It of Aitken J in Murugappa Chettiar v

It is clear that in Low Lee Lian for cause to the contrary, equitable rules may also be
applied. In the judgment of Aitken J
in Murugappa
Chettiar v Letchumanan Chettiar1 where
he said:

I agree that equitable principles
should not be invoked too freely for the purpose of construing our Land Code,
but surely a chargor, who shows that there would be no need to sell his land if
the chargee paid up in full what is due from himself in another capacity, has
shown good and sufficient cause why the land should not be sold. Section 149 of the Land Code obviously
contemplates that there may be cases in which charged land should not be sold,
even though there has been a default in payment of the principal sum or
interest thereon secured by the charge; and it seems to me that a chargor may
‘shew cause’ either in law or equity against an application for an order for
sale, and that the courts should refuse to make an order in every case where it
would be unjust to do so. By ‘unjust’ I mean contrary to those rules of the
common law and equity which are in force in the Federated Malay States.

The question arise as to whether the rules set out
in Low Lee Lian for order of the
contrary applies in the Islamic Banking System. In the case of Malayan
Banking Bhd v Ya’ kup bin Oje & Anor2, the court
held that Islamic contract relating to commercial transaction is not only subject
to the terms of the contract but must be decided subject to the Quranic
injunctions and/or Islamic world view as the case may be. For this very
purpose, the court can on their own motion decide the issue or alternatively
call experts to give their views, pursuant to s 45 of the  Evidence Act 1950  or pose the necessary questions to the
Syariah Advisory Council for their views. As matter of practice, most of the
Islamic banks do exercise their discretion and give a rebate, thereby keeping
with the true spirit and intent of justice and equity under the Syariah law.
Further, Islamic law of commercial transaction will not permit the bank to
state the rebate for default under the Al-Bai Bithaman Ajil (BBA) as Islamic
law of contract, though it may appear to be similar to the secular law, is not
the same. The Syariah law does not generally permit conditional contract, contract
upon a contract, etc. However, this does not mean that Islamic bank cannot
openly state their policy and rates of rebate without encapsulating in BBA
agreements. This will promote transparency and equity. The fact that ‘ibrar’ is
unilateral does not stop Islamic banks from voluntarily relinquishing part of
their claim or the court upon default by the customer to demand that proper
concessions be granted to the customer on equitable grounds when exercising its
jurisdiction and powers for order for sale under s 148(2)(c) of Sarawak Land Code
or that of s 256 of NLC. Equity in this case applied both to the plaintiff as
well as to the defendants. To obtain a just result and without dismissing this
originating summons, the court would give an opportunity to the plaintiff to
demonstrate equitable conduct by filing an affidavit stating:

(i)                
that upon recovery
of the proceeds of sale they will give a rebate; and

(ii)              
specify the
rebate.

The amount specified must not be a nominal rebate
but a substantial one taking into account the prevailing market force by banks
generally, and the meaningful decision in the cases of Affin Bank Bhd v
Zulkifli bin Abdullah3
and Malayan Banking Bhd v Marilyn Ho Siok Lin4.
If the court is satisfied that the proposed rebate is just and equitable, it
shall make an order in terms of the plaintiff’s application, subject to the
terms set out in the proposed affidavit. Otherwise, the court may not make the
order as prayed or may make some other order as the justice of the case requires.

The complication in Ya’kup Bin Oje is not so much on the similarities of rules of cause
for the contrary in Islamic Banking System and the Secular Banking System. In
fact, the issue is not whether BBA is valid, the question here is whether the
plaintiff is entitled as of right to the full profits in the event the BBA is
terminated very much earlier as in this instance, taking into consideration s
148(2)(c) of SLC or for that matter s 256 of NLC.

Habib Rahman bin
Seni Mohideen demonstrated his legal
scholarship in Syariah Banking in a manner never attempted by other local
writers in his article captioned Affin
Bank Bhd v Zulkifli Abdullah — Shariah Perspec-tive 2006 3 MLJ to say:

The Islamic banking industries must
be given space to find its own solution in remedying the situation.

However if the current trend
continues the court may intervene to remove the exploitation and injustice. The
court as guardian of justice can interfere in the contract between the banks
and its customers on the principle of Adl Wa Ehsan (justice and equity). It is
revealed in the Al Quran 16:90 ‘God commands justice and fair dealing’.

The court may readjust the
contractual obligations judicially if the parties are unable to find an
amicable settlement. There are various legal maxims which are applicable in
financial transactions such as:

(i)                
No harm may either be inflicted or reciprocated

(ii)              
Necessities allow actions which would otherwise be
prohibited

(iii)            
Harm must be removed

If a contract between the
contracting parties becomes an instrument of injustice, a judge cannot ignore
the unfairness and insist on strict adherence to the letter of contract. Hence,
a judge is empowered to set aside a contract when the fact discloses gross
unfairness on one of the parties as Islamic system is a just and equi-table
system that promotes close relationship between the banks and the customers
based on cooperation and equitable sharing of risks and rewards.

The article of the learned writer which shows
maturity, addresses the current issues which tarnishes the image of Islamic
Banking System and proposes ways and means to achieve growth and success in
Islamic Banking within the spirit and intent of Syariah law as opposed to some
articles written by writers who asserts in a mischievous manner that under the
Syariah if ‘you agree you must pay’,
without balancing the argument in favour of the debtor. It can be said that
Islamic Banks are only traders or venture capitalists. As any traders or
venture capitalists, they are subject to the laws of the country and obliged to
trade within the norms of their trading license. There is nothing sacrosanct
about the service they provide. Courts have to ensure that nobody exploits the
public by dubious methods and propagate justification through formulas and
concepts with which the public is not well acquainted currently. It is the
constitutional obligation of the courts to ensure that at all material times,
justice prevails in the right perspective, both for Islamic Banks as well as
consumers. In this respect, the courts must not reduce the status of Syariah
banks to charitable institutions but ensure and respect that they are trading
institutions entitled to earn profits out of their investment and only in
exceptional circumstance such as where there is default to adjust their profits
according to the facts and justice of the case as required under the Syariah
principles and practice.

 

1 1939
MLJ 296

2 2007
6 MLJ 389

3 2006
3 MLJ 67

4 2006
7 MLJ 249