Question: A man purchases a vehicle on instalment basis. For example,he pays R1000 every month. If he defaults in payment, the company (bank) levies a penalty on him. Is this penalty permissible or not?

Answer: If the debtor is in distress, the ruling is clearly stated in the Qur'aan-e-Hakeem: "And if he is distressed, then (grant him) an extension until ability (i.e. until he is able to pay)."And if he is not hard-pressed, then too, it is not permissible to extract a penalty from him. This is established on the basis of the clear texts of the Qur'aan and Hadith.

The Qur'aan states:"Do not consume your wealth (among yourselves) in unlaw-ful ways, taking it to the rulers so that a group may devourthe wealth of the people in sinful ways whilst youknow….." (Qur'aan)

"Whoever commits injustice to you, then you too may takevengeance in the (exact) manner as he had transgressedagainst you, Fear Allah and know that verily Allah is with theMuttaqeen." (Qur'aan)

"O People of Imaan! Do not devour your wealth among yourselves in unlawful ways, except that it (the manner ofa cquisition of wealth) is with your happiness...."(Qur'aan)

"And if you take revenge, then do so in the (exact) manner inwhich they had transgressed.." (Qur’aan)

"Abdullah narrated that Rasulullah (sallallahu alayhi wasal-lam) said: 'He who usurps the wealth of a Muslim unjustly,will meet Allah Ta' ala while He (Allah Ta' ala) will beWrathful to him." (Ahmad)

"Abu Humaidi Saaidi narrated that Rasulullah (sallallahualayhi wasallam) said: 'It is not lawful for anyone that he un-justly takes the wealth of his brother (Muslim). That is so be-cause Allah Ta' ala has made haraam the wealth of a Muslimfor another Muslim. " (Ahmad)

"Verily, Nabi (sallallahu alayhi wasallam) said: 'It is not law-ful for any person to take (even) the staff of a Muslim without his happy consent, and that is because Allah Ta' ala hasstrictly made haraam the wealth of a Muslim for another Muslim." (Ahmad)

"Abu Hurrah Rafashi narrating from his uncle said that Ra-sulullah (sallallahu alayhi wasallam) said: 'Beware! Do not be unjust. Beware! The wealth of a man is not lawful (totake) without the happiness of his heart." (Shu' bul Imaan,Ad-Daar Qutni)

Whether the stipulated penalty on defaulted payment is of the same kind as the debt or of a different kind, it is explicit riba.

"If the creditor imposes on the debtor a certain sum (to be paid as apenalty) if he does not fulfil his obligation (payment) on due date,there is no difference regarding it being unlawful (baatil) because itis explicit riba regardless of whether the imposed penalty is of the same kind as the debt or a fixed item or a benefit."

(Tahreerul Kalaamil Khattaab—Buying and Selling by Instalments of Maulana Muhammad Taqi Uthmaani, page 82)

"Because it is not permissible for any Muslim to usurp the wealth ofanother person without valid Shar'i cause...." (Haashiyah Raddul-Muhtaar, Vol.4, page 61)

According to the Zaahir Math-hub the Mufta Bihi (the official verdict)is impermissibility. (Alaaiyah Shamiyah Tahtawiyah, Bahr Mujma',etc.—Ahsanul Fataawa, Vol.5, page 557)

"Penalizing with wealth (i.e. paying a fine/penalty) is not permissibleaccording to the Raaji' version in view of it being the imposition ofzulm (injustice) by usurping the wealth of people and consumingit...." (Fiqhul Islaami Wa Adillatuhu, Vol.6, page 201)

"Imposition of penalty by usurping wealth is not permissible accordingto the Math-hab...." (Bahrur Raa-iq, Vol.5, page 41)

The imposition of monetary fines/penalties is zulm according to the Shariah. There is no basis for it in the Shariah. (This is stated in Imdaadul Muftiyeen, Vol.2, page 907).