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Islamic finance company: court adjourns hearing

Special Correspondent

Government order violative of Article 27: Swamy

KOCHI: A Division Bench of the Kerala High Court on Monday adjourned to December 14 the hearing of arguments on the two public interest writ petitions filed by Janata Party president Subramanian Swamy and another petitioner challenging a government order according sanction for registration of an Islamic finance service company by the Kerala State Industrial Development Corporation (KSIDC).

When the petition came up before the Bench — comprising Chief Justice J. Chelameswar and Justice P.R. Ramachandra Menon — Dr. Swamy contended that the government order proposed specific appropriation by the KSIDC, of Rs.110 lakh from the consolidated fund of the State, to purchase 11 per cent equity in the KSIDC-promoted and Sharia-compliant financial institution.

Therefore, he said it was violative of Article 27, and the KSIDC could not be permitted or allowed under the Constitution to appropriate public funds raised by taxes for an institution to be run according to Sharia principles.

Article 27 prohibits the use of government funds for the promotion and maintenance of any religion.

Dr. Swamy said the claim of the government and other respondents that four such companies had already been permitted by the Reserve Bank of India now turned out to be false. He said promoting an edict of Sharia was promotion of Islam.

He argued that it was not economically feasible for any financial institution to merely prohibit interest. There had to be compensatory activities to make up for the loss.

He pointed out that the Law Commission under Justice Gajendragadkar in 1975 — in its Report on the Interest Act 1839 — had opined, quoting Muslim law scholars, that prohibition of riba (interest) had become obsolete.

Dr. Swamy pleaded that the impugned government order granting sanction for the financial institution be quashed on the grounds that it was illegal under the statutes.

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