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HIWALAH - Coggle Diagram
HIWALAH
DEFINITION
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technically: To make transfer of a debt from the debtor to the debtor account of another.
- Transfer a debt from one person (debtor) to another withe same price, it comes to the consequences than liability of the debtor is abolished. In other words, the first obligator is freed from any financial obligations.
LEGALITY
The legitimate of hiwalah is based on the tradition of Prophet SAW who said: Delinquency rich debtors is a form of transgression, so if one of you has his debt transferred to a rich person, let him accept the transfer of debt (Muslim hadith no 1564)
TYPES OF HIWALAH
A. HIWALAH MUTLAQAH: Unstricted hiwalah which means a kind of transfer of debt in which the transferor is not the creditor to the payer. The payer undertakes to pay the amount of the debt owed by the transferor from his own funds and to have recourse afterwards to the transferor for settlement, provided that the transfer for payment was made on the order of the transferor.
B. HIWALAH MUQAYYADAH: Known as restricted hiwalah which means a transaction where the payer is restricted of settling the amount of the transferred debt from the amount of a financial or tangible asset that belongs to the transferor and is in the possession of the payer.
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LEGAL CONSEQUENCES
:check: A valid hiwalag discharges the transferor from any debt liabilities and any claims in respect of it. A transferee has not right of recourse against the transferor for payment. Nevertheless, if the acceptance of hiwalah based on the condition that the payer must be solvent, the transferee wil have the right of recourse if the payer is not solvent.
:check: The transferee is entitled to have a right of recourse against the transferor in the following situations:
(ii) liquidation of an institution, which payer in the case of bankruptcy before payment of the debt
(iii) the payer denies concluding the hiwalah contract and has taken a judicial oath to this effect and there is no evidence to prove otherwise.
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:check: The transferee is entitled to claim the amount of the debt assigned to him through hiwalah from the payer.
:check: The transferor is no longer entitled to reclaim from the payer and amount transferred to the payer in respect of the debt to be settled. (restricted hiwalah)
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