A few years back ( - 4 years) I had an opportunity to purchase a piece of land from the Bank.
I had no money. I approached my cousin who had the money to join me in this opportunity
The agreement between us was that his money would be used to purchase the land and further capital from him would be used to do a Development. In other words his money and my knowledge. At the outset I did mention to him that the idea was first to spend the money before you actually reap the benefits. Hence a CC company was formed whereby we had 50% share each.
After the property was transferred into a CC from the bank I approached my cousin for capital to start ground works on the project. His response was negative and I decided to meet with him and explain to him the urgency to now carry on. Once again his approach was negative. I offered to pay him his capital amount back with legal cost paid which the total cost was - R 120 000-00. Upon meeting with him and his father I was quiet shocked to learn that over and above his capital amount he now wanted extra R 250 000-00 in cash or land to the same value in 2 years time. Under pressure and upon receiving continuous sms messages in the form of deadlines I approached an Aaleem of his choice whose opinion was that my cousin was entitled to a profit for the R 120 000-00 outlaid. Under pressure I did not mention to the Aaleem that this initial amount of R 120 000-00 was only used to purchase the land and no extra money was actually outlaid by my cousin for the development itself. An Aaleem that I approached ruled that my cousin was not entitled to a profit at this juncture. Upon receiving his initial outlay of money (120 000-00) he resigned as a member only after documents were signed that he would receive R 250 000-00 or land to the same value. At this juncture I did not get paid or reimbursed for man hours which I put in into the proposed project while my cousin was also a member.
In January this year a property of his choice was transferred in his name. To satisfy my curiosity I enquired from a learned Aaleem about the correctness of the transaction. To my amazement I was advised that the transaction was incorrect and it was actual interest earned by my cousin. On delivering the documentation of the transfer of the property in his name I advised him about the opinion I received.
1. A profit of R 250 000-00 for an initial outlay of the purchase price of the land (R 120 000-00 inclusive of legal cost) even though at the time of his resignation as a member of the CC, the CC had no profits or extra money in the account. Today the same property value is R 500 000-00. I just feel that not being a member of the company how should he be entitled to this when I already paid him his initial outlay.
2. The initial agreement between us at the outset was that profit will only be distributed once the project was successfully completed by both of us as members of the CC.
In the name of Allah, Most Gracious, Most Merciful
Assalaamu `alaykum waRahmatullahi Wabarakatuh
We have studied the contents of your mail and hereunder is our understanding of the issues.
- You wished to purchase the property and did not have finance.
- You approached your cousin who would finance the property.
- A partnership was formed on a 50/50 % basis.
- You had made no capital contribution to the partnership.
- An agreement was made to develop the property.
- Your cousin did not want to pursue the development.
- You wanted to pay the costs (including legal) of the property and take over it.
- He pressurised you to substitute this land for another one to the value of R250 000.
According to Shariah, a partnership formed on the basis of one person’s capital and the others expertise is regarded as Mudarabah.
الدر المختار - (ج 5 / ص 208(
عقد شركة في الربح بمال من جانب) رب المال (وعمل من جانب) المضارب
1. The principle of Mudarabah is that the capital will always remain the ownership of the Rabbul Maal (financing partner). The Mudarib (working partner) will only become a partner if a profit is realised. If no profit was realised from the venture, the Mudarib (working partner) will not receive anything.
الاختيار لتعليل المختار - (ج 1 / ص 27(
لمضارب شريك رب المال في الربح ورأس ماله الضرب في الأرض، فإذا سلم رأس المال إليه فهو أمانة، فإذا تصرف فيه فهو وكيل، فإذا ربح صار شريكاً،
2. If the Rabbul Maal wishes to dissolve the Mudarabah partnership, any items purchased by the joint venture (with the capital) must be liquidated before dissolution of the partnership. The proceeds realised from the liquidation process will firstly be paid towards the capital. It is important to note that if any losses are suffered from the liquidation, the Rabbul Maal will solely bear the loss. However, if any profits are realised from the sale of the assets, the profits will be shared between the Rabbul Maal and Mudarib according to their agreement.
بدائع الصنائع في ترتيب الشرائع - (ج 13 / ص 253(
فَصْلٌ ) : وَأَمَّا صِفَةُ هَذَا الْعَقْدِ فَهُوَ أَنَّهُ عَقْدٌ غَيْرُ لَازِمٍ ، وَلِكُلِّ وَاحِدٍ مِنْهُمَا أَعْنِي رَبَّ الْمَالِ وَالْمُضَارِبَ الْفَسْخُ ، لَكِنْ عِنْدَ وُجُودِ شَرْطِهِ ، وَهُوَ عِلْمُ صَاحِبِهِ لِمَا ذَكَرْنَا فِي كِتَابِ الشَّرِكَةِ ، وَيُشْتَرَطُ أَيْضًا أَنْ يَكُونَ رَأْسُ الْمَالِ عَيْنًا وَقْتَ الْفَسْخِ دَرَاهِمَ أَوْ دَنَانِيرَ ، حَتَّى لَوْ نَهَى رَبُّ الْمَالِ الْمُضَارِبَ عَنْ التَّصَرُّفِ ، وَرَأْسُ الْمَالِ عُرُوضٌ وَقْتَ النَّهْيِ ، لَمْ يَصِحَّ نَهْيُهُ وَلَهُ أَنْ يَبِيعَهَا ؛ لِأَنَّهُ يَحْتَاجُ إلَى بَيْعِهَا بِالدَّرَاهِمِ وَالدَّنَانِيرِ ؛ لِيَظْهَرَ الرِّبْحُ ، فَكَانَ النَّهْيُ وَالْفَسْخُ إبْطَالًا لَحَقِّهِ فِي التَّصَرُّفِ ، فَلَا يَمْلِكُ ذَلِكَ ، وَإِنْ كَانَ رَأْسُ الْمَالِ دَرَاهِمَ أَوْ دَنَانِيرَ وَقْتَ الْفَسْخِ وَالنَّهْيِ ، صَحَّ الْفَسْخُ وَالنَّهْيُ ، لَكِنْ لَهُ أَنْ يَصْرِفَ الدَّرَاهِمَ إلَى الدَّنَانِيرِ ، وَالدَّنَانِيرَ إلَى الدَّرَاهِمِ ؛ لِأَنَّ ذَلِكَ لَا يُعَدُّ بَيْعًا لِاتِّحَادِهِمَا فِي الثَّمَنِيَّةِ .
تبيين الحقائق شرح كنز الدقائق - (ج 14 / ص 146(
قَالَ رَحِمَهُ اللَّهُ ( وَإِنْ عَلِمَ وَالْمَالُ عُرُوضٌ بَاعَهَا ) أَيْ عَلِمَ الْمُضَارِبُ بِالْعَزْلِ وَمَالُ الْمُضَارَبَةِ عُرُوضٌ بَاعَ الْعُرُوضَ وَلَا يَنْعَزِلُ مِنْ ذَلِكَ ؛ لِأَنَّ لَهُ حَقًّا فِي الرِّبْحِ وَلَا يَظْهَرُ إلَّا بِالنَّضِّ فَثَبَتَ لَهُ حَقُّ الْبَيْعِ لِيَظْهَرَ ذَلِكَ
3. If your cousin wished to dissolve the partnership, the land should have been sold. According to our understanding, instead of liquidating the asset you had agreed to substitute this land with another one to the value of R250 000. Your agreement although under pressure constitutes a Sulh (settlement) which becomes final and binding upon you.
4. Had you not agreed to this Sulh arrangement, then the situation would have been different. Assuming you had purchased the land from the partnership for R250 000, R120 000 would have been paid to your cousin as his capital and the profits of R130 000 would have been divided between yourselves on a 50/50 basis. Therefore you would have paid R185 000 for the land instead of R250 000.
5. In view of the Sulh arrangement between yourselves, it is correct for your cousin to keep the land given to him to the value of R250 000.
Do not hesitate to contact us if you require any further clarity.
And Allah knows best
Muhammed Zakariyya Desai,
Checked and Approved by:
Mufti Ebrahim Desai
Darul Iftaa, Madrassah In'aamiyyah