Kochi: The Kerala High Court today cleared
the way for setting up the country`s first Islamic bank in
The court nod came after it dismissed two PILs
challenging the setting up of an Islamic Financial Institution
in the state on the lines of Islamic Banks with the support of
Kerala State Industrial Development Corporation (KSIDC).
A Division Bench comprising Chief Justice J Chelameswar
and Justice Ramachandra Menon said the petitioners could not
demonstrate how the impugned government order had the effect
of directly promoting a particular religion. The petitions
were filed by Janata Party leader S Subramanian Swamy and
Hindu Aikya Vedi.
The state justified its stand and contended that the
investment was commercial in nature and will not offend the
secular principles of the Constitution.
The Company Al Barakh Fianncial Services, which was
registered under the Companies Act, assured the Court that
funding of financial institution will be in strict adherance
to the laws prevailing in the country as well as principles of
The petitioners complained that the government`s
decision was against the secular principles of the
Swamy`s contention was that Article 27 of Constitution
prohibits a state government body, in this case the KSIDC, to
engage in ventures like Islamic Banking.
The mandatory governing principles of Shariat,
religious code of Islam, to be adhered to is that not only
interest payment and receipt are barred, but also it bars
certain other activities which are legitimate under Indian
laws, he had stated.
KSIDC cannot be permitted to promote a corporate called
AL Barakh Financial Service Ltd, he submitted.
The bank was also to have a body of Islamic scholars to
advise whether the principles of shariah were being complied
The High Court had during the admission stage of the
petition in April last year directed the government and its
institutions not to participate financially or otherwise
in the financial company modelled on the lines of Islamic