had legal personality., According to him, Aqila has some features of legal personality. In Qatle Khata and Shib-hil- 'Amad, the 'Aqila, the relatives and family members of the murderer are bound to pay the blood money.
18. Dr. Aslam Khaki Juris consult is of the opinion that the concept of limited liability is against Islam as the liability is limited to the shares/assets of company and not to the assets of a person. He relied on the following verses of the Holy Quran and Ahadith of the Holy Prophet (SAWS):-- ' I Allah says: "Nobody will bear the burden of the other."
' By liquidation of the limited companies, the burden of the loss is borne by the public exchequer or the public directly when the loans against the companies, remained unpaid. II The Holy Prophet says: "Neither getting harmed nor harming others is allowed in Islam." (Ali bin Abi Bakr al Haithami:Mujma al Zawaid; Beirut 1407 A.H. Vol.4 page 110).
III The Holy prophet considered unlimited liability in the business and loan and directed to sell all the property of the insolvent except what remains for his basic necessities. The loans of the public are protected in Islam which would be evident from looking into the following Hadith thoroughly:-- "Abu Seed reports: A man in the period of Holy Prophet got a loss in his purchased fruit and his debts were increased. The Prophet said "Give him Sadaqah or Charity". Consequently the people gave charity to the person but it did not exhaust all of his debts. Then the Prophet said "Take whatever you find with him and you would not get anything except this".(Abu Awanah Yaqoob bin Ishaq:Musnad Abi Awanah; Dar al Ma`rifah Beirut 1998 Vol.3 Page 336).
20. Hence according to him the liability of any person, firm or company should not be limited as it is the source of loss to the public exchequer and the public. The Government has the responsibility of protecting the goods and the property of people which is one of the five basic or fundamental Masalih.
21. Late Maulana Taseen of Karachi, another Juris Consult had submitted in his paper that this form of business (company) was initially introduced in eighteenth Century in European countries at the instance of the Jewish investors which nourished under capitalism and flourished in Muslim Countries under the influence of western capitalism. According to him, the concept of the legal person and limited liability are alien to Islamic economic system. The present form of Joint Stock Companies neither resembles Sharikat al'Inan nor corresponds the principles of Mudariba in Islam.
There is big difference between them on major issues. In Sharikat allnan, it is pre-requisite that every partner must participate in the activities and affairs of Sharika (partnership) besides contributing in share capital; and every partner is treated as a representative of the other. The status of all partners is equal. Contrary to that, the shareholders of Joint Stock Companies do not carry equal status. In Sharikat al'Inan, every partner is supposed to earn money by working hard while the shareholders of the Company have to earn money/profit without mental and physical labour. No monthly salary or remuneration is fixed for them in Sharikat al'Inan whereas shareholders of the companies, they, receive certain proportion of profit in addition to monthly salary. The Directors of the company enjoy unlimited benefits. In Mudarba the Capitalist shall not participate in the business activities and the person who runs the business, (Mudarib) the worker, shall not contribute any share in the capital, otherwise the business of Mudariba shall become irregular. In Mudariba, the Amil, worker is not entitled to any salary or remuneration for his work like an employee or labourer. In case, he receives monthly salary or remuneration for his work, then the business of Mudarba transforms into another type of business. The profit earned as a result of business is not distributed amongst the workers and the Capitalist, so long as the business continues. The company issues share to its shareholders freely which are mere paper and cannot be termed as a Mal (a valuable thing) in the eyes of Shariah, hence its transaction is not permissible in Islam. The transactions of paper currency and paper shares, issued by the Company always witness ups and downs in terms of its value and never remain stable in the share market, which is not in consonance with the injunctions of Islam. Furthermore, through gambling, betting and artificial means, the prices of shares are remained high or low as there is no room for such business in Islam where a person earns money through share Capital, not by physical and mental labour and thus, takes benefit from the poverty of oppressed and less fortunate people. Islam lays emphasis on earning money through labour and hand working not by violating the rights of the oppressed and needy people. Islam treats this type of business as a business of 3rd grade category, permissible in Islam, keeping in view the needs of the people.
22. Here reference may also be made to the meeting of the Sub Committee of the Council of Islamic Ideology held from January 23rd to 26th of 1989, at Karachi, chaired by the then Chairman, 'Abdul Wahid Halipota, which was of the following view:-- "Under the existing Company law, the liability of shareholders and directors is limited. Though, the directors, themselves are shareholders but they are also "Ameen" (trustee) of the rest of shareholders. Under Islamic law, in case of any loss, Ameen does not become liable for it but there is the precedent established by Hazrat `Ali, by making Ameen liable in public interest. The Council made recommendation that in case of loss to a company or on its liquidation, the liabilities of the Directors of the Company should be unlimited because they run the affairs of the company and because of their negligence, dishonesty and inefficiency, the shareholders of the company may suffer the loss."
23. It may be mentioned here that a vast majority of contemporary Ulema, renowned scholars of Islamic world have upheld that Islamic law acknowledges the concept of Juristic personality. Their views are summarized below:-
(i) `Abdul Qadir Awdah states:- 'The Islamic law has since its dawn, recognized the existence of juristic persons. The jurists have discussed the state treasury (Bait-ulMal) and Waqf as juristic persons. Similarly, they have considered the schools, orphanages, hospitals, etc., as juristic persons and competent to hold and exercise the rights." (Al-Tashri 'ul Jenai al Islami, Mussasat al Risalah (1992) Volume 1, Page 393).
(ii) Renowned Jurist of Muslim world Mustafa Zarqa writes that:-- "When we referred to the original text and sources of the Shariah, we found in its legal provisions which in substance propound the concept of Juristic person and its legal status. And, also, we found the legal provisions which personify the juristic person with all its principles and characteristics which are attributed to it by the latest western law".
' And further:- "On the same pattern of the latest western legal position of the juristic person, it is found in the Shariah in the most perfect form in the shape of the Treasury, Waqf and the estate in which the head of the State personifies the entire Muslim Community." (Al-Madkhal al Faqhi-alAam Vol:3 pages 253, 258).
(iii) The consensus of Muslim Jurists is that the Waqf is a legal and religious institution wherein a person dedicates some of his properties for a religious or a charitable purpose. The properties, after being declared as Waqf, no longer remain in the ownership of the donor. The beneficiaries of Waqf can benefit from the corpus or the proceeds of the dedicated property, but they are not its owners. Its ownership vests in Allah Almighty alone. (Muhammad Bin Abi al Abbas al Ramali: Nihayatul Muhtaj Ila Sharh Al-Minhaj, Beirut, Vol.5 Page 385).
(iv) Abu Bakr Muhammad states:- "It seems that the Muslim Jurists have treated the Waqf as a separate legal entity and have ascribed to it some characteristics similar to those of a natural person. This will be clear from two rulings given by the Fuqaha, (Muslim Jurists) in respect of Waqf.
Firstly, if a property is purchased with the income of a Waqf, the purchased property cannot become a part of the Waqf automatically. Rather, the Jurists say, the property so purchased shall be treated as property owned by the Waqf clearly means that a Waqf, like natural person, can own a property. Secondly, the jurists have clearly mentioned that the money given to a mosque as donation does not form part of the Waqf, but it passes to the ownership of the mosque. (Abu Bakar Muhammad bin Abi Sehal Sarkhsi: Al-Mabsut Lil Sarkhsi, Beirut, 1406 A.H, Vol.12, Page 34).
(v) According to Maliki School, a mosque is capable of being the owner of something. (Muhammad Bin Abi al Abbas al Ramali: Nihayatul Muhtaj Ila Sharh al Minhaj, Beirut, Vol.2 Page 112). This capability of the mosque, according to it, is constructive, while the capability enjoyed by a human being is physical. A renowned Maliki Jurist, namely, Ahmad Al-Dardir, validates a bequest made in favour of a mosque, and gives the reason that a mosque can own properties. Not only this, he extends the principle to an inn and a bridge also, provided that they are Waqf. (Ahmad Al-Dardir: Al Shrhul Kabir, Vol:4 Page 77).
(vi) Shaikh 'Ali Khafif writes that the assignment juristic personality and its underlying effect is a legal issue and a simple matter of organization of rules of Shariah already exist. It is a matter of reorganizing these rules keeping in view the custom and usages and public interest of the people.
According to him, there is nothing in the Holy Quran and Sunnah that denies this assignment of legal personality to a non human. (AlSharikat Fiqhal Islami; Ali Al-Khafif Page-25).
(vii) Maulana Muhammad Taqi Uthmani in his article published in the New Horizon in 1992 is of the opinion that if the concept of legal personality is accepted the concept of limited liability should flow naturally from it. The main argument about the Waqf is that as the Waqf can own property, like something brought for a Waqf or something donated to the mosque, it should, therefore, be considered a legal person. Taqi Usmani also pointed out that Al-Dardir, the Maliki jurist, extends such thinking to inns and bridges as well, if they constitute a Waqf. (Justice Mohammad Taqi Usmani, 'The Principle of Limited Liability From the Sharjah Viewpoint," New Horizon, Aug/Sept, Pages 1992, 21-22). According to him the Muslim Jurists treated Waqf, Bait-al-Mal and Mosques as legal entities having the capability to own some thing. Let us discuss these issues in some detail.
(viii) Lahore High Court was pleased to hold the attribute of legal person to a Mosque but when appeal was preferred before Privy Council, this decision was set aside. (Masjid Shahid Ganj and others Vs. Shermani Gurdwara Parbandhak Committee Amritsar and others AIR 1940 Privy Council
116. In Tanqihul Hamidiah the liability to pay debt directly lies on a trust (Waqf) not on administrator or (Mutawalli) meaning thereby, the ancient jurists give it the status of legal person.(Tanqihul Hamidiya by Ibn Abideen Vol. 1 Page 206, published by Abdul Ghafar Tajiran Kutub, Irk Bazar, Qandahar Afghanistan).
(ix) Mr. Imran Ahsan Niazi writes: We find that there are many things in this modern world, at least for which an explicit Hukm cannot be found in the light of Quran and Sunnah and it is difficult to derive Hukm for it on the basis of analogy.
(Imran Ahsan Khan Niazee: Theories of Islamic Law, Islamic Research Institute and International Institute of Islamic Thought N.D. P.47). It is obvious that eighty per cent or more activities of a modern state are not covered by the books of the Muslim Jurists and would need an effective Methodology for the derivation of necessary Ahkam.
24. However, we cannot overlook the contention raised by Dr. Aslam Khaki, Juris consult, that the concept of "limited liability" is repugnant to Islam. He has placed reliance on the verse of the Holy Quran that "nobody will bear the burden of the other". This verse has been interpreted by a number of Scholars/Ulema from time to time. A plain reading of the verse will reveal that it relates to the Day of Judgment when the burden of one's sins will be borne by him and not shared by any one else and this has nothing to do with any kind of business transaction or worldly gain or loss. We find support in our view from the following Scholars/Ulema:--
(a) Maulana Abdul Majid Daryabadi says that no sinner shall bear the sin of another. This is said in answer to the idolaters who offered to take the guilt upon themselves if the Prophet would only conform to their ways of worship (Budh). This also completely contradicts the Christian doctrine of "atonement". Holy Quran with English translation, Taj Company Ltd., Karachi, N.D Vol.
1. p. 139- A).
(b) Abdullah Yusuf All commented that this verse deals with the doctrine of personal responsibility.
He says, "we are fully responsible for our acts ourselves: we cannot transfer the consequences to someone else. Nor can anyone vicariously atone of our sin& (Abdullah Yusuf Ali, Holy Quran with English translation, Published by Amana Corp. USA, WASH, P.339).
(c) Maulana Abul Maududi commented that everyone is responsible and accountable for one's own deeds and this responsibility can on no account, be shifted from one to the other. (Abul Maududi; The Meaning of the Quran, Islamic Publications Ltd., Lahore-Pakistan, Vol.II, p.174)
(d) Muhammad Asad says that this statement constitutes a categorical rejection of the Christian doctrines of "original sin" and "vicarious atonement". (Muhammad Asad Holy Quran with English translation, Dar AlAndalus, Gibraltar, p.816)
(e) According to Maulana Mufti Muhammad Shafi the word wizr originally means a burden, and the verse purports to say that every man shall have to carry his own wrongdoings, whether disbelief or sir', and none else shall carry his burden of sin, as Allah states in (35:18). Ma'ariful Qur'an, Maktaba Darul-Uloom Karachi.
14.Pakistan. Vol.8 page >229) (t) According to the Hadith of the Holy Prophet a child born out of wedlock will not be affected by the sin of his or her parents. (This Hadith has been reported by Hakim from Sayyidah `A'ishah).
Similarly the Hadith of Prophet cited by Dr. Khaki that "neither getting harmed nor harming others is allowed in Islam" appears to be of general nature not relating to business transactions only but extends to all spheres of life of a Muslim.
25. As far as the objection raised by late Maulana Taseen that Bank notes and shares being paper cannot be termed as "Maal" (valuable thing) in the eyes of Shariah, hence its transaction is not permissible in Islam, has no force and is untenable. No doubt in the days of Holy Prophet (P.B.U.H) there was no paper money and business transactions were being carried out on the basis of barter system. This is not correct. The Holy Quran in Surah Yousuf verse 20 states "And they sold him for a low price, a number of silver coins; and they attached no value to him." Similarly in Surah Al-e- Imran in Verse 75, reference is made to Dinar. However, the concept of paper money was introduced as legal tender in China in the 9th Century and in the year 812, the Chinese Emperor used it as temporary solution because of copper shortage. (Dr. Noor Ahmad Shahtaz: Kaghazi Currency, Fazli Sons, Karachi 1998 P.14). Paper money came in Europe some 300 years later. Paper money and paper notes are considered as 'Fiat money' decreed by a government to be legal tender with its value determined therein (Microsoft (R) Encarta (R) 2008 1993-2007 Microsoft Corporation).
' People have been accepting paper money in lieu of gold and silver and for purchasing movable and immovable properties, tangible or intangible assets. In short, the entire present day financial and economic activity revolves around it including international commercial dealings and financial transactions between State and State. In this context it may be stated that Pakistan is a signatory to the Charter of United Nations as well as to a number of conventions on international trade whereby paper currency of one country or the other is accepted as legal tender and comes within the ambit of Maal valuable thing like gold, silver or any other commodity with the difference that its value is guaranteed by Sates. In the case of suo motu case on "Gender Equality", PLD 2008 FSC 1, a Full Bench of this Court had held:-- "Holy Prophet (Peace be upon him) himself had made many treaties with States/tribes and fully adhered to its terms and conditions. However, treaties with the entire mankind such as above were not in the field in the days of Holy Prophet (Peace be upon him) which certainly stand at a higher pedestal than a treaty with a State tribe or individual to which the Holy Prophet attached great sanctity and importance. The Holy Quran attaches utmost importance to treaties, covenants, pledges and promises and enjoins its followers to fully adhere to its terms and conditions".
' A share certificate is also a piece of paper but somewhat different from paper money. It is issued to anyone who subscribes towards the capital of a company. There is no command or decree of the Government as in the case of a currency note that it may be treated as legal tender. It confers title to the owner or bearer and its value may fluctuate in terms of money from time to time in stock market. It is convertible into money by affecting its sale at the stock market. As long as it is capable to convert itself into money it maintains its value and in every sense it falls within the definition of 'Maal' and carries all the attributes of 'Maal'
26. Like majority of Muslim Jurists we are also of the view that the concept of 'limited liability' is not repugnant to Qur'an and Sunnah. In Mudarba as prevalent in the days of Holy Prophet, the capitalist would contribute the entire capital for purpose of business and would be liable for all losses but the Mudarib or the worker would be entitled to his share of profit but would not incur any liability or would not be personally responsible to the creditors. Thus the concept of `no liability' of Mudarib was prevalent in the days of Prophet. As against this, a company upon its incorporation functions as a legal entity, different and distinct from its shareholders having limited liability. Their personal property and assets shall not be liable for an act of company. Legal and Artificial entities like Baitul Mal, Waqf do exist in Islam from the very beginning although their function may be different from a company but none of them perform religious duties and is exempted to pay Zakat being not natural persons. In case of death the estate of a deceased also has its own existence and personality entirely different and distinct from natural persons. The estate is managed through the heirs of the deceased or his nominated executor and would be subject to claims of the creditors. In case the estate is not sufficient to meet the claims of the creditors they shall have no remedy available for recovery of their dues. According to Justice (R) Muhammad Taqi Usmani, a former Judge Supreme Court of Pakistan Shariat Appellate Bench there is nothing against Islam in subscribing capital in a limited company and issuance of shares against it by the company. The views of Government, other agencies, Juris consults and scholars are similar. We are therefore clear in our mind that there is nothing in Companies Ordinance, 1984 according to which a company, "its legal entity" and the 'limited liability' of its shareholders are found repugnant to the Injunctions of Islam as laid down in the Holy Quran and Sunnah of the Holy Prophet (P.B.U.H.) as envisaged under Article 203-D of the Constitution of Islamic Republic of Pakistan 1973.
27. However, what brings into fore is the concept of 'short selling' of shares as embodied in section 223 of the Ordinance to which special reference was made by Mr. Iqbal-ur-Rahim, Amicus Curiae'.
The term "Short Selling" of shares has not been defined anywhere in the Ordinance. It will be advantageous to reproduce the provision relating to short selling as under:-- Section 223. "No Director, Chief Executive, Managing Agent, Chief Accountant, Secretary or Auditor of a listed company and no person who is directly or indirectly the beneficial owner of not less than ten percent of the listed equity securities of such company shall practice directly or indirectly short selling such securities"
' According to the Regulations of Karachi Stock Exchange (Guarantee) Limited 'Short Sale' means "a sale by a Member, on his Proprietary Accounts or on Client's Account, not owning securities at the time of sale or the sale without constituting a Pre-Existing Interest but is a sale on Proprietary Account or Client's Account entered into on the basis of Prior Contractual Borrowing Arrangement to meet delivery requirements .On the settlement date." Under the same Regulations 'Blank Sale' means "a sale by a party that does not own shares or the sale does not constitute a sale with pre- existing interest or is a sale by a party that has not entered into a contractual borrowing arrangement to meet delivery requirements."
As per 'Black's Law Dictionary Eighth Edition page 1366' 'short sale' means "a sale of a security that the seller does not own or has not contracted for at the time of sale, and that the seller must borrow to make delivery. Such a sale is usually made when the seller expects the security's price to drop. If the price does drop, the seller can make a profit on the difference between the price of the shares sold and the lower price of the shares bought to pay back the borrowed shares." Blank Sale has not been defined anywhere. However, in the Black's Law Dictionary English Edition page 155, 'Blank shares' means "Series shares" which may vary in the relative rights and preferences as between different series but which may be fixed in articles of incorporation.
' The State Bank of Pakistan in its written submission considers that the provisions of section 223 are directed to protect the company from the underhand dealings. It is salutary in name and not opposed to the Injunctions of Islam. Similarly the Corporate Law Authority/Securities and Exchange Commission of Pakistan in their comments appearing at para. 8(vi) above state that 'short sale' as mentioned in section 223 is designed to protect the shareholders and/or the company whereas according to the Government of Punjab in para 10 above of their comments, there is nothing in section 223 which is against the Injunctions of Islam.
28. We do not agree with the above-mentioned view of State Bank of Pakistan, Corporate Law Authority/Securities and Exchange Commission and the Government of Punjab. There is nothing in section 223 to protect or safeguard either the interest of the shareholder or the company. In fact there is no mechanism provided under section 223 of the Companies Ordinance, 1984, for safeguarding the interests of shareholders from the underhand and unscrupulous dealings of directors and others named therein and Kingmakers of stock exchange. Similarly we find no penal provisions against those found guilty of violation thereof. Mr. Iqbal-ur-Rahim had brought to our notice "the Regulations for Blank/Short Sale under Ready Market" 2002 as amended up to the 21st July, 2008 of Karachi Stock Exchange with the prior permission/approval of Securities and Exchange Commission of Pakistan, which may advantageously be reproduced as under:--
5. SHORT SALE PREREQUISITES ' No Member on his Proprietary Account or Client's Account shall make a Short Sale unless:--
(a) The sale is made at an Uptick or Zero-Plus Tick; and
(b) The trade is declared as a Short Sale at the time of placement of order through KATS in a special Short Sale Order Window designated in the system for the purpose.
' Short Seller will have to declare Short Sale Transactions while placing the order in the system in the manner and procedure as may be prescribed by the Exchange from time to time. This identification would be at the trade level to the Exchange, which would then disclose the cumulative figures for public consumption at the close of market everyday.
7. Short Seller will have to make delivery of the net shares involved in the short selling on the day of settlement.
8. CRITERIA FOR SECURITIES ELIGIBLE FOR SHORT SELLING Short Sales are only allowed in the securities notified by the Exchange or National Clearing Company to the Members as eligible securities for CFS or CFS MK-II markets as per their respective regulations and procedures from time to time.
9. PROHIBITION
(a) No member on his Proprietary Account or on Client's Account, shall be allowed to carry over the short position through CFS or CFS MK-II transactions
(b) No Member who has financed transactions on his Proprietary Account or on Client's Account, through CFS or CFS MK-II against delivery of securities shall use the same securities for Short Selling and/or further lending.
10 PENALTY
(a) In case of non-compliance of the said regulation by a member (on his propriety any position) or an individual or corporate/institutional investor on UIN basis, penalties would include: ' For first violation, 5% of the value of short/blank sale or Rs,500,000 whichever is higher, plus confiscation of profits made on short/blank sale, plus in case of a member, suspension of trading up to three months; ' For subsequent violation, 10 % of the value of short/ blank sale or Rs,2,500,000 whichever is higher, plus confiscation of profits made on short/blank sale, plus penalty equal to 3 times of the profits earned on short/blank sale, plus in case of a member suspension of trading up to a year,
(b) The Exchange shall be responsible for monitoring compliance with this regulation.
29. These regulations of Karachi Stock Exchange are by itself a pointer to speculative nature and underhand dealings of Blank/Short Sale of shares for which penalty has been provided for. The gravity of such transactions may be gauged by the fact that the violator in the first instance shall pay by way of penalty the value of the short/blank sale or Rs,5,00,000 (Rupees five hundred thousands) whichever is higher plus confiscation of profits made on short/blank sale plus in case of a member suspension of trading up to three months. In case of subsequent violation, 10% of the value of short/blank sale or Rs,2,50.00,00 (Rupees two and a half million) whichever is higher, plus confiscation of profits made on short/blank sale, plus penalty equal to three times of the profits earned on short/blank sale plus in case of a member suspension of trading up to a year.
30. What is however imperceivable is that no penal provision has been prescribed against the individual violator or collectively against Director(s), Chief Executive, Managing Agent, Chief Accountant, Secretary or Auditor of a listed company or anyone else. The framers of law and the Government agencies rather overlooked the implications of unrestricted Blank/Short Sale of shares unmindful of grave consequences emanating from it.
31. It is, therefore, essential that the interest of ordinary shareholders and collective interest of all of them may be protected from the clutches of vested interests of monopoly stock holders and gang mafia operating in stock markets so as to inspire confidence and good corporate governance in the business world. This object is attainable only when the Federal Government would take necessary steps to eliminate this menace and fraudulent malpractices so frequently taking place in Stock Market. We are, therefore, of the view that unrestricted "Short Selling" under section 223 of the Companies Ordinance, 1984, or uncontrolled Blank Sale as in practice are repugnant to the Injunctions of Islam. Accordingly in exercise of our powers under Article 203-D of the Constitution of Islamic Republic of Pakistan, we require the Federal Government through the President of Pakistan to make suitable amendment therein within six months hereof which may not be repugnant to Quran and Sunnah of the Holy Prophet (P.B.U.H.) providing penal provisions in respect of Short Sale and Blank Sale ensuring adequate safeguards to ordinary shareholder of a company and public at large.