PUTRAJAYA (April 10): In a landmark decision, the Federal Court today ruled that findings on Islamic finance by Bank Negara's Syariah Advisory Council (SAC) is binding on civil courts.  

A nine-member bench, in a narrow 5-4 decision, also ruled that the ascertainment of Islamic law by the SAC does not amount to a judicial decision.

The dissenting justices included Chief Justice Tan Sri Richard Malanjum, Chief Judge of Malaya Tan Sri Zaharah Ibrahim, Chief Judge of Sabah and Sarawak Datuk David Wong Dak Wah and Federal Court judge Justice Tan Sri Idrus Harun.

Federal Court judge Datuk Mohd Zawawi Mohd Salleh wrote the majority judgment and it was also accepted by the Court of Appeal president Tan Sri Ahmad Ma'arop and Apex court judges Tan Sri Ramly Ali, Tan Sri Azahar Mohamed and Datuk Alizatul Khair Othman Khairuddin.  

The majority held that rulings by the SAC constitute an expert opinion in the matter of Islamic finance.

"The SAC members are highly qualified in the fields of syariah economics, banking, law and finance. The SAC rulings can be regarded as a collective ijtihad that provide consistency and conformity," Justice Zawawi said.

The SAC could be referred to so as to ascertain which opinion or jurist was most applicable.

"It is for the courts to apply the ascertained Islamic law to the facts of the case. The final decision in the matter remains with the court," the judge added.

The full nine-member bench was delivering on the decision in the referral by JRI Resources Sdn Bhd against Kuwait Finance House (KFH).

KFH filed a civil lawsuit filed in 2013 against JRI Resources for recovery of an outstanding amount of RM118.82 million, due to its four Ijarah Facilities agreements and one Murabahah Tawarruq agreement entered between them in 2008 and 2009.

KFH also instituted a claim against three guarantors.

JRI referred several questions for the Federal Court's determination, namely whether sections 56 and 57 of the Central Bank of Malaysia Act 2008 (CBMA) were constitutional for impinging on judicial powers, as the sections stated that rulings by the SAC bind the civil High Court.

Justice Malanjum ruled Section 57 as unconstitutional, as judicial power cannot be removed from the judiciary, the majority ruled otherwise.

"The effect of the section is to vest judicial power in the SAC, to the exclusion of the High Court in syariah matters. The section must be struck down as unconstitutional and void," the CJ said.

JRI counsel Datuk Malik Imtiaz Sarwar on commenting the decision said the fact that Justice Malanjum, Justice Zaharah, Justice Wong and Justice Idrus concluded that the provisions that made the SAC rulings binding on the courts was self evidently a usurpation of judicial power is telling.

"That they thought the provisions resulted in unfair trials in which litigants were denied the opportunity to test material evidence and make submissions is even more so.

"Though the majority of the court upheld the validity of the provisions, the strong view of the minority is reason enough for the Attorney General and the Government to consider whether the legislative framework should be amended.

“The CJ noted that there are other methods by which certainty can be achieved which do not impinge on judicial power. This is something that should be seriously looked at," Malik said.

His co-counsel Dinesh Nandrojog said the majority judgment found that the SAC's ruling pursuant to those sections are not determinative but merely ascertainment.

This, he said meant SAC is there to ascertain law and not determine law.

"Hence, it doesn’t take away the judicial functions of the court who ultimately makes the final decision of the case. SAC doesn’t determine rights of parties, merely ascertains Islamic law.

"The majority also says that there is no total separation of powers. There is slight overlap to help check and balances. Legislative power given to SAC to ascertain Islamic law pursuant to item K under the Federal Constitution.

Dinesh said the minority basically took the opposite position in saying that SAC’s ruling in effect is a determination of the case and not merely an ascertainment of the law.

"It takes away the right of a party to cross examine or question the SAC ruling and further pose additional expert witness enabling the court to then determine the relevance and weightage of each expert witness.

"The minority also held that SAC ruling is not subject to any check and balance as there is no appeal against it and hence by making it binding on the courts, it usurps the judicial function of the court," he explained.