PUTRAJAYA — April 10, 2019: In a 5-4 majority ruling today, the Federal Court held that findings by Bank Negara’s Shariah Advisory Council on Islamic finance are binding on the civil courts as it found as constitutional Sections 56 and 57 of the Central Bank of Malaysia Act which give power to the council.
The decision follows a dispute in five agreements under Islamic banking facilities between Kuwait Finance House (Malaysia) Berhad (KFH) and shipping company, JRI Resources Sdn. Bhd., and three guarantors.
The five judges who gave the majority decision were Court of Appeal president Tan Sri Ahmad Maarop and Federal Court judges Tan Sri Azahar Mohamad, Tan Sri Ramly Ali, Datuk Alizatul Khair Osman Khairuddin and Datuk Mohd. Zawawi Salleh.
Chief Justice Tan Sri Richard Malanjum, Chief Judge of Malaya Tan Sri Zaharah Ibrahim, Chief Judge of Sabah and Sarawak Datuk Seri David Wong and Federal Court judge Tan Sri Idrus Harun dissented.
The majority judgment was delivered by Zawawi who said the rulings passed by the council constitute a form of expert opinion in Islamic finance.
“The council members are highly qualified in syariah, economics, banking, law and finance and the council’s rulings can be regarded as a collective ijtihad to provide consistency and conformity,” he said.
Wikipedia describes itjihad as an Islamic legal term referring to independent reasoning or the thorough exertion of a jurist’s mental faculty in finding a solution to a legal question.
In the dissenting decision, Malanjum said the two sections must be struck down as they are unconstitutional and void. Further, a ruling by the council is not subject to any check and balance mechanism and its ruling is final on whether a clause in an agreement is syariah compliant.
“It would be a complete mockery to the doctrine of separation of powers if Parliament is allowed to delegate legislative power to any other branch of government or any administrative body,” said Malanjum.
KFH filed a civil lawsuit against JRI Resources for the recovery of outstanding amount for four Ijarah Facilities agreements and one Murabahah Tawarruq agreement entered between them. KFH also instituted a claim against three guarantors.
The High Court referred conflicting clauses in the agreements to the council to determine if they were syariah-compliant, which it found in favour of. — Bernama