Ruling On Imposing The Loss On The Borrower Due To Late Repayment

What do the noble scholars say regarding this matter: Three months ago, the mother of a friend of mine borrowed 1.5 million rupees from me, explaining that she had ordered some machines at a discount for her business operations and was in urgent need of 1.5 million rupees. She said, “Please lend us this amount; you can keep the file of our flat as security, which is worth 4.5 million. If you want, you may take the flat and pay the remaining amount to the builder.”

To this, I clearly refused and said that I have nothing to do with the flat. “I am giving you the money, and after three months, I will take back only the principal amount.” I did not keep any file or anything else as security. Then she said, “Alright, we will give you something extra as a gift like sweets when repaying after three months.” (The amount of profit was not fixed so that it may not fall into the category of interest.)

When the time of repayment approached, I sent a message asking if I would receive the money on time. I was assured that it would be repaid at the agreed time. Based on that assurance, I entered into a deal for a plot and paid one lakh rupees as a token amount. However, when I demanded my money on the due date, they asked for one more month and did not repay the amount, due to which my token money was lost.

I said to them, “You should compensate me for the amount I lost because of you.” They responded, “That would fall under interest. You should avoid this and not drag us into interest-based dealings either.”

My questions are:

·      Would this entire matter fall under interest?

·      Would any amount they give me willingly, without me demanding, also count as interest?

·      Can I demand something else instead of money — for example, a motorbike or other items?

·      Note: They took the money from me to purchase machinery for their parlor and gym at a 50% discount. So, would it be permissible for me to have a share in the profit they gained?

Please guide me.

بِسْمِ اللہِ الرَّحْمٰنِ الرَّحِيْمِ

اَلْجَوَابُ بِعَوْنِ الْمَلِکِ الْوَھَّابِ اَللّٰھُمَّ ھِدَایَۃَ الْحَقِّ وَالصَّوَابِ

In the asked scenario, the lender is only permitted to take back the exact amount he lent, i.e., 1.5 million rupees. Any additional money or item, of any kind, taken beyond that is impermissible and ḥaram. Whether it is for compensation of the lost token amount, or whether in the form of an item like a motorbike, or as a profit share in the borrower’s business — all such gain stemming from the loan is considered ḥaram and interest.

As for the borrower offering any additional money on her own, this too is not permissible to accept, because it was originally made conditional when taking the loan, as she had said, “we will give you some profit as a gift when repaying after three months.” Thus, the extra amount is conditional on the loan, and any conditional gain arising from a loan is ḥaram and riba (interest).

Note: It should also be remembered that in such transactions, where a plot is bought or sold, sometimes token money is forfeited, this too is impermissible and a clear form of oppression. The person who received the token money is obligated to return it.

About the prohibition of riba, the Qur’an says:

﴿وَ اَحَلَّ اللّٰهُ الْبَیْعَ وَ حَرَّمَ الرِّبٰواؕ- ﴾

Translation: And Allah has permitted trade and forbidden interest.(Surah Al-Baqarah, Ayah 275)

Any profit that is conditional upon a loan is ḥaram, as stated in the Hadith:

"كل قرض جر منفعة فهو ربا"

Translation: Any loan which draws benefit is interest.” (Kanz-ul-‘Ummāl, Ḥadīth 15516, Volume 6, Page 238, Beirut)

It is narrated in Ṣaḥīḥ Muslim:

"عن جابر رضی اللہ تعالی عنہ قال: لعن رسول اللہ صلی اللہ علیہ و سلم آکل الربا و موکله و کاتبه و شاہديه"

Translation: Sayyiduna Jabir (رضی اللہ تعالی عنہ) reports that the Messenger of Allah (صلی اللہ علیہ و سلم) cursed the one who consumes interest, the one who pays it, the one who writes the contract, and the two witnesses. (Ṣaḥīḥ Muslim, Kitāb al-Buyūʿ, Bāb al-Ribā, Volume 2, Page 27, Karachi Edition)

In Durr-ul-Mukhtar, it is written:

"کل قرض جر نفعاً حرام"

Translation: Any loan that generates benefit is ḥaram. (Durr-ul-Mukhtar, Volume 7, Page 413, Dār al-Fikr, Beirut)

 ‘Allāmah Ibn ‘Ābidīn Shāmī (رحمة الله عليه) writes under this in Radd-ul-Muḥtar:

"اذا کان مشروطاً"

Translation: when the benefit is conditional. (Radd-ul-Muḥtar, Volume 7, Page 413, Dār al-Fikr, Beirut)

Sayyidi Ala Ḥaḍrat Imam-e-Ahle-Sunnat Imam Aḥmad Raza Khan (رحمة الله عليه) states in Fatawa Razaviyya regarding profit on a loan:

”قطعی سود اور یقینی حرام و گناہِ کبیرہ و خبیث و مردار ہے ۔ “

Translation: “A clear form of interest, undoubtedly ḥaram, a major sin, vile and impure like carrion.”(Fatawa Razaviyya, Volume 17, Page 269, Raza Foundation, Lahore)

Answered By: Abu Muhammad Mufti Ali Asghar Attari Madani

Ref No: IEC-318

Date: 24th Muḥarram-ul-Ḥarām 1445 / 31st August 2024

Translated by Maulana Abdul Wajid Madani

وَاللہُ اَعْلَمُ عَزَّوَجَلَّ وَرَسُوْلُہ اَعْلَم صَلَّی اللّٰہُ تَعَالٰی عَلَیْہِ وَاٰلِہٖ وَسَلَّم