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Dec 27, 1999

  1. International
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SC rules Riba un-Islamic

The Supreme Court on Thursday outlawed 'interest' in every form and called by whatever name and laid down elaborate guidelines for a completely interest-free economy by June 2001, after dismissing government and bank appeals against a 1992 Federal Shariat Court judgment.

The transactions declared un-Islamic and, therefore, unconstitutional include mark-up, murabaha, bai' muajjal (deferred sale) and any so-called interest-free modes insofar as elements of Riba (usury and interest) have crept into them.

Any amount, big or small, over and above the principal in a loan or barter transaction, whether obtained for consumption or for commercial or productive activity, is prohibited by the Holy Quran, a Shariat Appellate Bench of the Supreme Court comprising Justices Khalilur Rehman Khan, Munir A. Sheikh, Wajihuddin Ahmed and Maulana Muhammad Taqi Usmani (member) held unanimously.

Justice Ahmed, however, expressed his reservations in a separate 98-page note about some of the findings and conclusions of the 716-page majority judgment authored by Justice Khan and concurred with by Justices Sheikh and Usmani (who also wrote a 277- page elaborative note). The order of the court is spread over 106 pages.

The domestic inter-government borrowings as well as the borrowings of the federal government from the State Bank shall be interest free. By January 24, 2000, the federal finance ministry will form a task force to find out ways to convert the domestic borrowings into project-related financing and to establish a mutual fund that may finance the government on that basis.

The units of the mutual fund may be purchased by the public and they will be tradable in the secondary market on the basis of net asset value. The certificates of the existing bonds and savings schemes shall be converted into the units of the proposed mutual fund.

Tax payments

The Central Board of Revenue (CBR) asked the tax-payers to deposit their taxes by December 30, as the banks will remain closed on December 31, 1999.

Five companies selling assets

Is the spate of notices being published in newspapers to sell fixed assets by listed companies connected with the current campaign to recover defaulted loans? capital market observers here wonder.

Within this month, they noted, as many as five companies have declared their "intention" to dispose of their fixed assets through notices of extraordinary meetings.

A common denominator in these notices is that the companies do not specify the assets to be thus disposed of. Do any such assets exist at all or were these shown only on documents in order to show expanditure of loans in collusion with the bank of ficials? these observers ask. SECP has already directed these companies not to move the proposed resolutions until it is decided whether the proposed sale of assets is justified and, if so, whether a liquidator should be appointed as required under Section 305 of the Companies Ordinance, 1984 (CO).

Rules for buy-back of shares notified

Securities & Exchange Commission of Pakistan (SECP) on Wednesday notified two new sets of rules under Sec 506 of the Companies Ordinance, '84, providing for buyback of shares of listed companies and for securitisation of assets by companies against their receivables.

In the works for quite some time past, the provisions had been deemed necessary to liven up the long dormant stock market in Pakistan. The two provisions are expected also to broaden the stock market.

In this context, the permission to buy back shares by the listed companies is particularly helpful in respect of the companies whose shares witnessed a slump in their demand over the past three or four years.

Another IPP cuts tariff

Yet another private power company Messrs Davis Energen has reduced its power tariff from 5.57 cents to 3.29 cents per unit.

The company's chief executive Miss Ummay Kulsoom signed a memorandum of understanding (MoU) with WAPDA chairman Lt Gen Zulfiqar Ali Khan at WAPDA House here on Monday. The 10.5mw thermal power plant will use flared gas near Pindi Gheb and will be commissioned by December 2002.

No cash margin on imports: SBP

The State Bank has clarified to all the banks that letters of credit for the import of industrial raw material can be opened without any cash margin.

The clarification has come in the form a letter issued to all banks on Tuesday. The letter says the State Bank has learnt that some banks are asking commercial importers to provide 35 per cent cash margin on LCs of industrial raw material. It says demanding cash margin on LCs of industrial raw material was in violation of the State Bank circulars on the subject.

Pay taxes, we will cut rates, CE

The Chief Executive of Pakistan General Pervez Musharraf has called upon the business community to perform their patriotic duty by paying the taxes and said: "If you pay taxes, we will reduce tax rates."

Speaking at a meeting with a combined delegation of FPCCI and Karachi Chamber of Commerce and Industry (KCCI) here on Monday at Governor House, CE called upon the business community to play the same role which they had played at the time of the creation of Pakistan.

"I agree that the tax rates are high by every count and it was so because of narrow tax base." He assured that tax rates can be brought down by expanding the tax base.