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2019 MarsdenLR 1664
FEDERAL COURT PUTRAJAYA
JRI RESOURCES SDN BHD – Appellant
Versus
KUWAIT FINANCE HOUSE (MALAYSIA) BERHAD; PRESIDENT OF ASSOCIATION OF ISLAMIC.... – Respondent
[Civil Appeal No: 06(i)-06-07-2017(B)]
The legislative power to ascertain Islamic law for Islamic finance is constitutionally valid under the Federal Constitution.
Headnote:The Federal Court examined the constitutionality of sections 56 and 57 of the Central Bank of Malaysia Act 2009 concerning the Shariah Advisory Council's role in Islamic finance. The court found that these sections do not breach the Federal Constitution, affirming the Parliament's power to legislate on Islamic law ascertainment for federal law. Concerns about judicial power and procedural fairness were addressed, and it was noted that while the SAC’s rulings are binding, the judicial authority resides with the courts. The court emphasized that the judiciary is the ultimate arbiter of disputes and must be allowed to consider advisory rulings without losing its constitutional role. The constitutional questions were answered in the negative.
| Table of Content |
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| 1. constitutional questions reserve judicial power for resolution. (Para 1 , 2 , 3 , 4) |
| 2. sac's decisions bind courts in islamic finance matters. (Para 5 , 6 , 7 , 20) |
| 3. binding rulings established by the shariah advisory council. (Para 12 , 47) |
| 4. legislative provisions do not infringe judicial independence. (Para 31 , 32 , 36 , 48) |
| 5. judicial power must solely reside with the judiciary. (Para 41 , 159) |
| 6. the role of the courts in applying shariah law. (Para 170 , 182 , 199) |
[1] This matter came before this court by way of a constitutional reference by the High court at Kuala Lumpur pursuant to s 84 of the Courts of Judicature Act 1964 ("Act 91") and art 128(2) of the Federal Constitution (" FC ").
[2] The constitutional questions reserved for determination by this court are as follows:
(1) Whether ss 56 and 57 of the Central Bank of Malaysia Act 2009 are in breach of the Federal Constitution and unconstitutional by reason of:
(a) Contravening art 74 of the Federal Constitution read together with the Ninth Schedule of the for the Shariah Advisory Council ("SAC") having been vested with the power to ascertain Islamic law;
(b) Contravening Part IX of the Federal Constitution for the said ss having the effect of vesting judicial power in the SAC; or
(c) Contravening art 8 of the Federal Constitution for the said ss having the effect of denying a litigant substantive due process.
(2) If the above is answered in the negative:
(a) Whether the court is nonetheless entitled to accept or consider the expert evidence in respect of any questions concerning a Shariah matter relating to Islamic finance business.
[3] The questions raised on behalf of the applicant are of great public importance, especially to Islamic banking and finance industry in Malaysia.
The Parties
[4] The applicant, JRI Resources Sdn Bhd, is a company incorporated in Malaysia with its address at No. 46-A, Jalan Ara Satu, Taman Rinting, 81750 Masai, Johor Darul Takzim, and was at all material times a customer of the respondent. The applicant is the 1st defendant in the proceedings before the High court.
[5] The respondent is a financial institution incorporated in Malaysia and has its registered address at Level 26, Menara Prestige, No 1, Jalan Pinang, 50450 Kuala Lumpur and had granted various Islamic facilities, including an Ijarah facility, to the applicant. The respondent is the plaintiff in the proceedings before the High court.
[6] The 1st intervener is the President of Persatuan Institusi Perbankan Islam Malaysia ("Association of Islamic Banking Institutions Malaysia" ("AIBIM")), a body stated to have been established in 1996. It was formerly known as the Association of Interest Free Banking Institutions Malaysia with the objective, inter alia, of promoting the establishment of sound Islamic banking systems and practices and also of promoting and representing the interest of members and rendering where possible such advice or assistance as may be deemed necessary and expedient to members. One of the supports provided by AIBIM is through the establishment of a special taskforce committee known as AIBIM-ISRA Shariah Standard Formulation Task Force to assist Bank Negara Malaysia ("BNM") and International Shariah Research Academy for Islamic Finance (ISRA) in drafting the standards for Shariah contracts.
[7] The 2nd intervener, BNM, was established pursuant to s 3 of the Central Bank of Malaysia Act 1958 ("the 1958 Act"). The 1958 Act was repealed and replaced by the Central Bank of Malaysia Act 2009 ("the 2009 Act"). The principal object of BNM is "to promote monetary stability and financial stability to the sustainable growth of the Malaysia economy" (see s 5(1) of the 2009 Act). The primary functions of BNM include to regulate and supervise financial institutions which are subject to the laws enforced by BNM (see s 5(2) and (1) of the 2009 Act) and to promote a sound, progressive and inclusive financial system (s 5(2)(f)). Section 5(4) further pr
