The Historic Judgement on Interest Delivered in the Supreme Court of Pakistan is a

book by Justice Maulana Muhammad Taqi Usmani. It was published in 2007 and is a
detailed account of the Supreme Court's decision to declare interest as unlawful
according to Islamic Law.

The book begins with an introduction by Justice Usmani in which he discusses the
history of interest in Islam and the different views that have been expressed on the
matter. He then goes on to analyze the relevant verses of the Quran and the Hadith,
and to present the arguments of those who believe that interest is prohibited.

Justice Usmani then turns to the legal arguments that were presented to the Supreme
Court in the case that led to its decision. He discusses the different interpretations of the
relevant laws, and he presents his own arguments in favor of declaring interest as
unlawful.

The book concludes with a discussion of the implications of the Supreme Court's
decision. Justice Usmani argues that the decision is a major step forward for Islam and
that it will have a positive impact on the Pakistani economy.

The Historic Judgement on Interest Delivered in the Supreme Court of Pakistan is an

important book for anyone who is interested in Islamic Law or the economy of Pakistan.
It is a well-argued and comprehensive book that provides a valuable insight into the
Supreme Court's decision.

Here are some of the key points of the book:

 Interest is prohibited in Islam because it is a form of riba, which is defined as the

taking of excess profit without providing any additional benefit.
 The Quran and the Hadith contain several verses and sayings that condemn riba.
 The majority of Muslim scholars throughout history have held that interest is
prohibited.
 The Supreme Court of Pakistan's decision to declare interest as unlawful is a
major step forward for Islam and will have a positive impact on the Pakistani
economy.

The book has been praised by many scholars and economists for its
comprehensiveness and its sound legal arguments. It is a valuable resource for anyone
who is interested in Islamic Law or the economy of Pakistan.
In a landmark decision, the Shariah Appellate Bench of the Supreme Court of Pakistan
banned interest in all its forms, declaring it as ar-riba and haram according to the
Qur'an. This decision made Pakistan the first Muslim country to officially prohibit
modern bank interest. The court outlined a step-by-step approach to eliminate interest
from the country's laws. The judgment was a result of appeals filed against the Federal
Shariah Court's 1991 declaration that laws allowing interest were repugnant to Islam.

The judgment was written by multiple justices, with Justice Muhammad Taqi Usmani's
text being reproduced here. The arguments against the prohibition of interest included
claims that interest-based transactions were a modern invention, not covered by the
term 'riba' in the Qur'an, and that the prohibition should be limited to specific
transactions mentioned in Hadith literature. Other arguments distinguished between
usurious loans and commercial loans, stating that the prohibition of riba only applied to
the former. Another theory posited that the Qur'an only prohibited a specific type of
loan transaction known as riba-al-jahiliyya.

The court examined these arguments and questioned whether commercial interest in
modern financial systems fell within the definition of riba, and if so, whether it could be
allowed based on necessity. Experts in various fields, including Shariah scholars,
economists, bankers, accountants, and representatives of the business and trade sectors,
provided input to help the court reach a decision.

The judgment is considered significant and has faced opposition from world powers and
their allies in Pakistan, who benefit from the exploitative nature of interest. It is crucial
for Muslims worldwide to educate themselves about the issue and support this historic
judgment.

The text discusses the verses of the Quran that mention riba (usury or interest) and
provides a historical analysis of these verses. The four sets of verses are mentioned in
Surah Ar-Rum, Surah Al-Nisaa, Surah Al-i-'Imran, and Surah Al-Baqarah.

In Surah Ar-Rum, the verse states that riba does not increase with Allah, implying that it
carries no reward in the Hereafter. Some commentators suggest that the word riba in
this verse refers to a gift offered with the expectation of a greater gift in return, rather
than usury or interest.

Surah Al-Nisaa lists the evil deeds of the Jews, including their practice of riba, which was
prohibited for them. This verse suggests that riba was sinful for the Jews, but it does not
explicitly prohibit riba for Muslims.
Surah Al-i-'Imran contains a clear prohibition of riba for Muslims. It is estimated to have
been revealed around the 2nd year after Hijra and is considered the first explicit
prohibition of riba in the Quran. The verse was revealed in the context of the Battle of
Uhud, where the invaders of Makkah had financed their army through usurious loans,
which could have influenced Muslims to do the same. The verse serves as a preventive
measure against Muslims engaging in riba.

Surah Al-Baqarah elaborates on the severity of the prohibition of riba. After the
conquest of Makkah, the Holy Prophet declared all outstanding riba amounts void. The
verses in this Surah were revealed in response to a proposed treaty between the tribe of
Thaqif and the Muslims, where Thaqif wanted to claim interest on their debts. The
revelation emphasized the prohibition of riba, warning of war from Allah and His
Messenger for those who do not repent.

In summary, the text provides an overview of the Quranic verses related to riba and their
historical context. It highlights the progression of the prohibition of riba and the reasons
behind its prohibition in different situations.

The text discusses the time of prohibition of riba (usury or interest) in Islam. It presents
different viewpoints regarding when riba was prohibited in the early days of Islam.

The author argues that riba was likely prohibited in the 2nd year of Hijra, but there is
doubt whether it was prohibited before that. The focus of early Muslims was on
establishing and defending their faith, so the severity of riba prohibition was not
emphasized during that time. However, in the 2nd year of Hijra, riba was explicitly
prohibited.

Some scholars claim that riba was prohibited in the last year of the Prophet
Muhammad's life, based on traditions and statements. However, the author counters
this argument by explaining that the prohibition of riba was already in effect before the
last days of the Prophet. The last sermon of the Prophet served as an opportunity to
reiterate and emphasize the injunctions of Islam, including the prohibition of riba. The
declaration regarding Abbas ibn Abdul Muttalib's riba transactions was specific to that
occasion and did not signify the first ever declaration of riba as void.

The text also addresses the notion that the last verse revealed in the Quran was about
riba. It clarifies that this statement refers to verse 281 of Surah Al-Baqarah, while the
severity of riba prohibition mentioned in verses 275-280 of the same Surah had already
been revealed before that.

In summary, the text concludes that although there were indications of displeasure
towards riba in the Makkan period, the explicit prohibition of riba was revealed around
the battle of Uhud in the 2nd year of Hijra. The term riba was well-known to the
audience of the Quran, and its prohibition was understood without needing a specific
definition.

In the Bible, specifically in the Old Testament, there are several references to usury,
which can be understood as the charging of interest or excessive lending. Here are some
relevant passages:

1. "Thou shalt not lend upon usury to thy brother; usury of money, usury of victuals,
usury of anything that is lent upon usury." [Deuteronomy 23:19]
2. "Lord, who shall abide in thy tabernacle? Who shall dwell in thy holy hill? He that
walketh uprightly, and worketh righteousness and speaketh the truth in his heart.
He that putteth not out his money to usury, nor taketh reward against the
innocent." [Psalms 15:1, 2, 5]
3. "He that by usury and unjust gain increaseth his substance, he shall gather it for
him that will pity the poor." [Proverbs 28:8]
4. "Then I consulted with myself, and I rebuked the nobles, and the rulers, and said
unto them, Ye exact usury, every one of his brother. And I set a great assembly
against them." [Nehemiah 5:7]
5. "He that hath not given forth upon usury, neither hath taken any increase, that
hath withdrawn his hand from iniquity, hath executed true judgment between
man and man, hath walked in my statutes, and hath kept my judgments, to deal
truly; he is just. He shall surely live, saith the Lord God." [Ezekiel 18:8-9]
6. "In thee have they taken gifts to shed blood; thou hast taken usury and increase,
and thou hast greedily gained of thy neighbors by extortion, and hast forgotten
me, saith the Lord God." [Ezekiel 22:12]

These passages condemn the practice of lending with usury or taking advantage of
others through unjust gain. The term "usury" in these verses refers to charging interest
or any excessive increase on loans. It is important to note that interpretations and
understandings of these passages may vary among different religious traditions and
scholars.

The passage you provided discusses the concept of Riba al-Fadl, which refers to a
specific type of prohibited transaction involving the exchange of certain commodities.
According to the passage, after the revelations of the Holy Qur'an, the Prophet
Muhammad prohibited certain barter transactions that could potentially lead to
engaging in Riba (usury or interest). The Arab society at that time used commodities like
wheat, barley, dates, salt, gold, and silver as a medium of exchange.

The prohibition stated that in these types of exchanges, such as wheat for wheat or gold
for gold, the quantities on both sides must be equal. If one side receives more or
demands more, it is considered Riba. This type of Riba was termed as Riba al-Fadl or
Riba al-Sunnah.

The passage explains that there were different interpretations among Muslim jurists
regarding the scope of these prohibited transactions and the commodities to which
they applied. Some jurists limited the rule to the six mentioned commodities, while
others believed it extended to other commodities of similar nature. The criteria for
identifying the commodities subject to the same rule varied among the jurists, with
some focusing on weighing or measuring, and others considering whether the
commodities were eatables or used as universal legal tenders.

Regarding the statement of Sayyidna Umar, it is clarified that his concern and doubts
were related to Riba al-Fadl and not to the original Riba prohibited by the Holy Qur'an,
which involved loans and non-barter sales. Sayyidna Umar expressed his desire for
further clarification on certain issues related to Riba, particularly Riba al-Fadl. However, it
is emphasized that he did not doubt the nature and prohibition of Riba al-Qur'an or
Riba al-Nasiah, which were clearly prohibited by the Holy Qur'an.

The passage also addresses the argument that the prohibition of Riba in the Qur'an only
applied to consumption loans and not to commercial or productive loans. It refutes this
argument by explaining that the validity of a transaction does not depend on the
financial status of the parties involved. Transactions are evaluated based on their
intrinsic nature, and the distinction between valid and invalid transactions is not
determined by the wealth or poverty of the individuals. Prohibited transactions,
including those involving interest, are considered invalid based on their intrinsic nature,
regardless of the financial positions of the parties involved. The passage argues that
there is no justification for distinguishing the validity of interest charges based on the
financial status of the borrower.
Overall, the passage provides insights into the concept of Riba al-Fadl, the interpretation
of Muslim jurists, and the position of Sayyidna Umar regarding Riba.

The excerpt you provided is from a text discussing the nature of Qur'anic prohibitions,
particularly focusing on the prohibition of riba (interest). The author presents several
arguments to refute the notion that riba only applies to consumption loans and not
commercial loans. Here is a breakdown of the key points made in the excerpt:

1. The verses in the Quran that prohibit riba do not differentiate between
consumption or commercial loans, and this distinction is not mentioned in the
literature of the Sunnah (teachings and practices of the Prophet Muhammad).
2. Even if it is argued that commercial loans were not common during the time of
the Prophet Muhammad, it does not justify adding a new condition to the
concept of riba. The prohibition in the Quran encompasses all forms of riba,
regardless of their prevalence at the time of revelation.
3. The author draws parallels with other prohibitions in the Quran, such as the
prohibition of liquor and gambling. These prohibitions cover the basic concept of
the transaction rather than specific forms, and they are understood to apply to all
present and future forms.
4. The author highlights that historical and academic research has shown that
commercial and productive loans were not foreign to the Arabs. The banking
transactions and commercial loans date back thousands of years, with evidence
from ancient Babylon, Greece, Rome, and Egypt.
5. The Byzantine Empire, which had significant economic and financial relations with
the Arabs, had laws regulating interest rates for commercial loans. This suggests
that the Arabs were aware of interest-based transactions through their trade and
economic interactions.
6. The Arabs of the Arabian Peninsula were primarily engaged in trade and had
extensive commercial relations with neighboring regions such as Syria, Iraq,
Egypt, and Ethiopia. Their trade caravans exported goods and imported from
various countries, indicating their involvement in international trade.
7. The author argues that the size and scope of the caravans, funded collectively by
the tribe, suggest that commercial and productive needs were significant. The
capital for these caravans came from contributions of individuals who had money
or borrowed it to invest in the caravan, aiming for profits.

Overall, the author contends that the prohibition of riba in the Quran is not limited to
consumption loans but applies to all forms of riba, including commercial and productive
loans. They provide historical and contextual evidence to support their argument.
The argument put forth by some appellants is that the prohibition of riba (interest) in
Islam applies only to interest transactions with exorbitant or excessive rates. They
support this argument by referring to a verse from Surah Al-i-'Imran (3:130) which
mentions "devour not Usury, doubled and multiplied." They interpret this verse to mean
that riba is prohibited only when the interest rate is so high that it doubles the principal
amount, and argue that the interest charged in the present banking system is not
normally so high.

However, this argument overlooks the fact that the verses of the Holy Qur'an should be
studied in conjunction with each other, and no verse should be interpreted in isolation.
The Qur'an addresses the subject of riba in multiple chapters, and these verses should
not contradict one another. The most detailed treatment of riba is found in Surah Al-
Baqarah, which makes it clear that every amount over and above the principal must be
given up, and a lender is only entitled to the principal amount. Repentance from the
practice of riba is not possible unless any excess amount is relinquished. This indicates
that the prohibition of riba applies to any amount charged in excess of the principal,
regardless of how small it may be.

Furthermore, the interpretation of the Qur'an should be based on the explanations

provided by the Holy Prophet (peace be upon him) and his companions who received
the revelation and were familiar with its context. The statements of the Prophet and his
companions affirm that riba is prohibited irrespective of the rate of interest. They
emphasize that any loan that derives a benefit for the creditor is considered riba.

While there may be some disagreement among scholars regarding the authenticity of
certain narrations, the principle that riba includes any increase over the principal is well-
established based on the statements of multiple companions of the Prophet. Their
understanding of the Qur'anic term riba, as direct recipients of the revelation, is
considered the most authentic basis for interpretation.

In conclusion, the argument that the prohibition of riba is limited to excessive rates of
interest is not supported by a comprehensive analysis of the Qur'anic verses and the
statements of the Prophet and his companions. The prohibition encompasses any
increase over the principal, regardless of the amount

In Islamic jurisprudence, there is a distinction between Illat and Hikmat in relation to the
prohibition of certain actions or transactions. Illat refers to the basic feature or condition
without which a law cannot be applied, while Hikmat refers to the wisdom or purpose
behind the law.
Illat can be understood as the essential element or characteristic that triggers the
application of a law. It is the specific condition or factor that must be present for the law
to be applicable. On the other hand, Hikmat refers to the underlying wisdom or
rationale behind the law. It represents the benefits or objectives that the legislator had
in mind while formulating the law.

According to Islamic jurisprudence, the application of a law is based on Illat and not
Hikmat. Even if the Hikmat or wisdom behind a law is not apparent or present in a
particular situation, if the Illat is fulfilled, the law still applies. Illat is a determinable and
specific condition, while Hikmat represents the broader goals or philosophy of the law.

To illustrate this distinction, let's consider an example. In traffic regulations, the law
requires vehicles to stop at a red traffic light. The Illat of this law is the presence of the
red light itself, while the Hikmat is to prevent accidents. Even if there is no immediate
risk of an accident, as long as the red light is on, the law applies, and vehicles must stop.

Similarly, in the context of the prohibition of riba (interest), the Illat is the excess claimed
over and above the principal in a loan transaction. The Hikmat or wisdom behind the
prohibition of riba may include considerations such as economic justice and avoiding
exploitation. While the Hikmat provides insights into the purpose and benefits of the
prohibition, the Illat is the specific condition that triggers the prohibition.

It is important to note that Illat is a clearly defined and determinable condition, while
Hikmat may involve broader principles and goals. Illat is essential for the application of a
law, while Hikmat represents the underlying wisdom and philosophy.

In Islamic principles, loans are viewed differently than in the secular capitalist system. In
the capitalist system, loans are seen as commercial transactions that generate fixed
income for the lenders. However, in Islam, loans are not considered income-generating
transactions. They are meant for lenders who do not seek worldly returns through
lending. Instead, they lend money for humanitarian reasons or to keep their money safe.
For investment purposes, there are other modes such as partnership that can be used.

The philosophy behind this approach is that the lender must decide whether they are
lending money sympathetically, to save their principal, or to share in the profits of the
borrower. In cases (a) and (b), where the intention is sympathetic or to save money, the
lender is not entitled to claim additional amounts over the principal. If the intention is to
share in the profits (case c), the lender must also be willing to share in the losses if they
occur. In this case, a joint venture or partnership arrangement would be more
appropriate rather than a loan transaction.
Financing a business based on interest can create an unbalanced atmosphere and lead
to injustice in different situations. With interest-based loans, the profit of the lender is
fixed and not based on the actual profits generated by the borrower. This can result in
the borrower bearing the full loss of a failed business while still having to pay interest to
the lender. Conversely, if the borrower's business earns significant profits, the lender's
profit is still limited to the fixed rate of interest. This imbalance can lead to injustice
where the borrower takes on most of the risk while the lender's profit is secured.

By prohibiting interest, Islamic principles aim to create a more balanced and equitable
financing structure. Loans are limited, and the emphasis is on equity-based financing
backed by real assets. Borrowing money is discouraged except in cases of dire need, and
incurring debt for unnecessary expenses or excessive wealth growth is discouraged. The
objective is to limit unnecessary expenses and encourage equitable participation in
profitable ventures.

The use of interest in the present banking system tends to favor the rich and contribute
to inequalities in the distribution of wealth. Loans are primarily provided to those who
can offer satisfactory collateral, reinforcing the unequal distribution of capital. This
practice often benefits the rich, and even though deposits come from a broader section
of the population, the majority of the benefits go to the wealthy. Additionally, interest-
based loans can lead to non-productive borrowing, encouraging people to live beyond
their means and governments to borrow for lavish expenditures or politically motivated
projects. This contributes to the growth of debts and increases the burden of debt
servicing.

Moreover, the expansion of artificial money through interest-based loans can lead to a
mismatch between the money supply and actual production, which can fuel inflation.
The modern banking system's practice of "money creation" allows banks to lend out
more money than they actually have in reserves, leading to the creation of money out of
thin air. This practice, rooted in historical fraudulent actions of goldsmiths, has become a
standard practice of fractional reserve lending in the modern banking system. It has
serious implications for the stability of the economy and the equitable distribution of
resources.

In summary, interest-based loans in the secular capitalist system have adverse effects on
the allocation of resources, production, and distribution of wealth. They tend to favor
the rich, encourage non-productive borrowing, and contribute to inflation. Islamic
principles aim to establish a more equitable and just financial system by prohibiting
interest and promoting equity-based financing.

In this excerpt, the discussion revolves around the topics of interest and indexation in banking
transactions. Some appellants argue that interest is justified as compensation for the erosion of the
value of money during the borrowing period, while others suggest that indexation of loans could be
a substitute for interest. However, the court finds these arguments to be without force.

The court states that interest rates are not determined based on the rate of inflation but rather by
the demand and supply of money. If interest were truly a compensation for inflation, the interest
rates would always match the inflation rate, which is not the case. The court also highlights that
implementing indexation of loans would not be practical for banking transactions, as it would result
in banks receiving the same rate from borrowers as they have to pay to depositors, leaving no profit
for the banks themselves.

Regarding the erosion of the value of money, the court acknowledges its relevance to individual
loans and unpaid debts. However, it suggests that further research and study should be conducted
by relevant institutions to find a solution. Various suggestions are mentioned, such as indexing loans,
tying loans to gold or a hard currency, or sharing the loss of value between creditors and lenders.

The court also addresses the argument that banks in Pakistan do not deal in interest but charge
mark-up instead. It notes that while the State Bank of Pakistan introduced 12 modes of financing
based on profit and loss sharing, the practical implementation has often resulted in a mere change of
nomenclature from interest to mark-up. The mark-up system in practice does not adhere to the
original concept of Islamic finance, and the objections against interest are applicable to the mark-up
system as well.

Lastly, some appellants raise the doctrine of necessity, arguing that interest has become a universal
necessity in the modern economy. They claim that enforcing the prohibition of interest on a
wholesale basis would lead to economic collapse. The court acknowledges the doctrine of necessity
but also emphasizes the need for a serious examination of this aspect in consultation with
economists, bankers, and professionals.

The concept of profit and loss sharing is a fundamental characteristic of Islamic

financing. Instead of a fixed rate of interest, Islamic finance operates on the principle of
sharing profits and losses between the parties involved. This approach has gained
attention from economists worldwide, including some in the Western world who
advocate for an equity-based financial system.

The current debt-based economy has been criticized for its negative consequences,
prompting economists to explore alternative arrangements. James Robertson, an
advocate for monetary reform, questions why the power to issue new money and create
credit has been delegated to banks, allowing them to profit from interest-bearing loans.
He suggests that governments should issue money directly and explore an equity-based
financial arrangement. Similar proposals have been made by John Tomlinson, an
Oxford-based economist, who emphasizes the need to convert debt into equity to
address economic collapse and promote risk-bearing participation in useful enterprises.
The shift towards equity-based finance is not limited to Islamic circles but is also
championed globally. Philip Moore highlights how even non-Muslim countries, such as
Italy, have been gravitating towards equity-based finance through privatization
programs. The transition from a bond-based to an equity-based financial system aligns
with Islamic economic principles and is seen as a means to address the flaws of the
current system.

Objections to profit and loss sharing, particularly through Musharakah financing, include
concerns about the risk of loss and the potential for dishonesty. Critics argue that
passing on losses to banks and depositors may discourage savings and hinder economic
development. However, it is important to note that banks already assess the feasibility
of loan proposals in the current system and would continue to do so in an equity-based
system. Diversification of Musharakah portfolios and careful risk assessment can help
mitigate the risk of losses. Additionally, measures such as credit rating systems,
independent auditing, and punitive actions against misconduct can address concerns of
dishonesty and ensure transparency in Islamic banking.

Overall, an equity-based financial system, including profit and loss sharing, is seen as a
way to promote distributive justice, stability, and sustainable economic growth. It
encourages savings, rewards merit, and promotes a more caring and compassionate
society. While challenges exist, the potential benefits make it a worthwhile endeavor to
explore and implement such a system.

The passage you provided discusses the issue of government loans, both domestic and
foreign, and the challenges they pose in eliminating interest from the financial system.
The passage emphasizes the magnitude of the government's debt and its impact on the
nation's economy.

Regarding domestic loans, the suggestion put forth is to design government borrowings
based on project-related financing, which would be in line with Islamic principles and
help prevent corruption and misappropriation of funds. The passage acknowledges that
the elimination of interest in government loans may require more time than private
banking transactions.

When it comes to foreign loans, the passage acknowledges that once interest is deemed
illegal, these transactions will also be affected. The passage highlights the alarming
increase in foreign borrowings and the negative consequences they have on the nation's
economic independence. It discusses how developing countries, including Pakistan, have
been trapped in a cycle of debt that hinders their development and perpetuates
underdevelopment.
Various studies and economists have shown that the conditions attached to IMF and
World Bank loans often result in negative impacts on the borrowing countries, such as
rising unemployment, falling incomes, inflation, increased imports, mounting external
debts, and reduced social services. The passage points out the disparity in resource
flows, where developing countries remit significant amounts in debt service, while their
debt burden continues to increase.

The passage suggests the need for a well-considered program to address the issue of
debt and a firm commitment to implementing it. It mentions the possibility of
renegotiating existing loans with lenders to convert them into Islamic modes of
financing. The passage also references the report of a committee appointed by the
Prime Minister of Pakistan, which concluded that self-reliance could only be achieved by
eliminating interest.

In conclusion, the passage emphasizes the prohibition of interest (riba) in Islam and the
need to address the issue of government loans, both domestic and foreign, to free the
country from the cycle of debt and promote economic independence. It highlights the
challenges and complexities involved in transitioning to an interest-free system but
stresses the importance of taking steps towards this goal.