' FIDA MUHAMMAD KHAN, J.---By this Shariat Petition, filed by M.R. Roshan Din (hereinafter called the learned petitioner), Sections 2 and 5 of the Provident Fund Act, 1925 (as amended up to 1966 (afterwards referred to as the Act) and its application to Regulations under Section 14 (5) and (6) of the N.-W.F.P. Servants Provident Fund Rules, 1935 have been challenged on the ground that they are repugnant to the Injunctions of Islam. During the course of hearing, Section 6 of the Act was also pointed out by the learned counsel for the State to be in line with the impugned section as far as mentioning of the word interest was concerned. Under the suo motu jurisdiction granted by the Constitution of Pakistan under Article 203-D, therefore, the said section of the Act was also taken up for consideration.
2. The impugned sections read as under: "Section 2: In this Act unless there is anything repugnant in the subject of context,-
(a) "Compulsory deposit" means a subscription to, or deposit in, a Provident Fund which, under the rules of the Fund is not, until the happening of some specified contingency, repayable on demand otherwise than for the purpose of the payment of premia in respect of a policy of life insurance For the payment of subscriptions or premia in respect of a family pension fund], and includes any contribution...And any interest or increment which had occurred under the rules of the Fund on any such subscription, deposit or contribution, and also any such subscription, deposit, contribution, interest or increment remaining to the credit of the subscriber or depositor after the happening of any such contingency;
(b) 'contribution' means any amount credited in a Provident Fund, by [any authority administering the Fund], by way of addition to, [a subscription to, or deposit or balance at the credit of an individual account in,] the Fund; and 'Contributory Provident Fund' means a Provident Fund the rules of which provide for the crediting of contributions;
(c) 'dependant' means any of the following relatives of a deceased subscriber to, or a depositor in, a Provident Fund, namely, a wife, husband, parent, child, minor brother, unmarried sister and a deceased son's widow and child, and, where no parent of the subscriber or depositor is alive, a parental grandparent;
(d) 'Government Provident Fund' means a Provident Fund, other than a Railway Provident Fund, constituted by the authority of [the Secretary of State, the Federal Government, the Crown Representative or any Provincial Government] for any class or classes of [persons in the service of the State] or [of persons employed in educational institutions or employed by bodies existing solely for educational purposes], [and references in this Act to the Government shall be construed accordingly];
(e) "Provident Fund" means a fund in which subscriptions or deposits of any class or classes of employees are received and held on their individual accounts and includes any contributions and any interest or increment accruing on such subscriptions, deposits of contributions under the rules of the Fund;
(f) "Railway administration" means--
(i) any company administering a railway or tramway in [Pakistan] [under a Pakistan law] or under contract with the [Government] or
(ii) the manager of any railway administered by the Federal Government or the manager of any tramway administered by a Provincial Government: and
(g) `Railway Provident Fund' means a Provident Fund constituted by the authority of a railway administration for any class or classes of its employees.
' Section 5.--(l) Notwithstanding anything contained in any law for the time being in force or in any disposition whether testamentary or otherwise, by a subscriber to, or depositor in, a Government or Railway Provident Fund of the sum standing to his credit in the Fund, or of any part thereof, where any nomination, duly made in accordance with rules of the Fund, purports to confer upon any person the right to receive the whole or any part of such sum has become payable or before the sum, having become payable, has been paid, the said person shall, on the death as aforesaid of the subscriber of depositor, become entitled, to the exclusion of all other persons, to receive such sum or part thereof, as the case may be unless,-
(a) such nomination is at any time varied by another nomination made in like manner or expressly cancelled by notice given in the manner and to the authority prescribed by those rules, or
(b) such nomination at any time becomes invalid by reason of the happening of some contingency specified therein,-- ' and if the said person predeceases the subscriber or depositor, the nomination shall, so far as it relates to the right conferred upon the said person, become void and of no effect: ' Provided that where provision has been duly made in the nomination in accordance with rules of the Fund, conferring upon some other person such right in the stead of the person deceased, such right shall, upon the decease as aforesaid of the said person, pass to such other person].
(2) Notwithstanding anything contained in the [Succession Certificate Act, 1925] or the Sind Regulation VIII of 1827, any [person, who becomes entitled as aforesaid, may be granted] a certificate under that Act, or that Regulation, as the case may be, entitling him to receive payment of such sum or part, and such certificate shall not be deemed to be invalidated or superseded by any grant to any other person of probate or letters of administration to the estate of the deceased.
(3) The provisions of this section as amended by subsection (1) of section 2 of the Provident Fund (Amendment) Act, 1946, shall apply also to all such nominations made before the date of the commencement of that Act: ' Provided that the provisions of this section as so amended shall not operate to affect any case, in which before the said date any sum has been paid, or has under the rules of the Fund become payable in pursuance of any nomination duly made in accordance with those rules.] ' Section 6: When the sum standing to the credit of any subscriber or depositor in any Government or Railway Provident Fund which is a contributory Provident Fund becomes payable, there may, if the authority [specified in this behalf in the rules of the Fund] so directs, be deducted therefrom and paid to [Government or the Railway Administration, as the case may be,]
(a) any amount due under a liability incurred by the subscriber or depositor to [Government or the Railway Administration], but not exceeding in any case the total amount of any contributions credited to the account of the subscriber or depositor and of any interest or increment which has accrued on such contributions ; or
(b) where the subscriber or depositor has been dismissed from [his employment] for any reasons specified in this behalf in the rules of the Fund, or where he has resigned such employment within five years of the commencement thereof the whole or any part of the amount of any such contributions, interest and increment.
' The impugned rule reads as under: 14 (5): Interest shall not be credited to the account of a Muhammadan subscriber if he informs the Account Officer. That he does not wish to receive it; but if he subsequently asks for interest, it shall be credited with effect from the first day of the year in which he asks for it.
(6) The interest on amounts which under sub-rule (3) of Rule 13, sub-rule (5) of Rule 16, sub-rule (3) of Rule 19, sub-rule (3) of Rule 21, sub-rule (1) of Rule 23, sub-rule (1) or (2) of Rule 24, Rule 29 or Rule 30 are replaced at the credit of the subscriber in the Fund, shall be .Calculated as such reates as may be successively prescribed under sub-rule (1) of this rule and so far as may be in the manner described in this rule."
3. The said petition was admitted and fixed for regular hearing on 13-5-1992 when the learned petitioner and a distinguished religious scholar Qazi Abdud Daim who had been produced by the learned petitioner to assist him were heard in detail. Mr. Hafiz SA. Rahman, learned Advocate for the Federation accompanied by Mr. Tariq Azhar Sheikh, Section Officer, Ministry of Finance was also heard and the judgment was reserved. The same is being disposed of now by this judgment.
4. It is pertinent to mention here that another Shariat Petition No, 15/1 of 1990, on similar point, challenging a provision of Provident Fund i,e, Rugulation No,14 of the Pakistan Insurance Employees Provident Fund Regulations, 1954, was also considered by a Full Bench of this Court. The said Shariat Petition was allowed on 14th November, 1990.
5. In the instant petition, the learned petitioner relied on several verses of the Holy Qur'an and numerous Ahadith on the subject of interest and submitted that the provisions relating to the payment of interest in the Act were repugnant to the Injunctions of Islam and as such needed to be struck off. He sought permission of the Court to produce a religious scholar Qazi Abdud Daim.
Permission was granted and the learned religious scholar was also heard in detail. The learned scholar intentively read out various quotations from a booklet titled " " by Qazi Mohammad Sadruddin".
6. The learned counsel for Federation placed reliance on a booklet named " {{ARABIC TEXT}} " by Maulana Mufti Muhammad Shafie.
7. We have considered the arguments of both the sides in detail .Our conclusions are summed up in the subsequent paragraphs.
8. So far as the prohibition of interest is concerned, there could be no two opinions regarding its repugnancy to the injunctions of Islam and especially so in a Muslim community. Our detailed judgment on the subject of Riba written by Hon'ble Mr. Justice Dr. Tanzil-ur-Rahman the learned Chief Justice, is very comprehensive and contains all necessary relevant material on the subject which need not be repeated (in full). (See PLD 1992 FSC 1).
9. The main question which we are confronted herewith relates to the interest accrued by the Government on the compulsory deduction as Provident Fund of the Government employees. In simplified form the issue is just confined to the fact whether the part of remuneration which is compulsorily deducted at source, withheld by the Government, invested arbitrarily and handed over to the employees with some fixed addition in the name of interest comes under the definition of Riba and is prohibited or not.
10. To decide the question we have to see the definition of Riba and then appraise the present point in its light. For this purpose it would be most appropriate to quote from the judgment on Riba referred to above. The relevant paras are reproduced as under: "67: According to the above Quranic Illustrations, the literal meaning of Riba is, `increase'. In Shariah it means an 'addition, however slight over and above the principal', and thus includes both usury and interest (See: Lanes's Arabic English Laxicon). This finds support from the best authorities in Arabic language like Imam Raghib Isfahani {{ARABIC TEXT}} and Zubaydi Refer their Encyclopaedic Works: Mufradat al Qur'an (and Taj al-Arus {{ARABIC TEXT}} 68: The word "interest", by and large, has now been accepted and is understood as Riba (See Stiengass English-Arabic Dictionary, Lahore 1979, the word "interest").
69: Riba ( L 1) Usury, as defined in 'A Dictionary of Islam' by Thomas Patrick Hughes, Lahore 1964, page 544 means "A term in Muslim law defined as "an excess according to a legal standard of measurement or weight, in one or two homogeneous articles opposed to each other in a contract of exchange, and in which such excess is stipulated as an obligatory condition on one of the parties without any return.
70: The word `Riba' appears to have the same meaning as the Hebrew Neshec, which included gain, whether from the loan of money, or goods, or property of any kind. In the Mosaic law, conditions of gain for the loan of money or goods were rigorously prohibited (See Exold. Xxii 25; Lev. Xxv. 36 (USURI).
71. Therefore, Riba includes both 'usury' and 'interest' as known in English terminology. In legal sense it is that excess amount which a `Creditor' settles to receive/or recover from his 'Debtor' in consideration of giving time to the said debtor for re-payment of his loan. Imam. Tabri (d.310 A.H) in Tafsee Tabri (Vol. III, page 64) commenting on the Ouranic verse {{ARABIC TEXT}} that is, Riba is that increase (financial) which an owner of valuable property,(Mal) receives from his debtor for giving him time to repay his debt.
72. Ibn al-Athir, in his famous work `Kitab-al-Nihayah fi-Gharib al-Hadith wa'I Athar Cairo, 1322 A.H.
Vol.II, page 66 says: {{ARABIC TEXT}} (The original meaning of Riba is excess and in the terminology of the Shari'ah, it means increase in the principal without any contract of sale having taken place).
73: Ibn Arabi in his noted work, Ahkam al Qur'an, Cairo 1957, Vol. I, page 242 has defined riba to be the name of every increase in lieu of which there is no consideration viz. Property (Mal). {{ARABIC TEXT}} ' This is definition which Allama Burhanuddin al-Marghinani (d. 593 A.H.) has also stated in his famous book, AI-Hidayah (See Al-Hidaya, Quran Mahal, Karachi, Kitab-al Buu" ) Sing. Bai ( ) (Sale)
Chapter on Riba (Vol. III, page 78), which reads as under:-- {{ARABIC TEXT}} ' Riba, in law, signifies an excess (increase) in a (loan) contract in which such excess is stipulated as an obligatory condition on one of the parties, without any return, i,e, without any property (Mal), in exchange. (See Book XIV on Sale, Chapter VIII on Riba or usury. Hidayah, English Translation by Hamilton, Lahore, page 289), Imam Fakhrud Din Al-Rani (d.606 A.H.) in his well-known Tafseer Al- Kabir writes that the meaning of the word Riba is increase but it does not mean that to recover every kind of increase is Riba and is unlawful ( ). The forbiddance of Riba relates to a special kind of contract which was known amongst the Arabs as Riba al-Nasiyah J) i,e, increase on debt. (The other kind of Riba called "Riba al-Fadl" ( ) is outside the scope of the present discussion).
74: Al-Jassas in Ahkam al-Quran (Istambol 1335 A.H. Vol. 1, page 469 defines the term `riba' as follows: {{ARABIC TEXT}} (Riba is the loan given for a specified period on condition that on the expiry of the period, the borrower will repay it with some excess).
75: Maulana Maudoodi has stated the definition of Riba as follows: {{ARABIC TEXT}} 76: Even in common law parlance 'interest' has been held as 'The excess over the original advance is certainly the compensation which the creditor gets for lending his money for the particular period. The fact that it is not described in so many words as interest will not alter its character'. (AIR 1944 Mad. 243).
77: Halsbury's Laws of England, Vol. 23, S. 253 defines interest as follows:- ' Interest when considered in relation to money denotes the return of consideration or compensation for the use or retention by one party of a sum of money or other property belonging to another.'
78: It can thus be concluded that interest is not an increase simpliciter but in the Shari'ah it is a special kind of increase, otherwise in Bai (Sale), there is an increase which is termed as profit, whereas Riba is the consideration or compensation of the period of repayment of loan. Since this 'period' is not a valuable property (Mal), its return has been declared as unlawful, whether it be money or any other thing. In other words, wherever there is money from the One Part and there is only grace period or deferment of the repayment of loan on the other, and for that a 'return' is stipulated it is Riba. On a careful study of several forms of commercial activities and credit transactions, prevalent among Arabs during the period of Holy Prophet a transaction with contains excess or addition over and above the principal amount of loan, which is pre-determined in relation to time or period to be conditional on the payment of that pre-determined excess or addition, payable to the creditor (such a transaction containing the said elements) constitutes Riba and any sale, transaction or credit facility, in money or in kind, has been considered to be a transaction or Riba which is unlawful, Haram in territory of Islam (Dar al Islam in Muslim society.
There is consensus (Ijma, of the Muslim jurists on it. (Federal Shariat Court Judgment on Interest
(Riba) paragraphs 67 to 78)".
11. Before dealing with the subject it also seems appropriate to reproduce in their own words the relevant portions of arguments put forward in support of both the propositions by the parties. A distinguished scholar of the subcontinent, Maulana Mufti Muhammad Shafi who was of the opinion that the interest accrued on the compulsorily deducted portion of Provident Fund by the Governmnt does not come under the definition of Riba, writes in his booklet titled {{ARABIC TEXT}} as under: {{ARABIC TEXT}} {{ARABIC TEXT}}
12. Controverting the aforementioned point of view. Another religious scholar of great repute Maulana Qazi Sadrud Din writes in his booklet named {{ARABIC TEXT}} as follow: {{ARABIC TEXT}} {{URDU TEXT}}
13. Regarding the ownership of the Fund before its possession, the said learned scholar explains in reply to a question as under : )1 {{URDU TEXT}} 13A. As far as the point ,of ownership before actual possession as raised by {{URDU TEXT}} referred to above is concerned that view in fact was advanced in rebuttal to the point of view of Imam Shall who considers that hire becomes due immediately on concluding the contract whereas according to Hanfi point of view that becomes claimable only in virtue 'L of an agreement or in consequence of the end of the contract being obtained. According to latter view, it can be claimed on one of the three grounds only, either it is claimable in advance, in virtue of a previous agreement--or in advance independent of such agreement--or in consequence of the hirer obtaining the thing contracted for. This view of the matter is based on the concept that a contract of hire is renewed every instant according to the occurrence of the usufruct and thus the contract in fact is a contract of exchange which requires equality betwen the consideration and its return. Since, there is a necessary delay in the usufruct, there must always be a delay with respect to the return for it i,e, the hire. However, where the usufruct is obtained the right of ownership takes place with respect to the hire, so that the equality may be established. And so also in case of stipulation that the hire shall be in advance or is paid in advance by the hirer, as therein the hirer himself forgoes his right. For details see {{URDU TEXT}}
14. It is clear from the above that the issue of ownership before or after possession of the hire is based on a highly technical ground. It transpires from perusal of the Act and relevant Rules thereof that as far as practical aspect of the matter as applied to- the ownership of Provident Fund is concerned, it is considered to be the absolute property of the subscriber in all respects. It is credited in his/her account by name. He/She is authorized to make increase/decrease in the monthly instalment only. He/she is considered competent to make nomination and confer the right to receive the amount that may stand to his credit in the Fund in the event of his death before the amount standing to his credit has become payable, or where the amount has become payable, before payment has been made. He/she alone at the time of joining the Fund, is required to send a nomination in the form set-forth in the First Schedule in favour of one or more members of his family, if he/she has a family and, in case he/she has no family, shall similarly nominate a person or persons in the form set-forth in the Second Schedule. He/ she is equally authorized to formally cancel/replace the previous nomination. Likewise he/she may in the nomination distribute the amount that may stand to his/her credit in the Fund amongst the nominees at his/her own discretion. He/she is authorized also to be granted advance from the amount standing in his own credit in the Fund, with certain conditions imposed in his own interest. He/ she has several options to exercise in continuing or discontinuing subsribing to the Fund at any time, as mentioned at S. Nos,6, 7, 10 and 11 of the said Rules. The accruing of interest on the Fund forms an integral part of the contract and being known to the subscriber is well within the meaning of stipulation as a thing known by common usage is like a stipulation which has been made {{URDU TEXT}}
15. It is also interesting to note with great care that in spite of all these options and decisions, a "Muhammadan" i,e, (Muslim) subscriber has also been further authorized to accept or reject the interest, as he/she may like to do so. Rule 14 (5) which is relevant in this connection reads as under:.
14 (5) "Interest shall not be credited to the account of a Muhammadan subscriber if he informs the Accounts Officer that he does not wish to 1" receive it; but. If he subsequently asks for interest, it shall be credited with effect from the first day of the year in which he asks for it."
' It may be mentioned that in the case, a subscriber of the Fund draws advance from his account in the Fund, the same will be recovered from him in the specified number of instalments and after principal of the advance has been fully repaid interest shall be paid thereon at the fixed rate mentioned in the said Rules. However, the Muslim subscribers whose deposits in the Fund carry no interest shall not be required to pay into the Fund any additional Instalments on account of interest on advances granted to them from the fund. (Rule 15 (4)).
16. A resume of the said Rules relating to the subject under examination summed up above clearly shows that the subscriber has full say in subscription to the Fund, its handling and its operation on interest-free/interest bearing basis. Therefore, it is not at all arbitrarily maintained and he/she has every right and responsibility in its manipulation.
17. It appears that the true and full factual position was not brought to the kind notice of the honourable scholaRs, The relevant law and rules were not completely reproduced before them and instead only a portion thereof was formulated in a questionnaire form and thus the aforementioned Fatwa was issued in favour of the interest accrued on the compulsory portion of the Fund. It may be noted that the honourable grand Mufti, may Allah bless his soul, did not approve of the receipt of interest accrued on the optionally increased portion of the Fund. He writes: {{URDU TEXT}} ' It shows that wherever the subscriber has the option or say in the matter, the nature of the matter changes and so it results in a different position. We are sure that if the whole law on the issue was presented before him, the reply would have been certainly different from the one before US.
18. We may also mention that the said Fatwa of the late grand Mufti of Pakistan issued in favour of the permissibility of the said interest was primarily based on the view favourably taken by another distinguished religious scholar of the sub-continent of a very high stature namely Maulana Ashraf All Thanwi in this connection. When asked about the interest on Provident Fund, he wrote: {{URDU TEXT}} ' However, upon an elaborate question when asked in this respect, he changed his view altogether in the year 1342 Hijra before his death. The question and his answer are as under : {{URDU TEXT}} {{URDU TEXT}} Referring to the same, Honourable Mufti Muhammad Shafi writes : {{URDU TEXT}} {{URDU TEXT}}
19. The upshot of the above discussion is that the subscriber is a necessary party to the whole transaction who exercises his/her option continuously right from making subscription to the Fund in the first instalment to his participation uptil last. The option to increase the said subscription or abstain from it is exclusively his/her own. The conditions thereof are made well known to him/her and he/she has every authorization to change or modify his option C in every respect. The stipulation of interest which forms a part of the contract is open to him/her for acceptance or rejection. It seems that the view adopted in favour of the permissibility of the interest accrued on only the compulsory portion of the Fund was based on a highly technical reason. However, it is evident from the correspondence that the renowned scholar was explaining a solution to individuals/persons who being Government employees were considered to be placed in situations out of their control. But it appears that neither the whole law on the subject alongwith the detailed Rules thereof was placed before the honourable scholars nor to them it was a matter of examination of a law enacted by, or enforced in an Islamic State, the primary duty of whose as mentioned in the Objective Resolutions, now a substantive part of the Constitution of Pakistan by virtue of Article 2-A, is to enable the Muslims to order their lives in the individual and collective spheres in accordance with the teachings and requirements of Islam as set out in the Holy Quran and Sunnah. The learned scholar Qazi Sadrud Din has rightly observed in this connection that. {{URDU TEXT}}
20. To sum up, we agree with the contention that the subscriber is the owner of his/her Provident Fund in all respects. It is a portion of his/her remuneration deferred in his/her own interest according to the mutually accepted contractual agreements. It is a sort of loan to be paid by the Government and he/she has the option to accept or reject interest thereon.
21. In this view of the matter, we are of the considered opinion that the interest accrued on the Fund comes under the definition of Riba as mentioned at para 10 of this judgment and as such the impugned provisions of the Act namely Sections 2, 5 and 6 and Regulation related thereto i,e, 14 (5),
(6) are hereby declared repugnant to the injunctions of Islam as contained in the Holy Qur'an and Sunnah and resultantly there is an urgent need to amend the same by substituting it with any system of PLS etc. That is in consonance with the teachings of Islam.
22. Consequently, we direct that the said provisions alongwith the said Rules be brought in conformity with the Injunctions of Islam in the light of our observations made at para 21, by 31st December, 1992.