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CASE NO. 6149/2015


In the matter between Albaraka Bank Limited (Plaintiff)


Feroze Sheik  (Defendant)

(In this matter there are six Defendants


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


Hijri Date