The PCGA said the petitioner is the registered company of cotton ginners and its member are law-abiding citizens of Islamic Republic of Pakistan. The petitioner felt and wished that true sense of being Islamic should be implemented in all the laws, rules and regulations and practices prevalent in the country's institutions.
It added that the petitioner has gone through some regulations of Karachi Cotton Association 2002 and noted that its by-laws 45, 83, 134, 142, 143, 144 and 147, inter-alia, were against the basic concept of justice, equality, fair play, as well as against the injunctions of Islam as enshrined in Holy Quran and Sunnah. These by-laws of the Karachi Cotton Association 2002 relate to hedge marketing alias "Satta" business.
FOLLOWING IS THE TEXT OF THE PETITION:
BY-LAW NO.45:
TRADING IN HEDGE CONTRACTS: Trading in hedge contracts shall be opened for delivery months as specified in Schedule "A" (Schedule "A" is attached Annex "A").
The Board decides the date from which the first five hedge contracts shall commence. On maturity of any contract the next contract due will be opened for trading.
The Board may also lay down for which month or months of delivery (specified in Schedule "A" hereto) trading shall commence in respect of any or all of the hedge contracts and may also prescribe, before permitting trading for the following delivery months, which hedge contract or hedge contracts shall be traded in or shall not be traded in.
BY-LAW NO.83:
METHOD OF DELIVERING ORDER: The seller when issuing a delivery order must (unless it is stated in the delivery order that the bales bear no private marks) insert in it the mark or marks of the cotton, as prescribed under By-Law 51(a)(1) the contract price or the rate of the last settlement (if any).
The day on which the right to hold an arbitration on the cotton will expire, and the exact place where the cotton is lying, if cotton tendered against at forward contract includes lots from different stations, the number of bales form each station shall be stated in the delivery order.
If this is not done by the seller, the buyer may reject all bales which are not from the same station as the bales sampled, and invoice back at the rate of the working day following the day on which he rejects the bales, or if the seller goes to arbitration (of which he must give notice within 24 hours to the buyer), at the rate of the day on which the final award is made, plus a penalty of Rs 20-per 40 kilograms in either case or as may be fixed by the Board from time to time.
BY-LAW NO.134:
CONTRACTS TO BE INCLUDED: All contracts entered into up to and including the day on which the prices are fixed shall be included in each Settlement.
BY-LAW NO.142:
TENDERS: Any member desiring to tender cotton against a hedge contract shall send into the Clearing House not later than 1:00 pm on any one of the tender days and on due date particulars of his tender on the Clearing House Delivery Order Forms (Forms 5 and 6). These forms shall specify the contract price or last settlement price, if any, the marks and the description of the cotton tendered, the standard under which it is to be surveyed and order and in Form 5 the names of the seller and of his immediate buyer. The name of the last buyer shall be posted on the notice board of the Association as soon as practicable. The Clearing House shall give each tender a registered number and shall enter in the delivery order the difference in value between the standard basis of the contract and the particular description of cotton tendered under the contract; this difference to be calculated on the spot values as fixed and dealt with under by-laws 53 and 84. The Clearing House shall pass delivery order on to other parties who have contracts for the same description and quantity of cotton.
BY-LAW NO.143:
PASSING ON DELIVERY ORDERS: The Clearing House shall have power to pass on delivery orders in the manner laid down in by-laws particularly No 142 and the first seller and the last buyer shall thereby be deemed for the purposes of by-laws to have made a contract the one with the other in the appropriate form prescribed by the by-laws without prejudice to the contracts made by both or either of them with intermediate parties or between other intermediate parties inter se.
BY-LAW NO.144:
LAST BUYERS: When the passing on of the delivery order has been completed, the clearing House shall hand over to the buyer whose name appears last thereon (and who shall be known as the "Last buyer") the pucca Delivery Order (Form 6) which shall be stamped with official stamp of the Clearing House.
BY-LAW NO.147:
PAYMENT FOR COTTON: The last buyer shall pay for the cotton at the rate at which the delivery order was issued from the Clearing House, and subject to the provision of by-law 90, for the actual weight delivered, but for the purposes of settlement and for the adjustment of accounts between intermediate parties on delivery orders passed on, the weight of all bales shall be considered to be 8.5000 mertic tonnes per 50 bales.
The above said provisions of hedge contract in the Karachi Cotton Association By-laws & Rules 2002 are against the justice, harmful to the society & against the injunctions of Islam as laid down in Quran & Sunnah on the following grounds inter-alia.
GROUNDS: That in Islam the sale of a commodity, which is not present at the time of sale is strictly prohibited. The holy Prophet (PBUH) said: "Do not sell a thing, which is not with you".
In the hedge contract, the commodity at sale even with the original owner/first seller is not present at the time & place of sale. Further, when initially the sale is struck from 1st seller to the 1st purchaser becomes the 2nd seller & puts the sale of the commodity lying or claiming to be lying with the 1st seller (original owner) at his place. The second seller without having seen the commodity without verification of its existence or quality and without having its possession, transfers orally to the next buyer. The sale goes on continuously to the next buyers/purchasers.
ALL THESE TRANSACTIONS OF SALE ARE:
a. Without the presence of the commodity at sale.
b. Without inspection or examination of the sale commodity by the purchaser.
c. Without possession.
That the hedge contract promotes & encourages the accumulation of the cotton crops in the hands of few rich people. The holy Prophet (PBUH) forbade from such sale contract.
The Prophet (PBUH) said: "The accumulator is a condemned person. "That through hedge contract of cotton, the real beneficiary is a person who is neither the grower nor the processor nor the worker. He is a man with usually a presumptive investment & with licence only. He earns a lot without labour & real investment. Such activities even if valid otherwise are prohibited by Islam on the principle of "Irtikaz" ie concentration of wealth in few hands.
The Holy Quran Says: "And the People who accumulate the wealth & do not spend it in the way of Allah warn him of the painful punishment or persecution" (9/34). "And lest the wealth should concentrate in few hands".
That the hedge contract lead to the deprivation of actual consumers from purchasing the cotton commodity directly from the grower or from open market. Such situation leads to blackmailing of the investors in the cotton market and ultimately results in harm to the cotton ginners, textile mills & ultimately to the public. In Islam anything which is harmful to the society is prohibited.
The holy Prophet (P.B.U.H) said: "Neither harming yourself, nor harming others is permitted in Islam" In the explanation of said Hadith, the Muslim scholars & specially Allama Tofi Al hambli have held that this principle of "Non-harm" is the underlying principle of all the injunctions of Islam as Islam came to eliminate harm from the society. Hence even if an act or transaction is permitted in law it may be declared unlawful if it creates harm.
That the said transaction of hedge contract is based upon uncertainty or 'Gharar'.
The Holy Prophet (PBUH) forbade such transaction or sale. "It is reported by Abu Hurairah that the Prophet (PBUH) forbade the sale of Hasat and from Gharar sale.
The famous and great companion of the Holy Prophet (PBUH). Ibn-Masood reported that the Prophet (PBUH) said "Do not sell the fish in the water as it is Gharar".
It is pertinent to note that any transaction in which sale commodity is either Non-existent or Unknown or out of possession is a Gharar sale.
Imam Navavi said that the prohibition of Gharar sale is one of the fundamental principles of Shariah which inovlves many Ahkam.
(Nail-ul-Autar Vol.5, P.157 by Allama Shokani)
that under the above said principle, the sale of fish in the pond the bird in the air the absconder sale & the cotton in the bud are for bidden.(I.B.I.D) that on the same above said principles, the prophet forbade the following sales.
Mula misaha, Munabiza, Muhaqilah, Mukhazirah, the sale of animal in the womb etc.
PRAYER: It is respectfully prayed that this honourable court may be pleased to declare the provision of by-laws 45, 83, 134, 142, 143, 144 & 147 & others relevant by-laws of the Karachi Cotton Association as repugnant to provision of Quran & Sunnah, hence void & ineffective in law & practice.
Any other relief, which this honourable court may deem fit and proper, be also granted.