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Tuesday, February 16, 2010



The Kerala High Court yesterday (5-1-2010, Tuesday) has granted a stay order to Dr Subramanian Swamy who had moved a Public Interest Writ Petition in the Kerala High Court in Kochi on 8 Dec, 2009 for the grant of an INTERIM STAY against the outlandish and outmoded proposal of the Kerala Government for the establishment of an Islamic Banking Company in Kerala based upon Islamic principles of Shariah.
Dr Subramanian Swamy has rightly argued in his writ petition that the Kerala Government action starting of an Islamic Bank will running counter to the Secular principle enshrined in our constitution. Establishment of such a Bank in one state would lead to a clamour of similar demands from other regions and other states.

Taking note of the unassailable legal and Constitutional points raised by Dr Subramanian Swamy, a Division Bench of the Kerala High Court, comprising Chief Justice S R Bannurmath and Justice Thottathil B Radhakrishnan has restrained the Kerala State Government and the Kerala State Industrial Development Corporation (KSIDC) from commencing the operation of an Islamic financial institution on the lines of Islamic bank till further orders.The Bench passed this order while admitting a public interest petition filed by Janata Party president Subramanian Swamy challenging the Government Order (GO) giving sanction to setting up a company by the KSIDC for providing financial service in KSIDC accordance with Shariah.

With unholy haste the Government of Kerala had issued orders in G.O (Rt) No. 1336/2009/ID dated 14.10.2009 (Filed as Exhibit P1 by Dr Swamy in his Writ Petition) according sanction for registration of a company by the Kerala State Industrial Development Corporation (KSIDC) which will provide financial services ‘in accordance with the Shariah of the Muslim community’.

Janata Party President Dr. SubramanianSwamy addressing the media afterpresenting his Public Interest Writ PETITION at the Kerala High Court in Kochi on 8 December, 2009

The same Government Order also specified that the proposed Islamic Banking Company will have 11% equity contribution from KSIDC which is fully owned by the Government of Kerala. In his writ petition Dr Subramanian Swamy has riveted the point that the setting up of a financial services company with Kerala Government participation, which would follow the injunctions of law of a particular religion like Islam is a clear instance of the Kerala State favouring the religion of Islam.

When Dr Swamy sought information relating to this new Shariah Bank in Kerala from the KSIDC, he got a reply from them to the following effect: “KSIDC is taking steps to promote Islamic Financial Institution. It is a company promoted by the Private Promoters and KSIDC. The proposed institution will not collect interest or charge interest for financing. It will function with full compliance of SHARIAH PRINCIPLES.” (Reply from KSIDC Filed as Exhibit P2 by Dr Swamy in his Writ Petition)

Counsel for the KSIDC submitted that as per the Kerala Government GO, a Company has been formed and registered and it would function only in accordance with the provisions of the Companies Act and RBI Act. As per the proposal, the KSIDC would contribute about 11 per cent equity to set up an Islamic financial service organisation. The organisation will not collect or charge interest for financing. Taking note of this Dr Swamy strongly agued that ‘The Government’s act is violation of the Banking Regulation Act, 1949. Its attempt is to use public funds for favouring a particular religion.’

Dr Swamy invited the kind attention of the Kerala High Court to the Shariah Advertisement issued by the Shariah KSIDC with Islamic commitment to Shariah law for the filling up of vacancies for the positions of Chief Executive Officer (CEO), Company Secretary in the new Islamic Bank. This advertisement has been placed in the website ( of KSIDC. In the terms of reference for CEO, it is clearly stated that he will report to the SHARIAH ADVISORY BOARD. Dr Subramanian Swamy has placed a copy of this Shariah advertisement as Exhibit P3 in his Writ Petition. It is clear from the Exhibit P3 that the Muslim CEO, the new Islamic Banking Company is required to report to the Shariah Advisory Board.

Dr Swamy, a Harvard-educated economist, has effectively argued in the Kerala High Court that the new Islamic Banking firm would be bound by the Shariah law and its Chief Executive would be answerable only to a Shariah Advisory Body and not to any constitutional authority and investing Indian public money in such an Islamic company will be wholly unconstitutional.

Here we can see clearly the convoluted and twisted ways of the Government of Kerala, to hand over as a pioneering trial measure, the Islamic Bank of Kerala to the Muslims of anywhere and everywhere in any and every part of the world! The CEO will work for an Islamic Company in which 89 % of the shares will be held by the Muslims from anywhere and everywhere and only 11% would be held by the KSIDC. In short the KSIDC (A KERALA GOVERNMENT ORGANIZATION), would be the sleeping partner in this State-sponsored Islamic Financial Institution and the Muslims would be the dominant and deciding authroties.

Dr. Subramanian Swamy is absolutely right when he says that the Communist Government of Kerala is functioning as an official sales agent for the promotion of Islam in Kerala! The same Islamic Government is least concerned about the Hindus of Kerala who constitute 55% of the population. Dr Siby Mathew (Additional Director General of Police, Kerala) has recently furnished details regarding the Suicide Statistics of Kerala.
Hindus constituting 55% of the population account for 79.5% of the total suicides every year. Muslims constituting 26.5% of the population account for only 7.5% of the total suicides every year. Christians constituting 18% of the population account for only 12.5% of the total suicides every year. This clearly shows that the poor Hindus of Kerala are being treated as State-less Citizens by the Government of Kerala.

In November 2008, the U.S Treasury Department hosted a Seminar on Islamic Banking to train U.S Government employees on Sharia-compliant finance (SCF). It was “designed to help inform the policy community about Islamic financial services, which are an increasingly important part of the global financial industry.” George Bush was responsible for this irresponsible initiative. On the one hand he illegally attacked Iraq and on the other he took the illegal initiative for establishing an Islamic Bank in America. George Bush failed to achieve his objective because of strong American public opinion against Islamic Banking.

In this context, I fully endorse the brilliant view of Supna Zaidi on Western approach to Islamic Banking. Let me quote her words: “It is interesting to note that while many in the West deride parallel societies, the lack of integration, and overall “foreign-ness” of its Muslim populations, they have no problem embracing Islamic banking. Maybe because this is the one area of religious “encroachment” that allows the West to make money, and lots of it.”

Taking note of the record of terrorist Islam in India and the Government of India’s Gandhian infatuation for it, I am firmly of the view that no short-term gain in the sordid world of banking is worth the long-term danger presented by these murky, Islamist-backed financial Institutions.

I fully share the view of Dr. Subramanian Swamy that Islamic Banking as a Government initiative will never be acceptable in India. Islamic Banking demands the abolition of payment of interest. Can payment of interest be abolished? Islamic scholars argue that Payment of Interest is a bane on the society. What are the alternatives especially example, for old aged people who live on the interest from deposits of their lifelong savings, if interest is prohibited? How will banks survive without charging interest on loans extended?

An Islamic bank cannot charge interest, but then what does it do to survive? How does it manage to survive? It manges to survive only by giving by one hand, and taking away twice as much or more by the other hand! Let us take an example: If you want to purchase a house worth of Rs.10 lakhs an Islamic bank will not give you a loan of 10 lakhs at a rate of interest and fixed maturity as non-Islamic banks would. Instead the Islamic banks will purchase the house and sell it to you at a higher price! This means they will make a profit and such profit is called, Halal as per Sharia! They will ask you to pay this back in say 15 years or so. Of course interest-free. This is back-door collection of interest.

I cannot help quoting the succinct words of Dr. Subramanian Swamy:

‘Thus an Islamic bank is like boiled ice cream; it cannot exist in real life without tricking our confidence. An Islamic bank, or even NBFC, that operate in India, would violate at least the following laws, rules and regulations:

a) Partnership Act (1932) which stipulates a maximum of 20 partners, since KSIDC says it will be an open partnership between it and private investors without limit.

1. Wagering (not permitted under Sharia) as per Section 30 of Indian Contract Act (1872).

b) Sections 5(b) & (c), 9 and 21 of Banking Regulation Act (1949) on Prohibition of Profit- Sharing, buying & selling property, and for not charging interest.c) RBI Act (1934)d) Negotiable Instruments Act (1881)e) Co-operative Societies Act (1961).’

Islamic Banks will not be permitted by Sharia to give loans for liquor manufacture, cinema, hotel, Entertainment industry etc. These however are under current laws of India legitimate and legal activities.

The Government is a partner in the Islamic NBFC promoted by KSIDC in Kerala. How can such a NBFC which is partnered by KSIDC deny loans for such legitimate activities, without violating Article 14 of the Constitution, a fundamental right of equality before the law?

It is clear that Islamic bank or NBFC cannot be started in India without violating numerous laws and regulation. Can Kerala Legislature amend the laws to make it Islam-compliant? Not possible because under Article 246 of the Constitution only the Central Government is empowered to change banking and financial statutes. Moreover, Article 27 explicitly bars using tax money with Government for furthering any religion.

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