CASE NO. 6149/2015
IN THE KWAZULU-NATAL HIGH COURT, DURBAN
In the matter between Albaraka Bank Limited (Plaintiff)
And
Feroze Sheik (Defendant)
(In this matter there are six Defendants
THE HARAAM RIBA SHENANIGANS OF ALBARAKA BANK
Albaraka Bank has issued a High Court summons against Feroze Sheik and Others of Durban, claiming payment of R966,355. Feroze Sheik is defending the matter, denying that he and the other five defendants are indebted to the bank for the amount claimed.
The background history
Feroze owned a property at 153 Alpine Road, Durban. He required finance and approached Albaraka Bank for a loan. To halaalize the riba loan, Albaraka presented the baatil “Diminishing Musharaka” model which has been fabricated by some scholars for dollars specifically to halaalize riba loans given to clients.
According to the baatil diminishing musharaka concept, the bank buys a share of the property thereby becoming co-owner/partner with the original owner who seeks the loan. In terms of this baatil model, the client (the original owner) pays a monthly rental for occupying the Bank’s share of the property. In addition to the leasing agreement, is a haraam baatil ‘buy back’ purchase agreement by which the client (the original owner) has to incumbently buy back a percentage of the Bank’s share on a monthly basis.
In Feroze’s example, he has to buy the property back in 120 months. So, every month he has to buy back just under 1% of the property so that at the end of the 120th month he once again becomes the sole owner of the property while the bank has received the riba which it had levied on the loan.
For the purposes of this article, the bank’s shenanigans will be pointed out in terms of its own diminishing musharaka agreement. For the purposes of this discussion, the baatil concept and agreement shall not be made the subject of our assault. Here the dishonest, fraudulent practices of the Bank shall be shown in terms of its own diminishing musharaka contract.
In 2012 when Feroze sought a loan, the Bank valued his property at R1.37 million. It ‘purchased’ 70% of the building for the sum of R960,000 while Feroze retained 30% share.
In terms of the diminishing musharaka agreement, the parties are supposed to share proportionately the gain (rental) yielded by the property, i.e. 70% of the income for AlBaraka and 30% for Feroze. The following month, the Bank’s stake in terms of the agreement decreased by about 1%, hence the bank’s share of the profit was 69% (approximately), and Feroze’s share 31% (approximately). This pattern was supposed to continue each month with Feroze’s share increasing by roughly 1% per month and the bank’s share decreasing correspondingly.
In terms of the musharaka contract both parties are also supposed to share proportionately in any loss since the venture was a joint partnership.
The Facts
Since 2012 to date, Feroze has paid AlBaraka Bank R295,000, Then, Feroze also paid R27,500 rates for the property, and R340,000 for repairs to the building done in 2014.
While in terms of the musharaka agreement, the Bank is liable for its proportionate share of the expenses, it (the Bank) has not paid one cent. The above items of expenditure were borne by Feroze alone.
The Bank had purchased its 70% share for R960,000 in 2012. This was not a debt incurred by Feroze. He sold 70% of his property to Albaraka who paid him this amount. Thus, the R960,000 in terms of the Bank’s own baatil haraam diminishing musharaka contract is the property of only Feroze. The bank has no share in the purchase price given to the seller. In lieu of the R960,000 the Bank was given 70% ownership of the property.
However, 3 years later, that is in April 2015, Albaraka is claiming R966,355 from Feroze, i.e. R6,355 more than the initial amount of R960,000 despite Feroze having paid R295,000 plus the other amounts the bank owes him, that is, the bank’s portion of the R27,500 and R340,000, yet the bank is asking the court to decree that the property is ‘executable’ to enable Albaraka to acquire substantially more than the initial R960,000 outlay of 2012. It has swallowed into its satanic belly the entire R295,000 paid by Feroze, plus the other large amounts the Bank owes for maintenance, etc.
When Albaraka purchased 70% of the property, it took out a bond of R2.2 million on the property. For what was this bond? To secure what? In a musharaka agreement, the parties are proportionately liable for the risks. The bond is clear evidence that the R960,000 advanced to Feroze was a riba bearing loan, hence the mortgage security.
In terms of Albarala’s own diminishing musharaka contract, there are no grounds for legal action against Feroze. The Bank is supposed to be part owner of the property. So for what purpose is the summons? Feroze is not indebted to the bank for any monies additionally loaned to him.
After having paid R295,000 in monthly instalments, the bank demands more than the R960,000, its initial outlay. Even a non-Muslim conventional riba bank would not stoop to this level of rat shenanigans. A straightforward riba bearing loan of R960,000 will also be substantially less than the capital amount after having paid almost R300,000. But Albaraka is demanding more than the initial loan amount – and that is precisely what the whole haraam deal was about. It was a riba bearing loan disguised as a ‘musharaka’ (partnership) to dupe Muslims into believing that Albaraka’s deals are shariah-compliant.
Even according to the understanding of Albaraka Bank, the R960,000 advanced to Feroze was a loan notwithstanding the baatil so-called musharaka contract. Thus, in its summons, Albaraka states:
The agreed period for repayments of the sum of R960,000 was fixed at 120 months, calculated as from 20th June 2012.”
While Albaraka may succeed in fooling and duping ignorant Muslims with its stupid and baatil ‘diminishing musharaka’ concept fabricated by scholars for dollars to legalize Riba, those having some intelligence, and even non-Muslim banks fully understand that the diminishing musharaka concept is nothing but a gimmick to legalize Riba.
The full texts of the legal proceedings can be downloaded
-- Albaraka Bank’s claim and Feroze Sheik’s Response Part 1 and part 2.
23 Muharram 1437 – 6 November 2015
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