Please enable JavaScript.
Coggle requires JavaScript to display documents.
JRI RESOURCES SDN BHD v. KUWAIT FINANCE HOUSE (MALAYSIA) BERHAD; PRESIDENT…
JRI RESOURCES SDN BHD v. KUWAIT FINANCE HOUSE (MALAYSIA) BERHAD; PRESIDENT OF ASSOCIATION OF ISLAMIC BANKING INSTITUTIONS MALAYSIA & ANOR (INTERVENERS)
[2019] 3 MLRA (Federal Court)
Rational
Doctrine of basic structure which includes the doctrine of separation of power and independence of judiciary. Thus, the rights and liabilities of the parties in dispute are determined by the SAC in its ruling. With regards to the enforceability, the learned judge stated the ruling of SAC is not enforceable by itself as the court has no option but to apply the SAC ruling in making the decision.
Any ruling made by SAC pursuant to a reference is binding on the High Court , as it is to vest judicial power in the SAC on Shariah matters
If the litigant parties were allowed to be lead expert evidence, it would cause difficulty and confusion as to what law has to be refer by the disputing parties in dealing with Islamic Matters involving Shariah Principle
However, this does not mean that the power of judiciary has been vest to SAC, this is because, only the Court that has the power to apply ruling made by SAC to the disputing parties according to the fact of the case.
COA
2015 : CoA allowed the appeal subject to the following question to be referred to the Shariah Advisory Council (SAC) -whether cl 2.8 of all the Ijarah Agreements (4 in total) between the plaintiff and its customer (the 1st defendant) is Shariah compliant.
2016 : Both submitted an expert opinion to the SAC but had differ opinion.
App's expert : disagreed with the inclusion of cl 2.8 in the Ijarah Facilities Agreements as did not comply with Islamic law.
Resp’s expert : non-compliance was not material and therefore did not invalidate the Ijarah Facilities.
App's submission : 1) failure to derive income from the charter was due to the resp's failure to carry out major maintenance works on the vessel
2) HC had erred in not seeking a ruling on a Shariah issue in relation to the Shariah compliance of cl 2.8 of the Ijarah Facilities Agreements
App declined to accept the ruling issued by the SAC & filed an application for a reference to the FC pursuant to art 128(2) of the FC & s. 84 of the Courts of Judicature Act 64 to determine if ss 56 and 57 of the 2009 Act under which the SAC gave its ruling was constitutionally valid.
2017 : HC made the constitutional reference to the FC. Hence, these reference proceedings before FC.
LEGAL ISSUE
-
-
1) Whether ss 56 and 57 Central Bank of Malaysia Act 2009 had legal effect of encroaching on judicial power of civil courts
-
Concurrence and Dissent
Question on 1 (b) is affirmed by the COA : SAC in ascertaining Islamic law for Islamic banking does not conclusively and finally determine the right between the parties as it is within the power of the adjudicating judge.
Question 1 (c) is affirmed by the COA : with regards to Section 56(1)(b) of CMBA 2009 Act, the parties involved are allowed to provide their own Shariah expert's view, applicant is allowed in this case to provide to the SAC its own Shariah's expert.
Federal Court - Concurrent - The ruling of SAC cannot be enforceable by itself as it is the duty of the court to apply it in deciding the cases that involve the matters within the SAC authority to make ruling.
PARTIES TO THE CASE
-
RESP : Kuwait Finance ( financial institution)/ granted various Islamic facilities to the App/ the plaintiff in the proceedings of HC.
HC
2013 : the Resp filed a civil action against the App and the Guarantors for the recovery of the amounts due under the facilities.
2014 : Application for summary judgment was filed & HC granted summary judgment against the App and the Guarantors for the outstanding amounts due amounting to RM118,261,126.26 together with compensation fees.
2008 : 4 Ijarah Facilities and a Murabahah Tawarruq Contract Financing facility (“the MTQ Facility”) entered between the App and the Resp. App's fail to make payment of the amount outstanding to the Resp under the facilities granted.
-
Holding
Federal Court - Dissenting judgment : There is a merit on JRI's contention that the binding ruling of SAC under Section 56 and Section 57 of CMBA 2009 had violated doctrine of judicial power as it deprived of his right to a fair trial, denies the right to lead the evidence and to argue clause 2.8 is forbidden by law.
Minority - SAC exercises judicial power as the trial judge is bound to follow the SAC's ruling with regards to question of Islamic law referred to it
Federal Court : Majority- SAC does not encroach into realm of judicial power as the presiding judge is bound to decide the case based on the ruling set out by the SAC.
Comments
Section 56 and 57 of CMBA is well-intended to provide the guidelines and to ensure the certainty in Islamic Banking principles which gives the SAC the authority to provide rulings, ensuring Shariah compliance. It is also noted that, SAC comprises of members of wide and vast experience, knowledge in various fields specifically, in Islamic law banking and finance.
Without the SAC ruling, the court will not be able to deliver judgment on the disputed matter and it is also important to note that, SAC ruling cannot stand on its own as it requires the court to enforce it, by referring to SAC ruling in deciding a case. Thus, it is said the SAC ruling is binding upon the court.
The SAC is the sole authority for the ascertainment of Islamic law for the purpose of Islamic financial business. Although every Islamic financial institution is responsible to form their own Shariah Committee at their institutional level, they are required to observe the advice from the SAC pertaining to Islamic financial businesses.
Similarly, when a ruling given by the Shariah committee
members constituted in Malaysia by an Islamic financial institution differs from the ruling given by the SAC, the ruling of the SAC shall prevail.
This further clears the ambiguity and creates no opportunity for such conflicting
ruling/advice to be rendered at all by Shariah Committees.
CLl 2.8 : the parties hereby agree that the Customer shall undertake all of the Major Maintenance as mentioned herein and the Customer will bear all the costs, charges and expenses in carrying out the same.”
-
-
-
June 2016 : SAC forwarded its ruling to the HC -
SAC decided that the negotiation to determine the party that will bear the maintenance cost of the asset is allowed, as long as it has been agreed by the contracting parties
-
Matter remitted to the High Court to make reference to SAC for a ruling whether clause 2.8 is Shariah compliant or otherwise.
In response to HC request, SAC issued a ruling dated June 30, 2016, KFH (as the owner) should bear maintenance cost of the lease vessel. It is permissible that both parties to negotiate and come into an agreement as who is should bear the cost. Thus, SAC ruled that clause 2.8 is Shariah compliant.
JRI referred to the High Court for leave to refer the matter on constitutionality of Section 56 and 57 of CMBA 2009
-