The Kerala High Court on Tuesday directed the State government and the Kerala State Industrial Development Corporation (KSIDC) to ensure that a newly-formed banking company, said to be based on Islamic principles, did not commence its operations until further orders.
A Bench of Chief Justice S.R. Bannurmath and Justice Thottathil B. Radhakrishnan passed the interim direction on a public interest writ petition by Janata Party leader Subramanian Swamy challenging a government order according sanction for registration of the Islamic finance service company by the KSIDC.
Dr. Swamy argued that the government action was against the country’s secular principle and would lead to similar demands from other religions.
Counsel for the KSIDC said the company, already registered, would function not on the basis of Islamic laws but in accordance with the Companies Act and the Reserve Bank of India Act.
In its order, the Bench said the question whether the KSIDC was a company owned by the government required deeper consideration. It impleaded the Centre and the RBI as additional respondents to know their views in the case.
The court said no activity could be undertaken by the newly formed company in violation of the provisions of the Reserve Bank of India Act, the Banking Regulation Act and related laws.
According to Dr. Swamy, the setting up of a financial service company, with government participation, which would follow the canon of law of a particular religion was a clear instance of the state favouring a particular religion.
It was clear from the order that the company was to be set up strictly in accordance with the Shariah. It also implied the setting up of a Shariah Advisory Board. It was stated in the order that the company’s chief executive officer was required to report to the Shariah board. This made it clear that the board would have some measure of supervision over the company.
Dr. Swamy said that as per the government order, 11 per cent of the equity would be held by the KSIDC. This showed the identification of the KSIDC with Islam. The setting up of a company with co-ownership of the state was “antithetical” to equal treatment of all religions. The Shariah-compliant operation of the company would also mean imposing prohibitions under the Shariah law.
