Kerala HC stays Islamic financial institution proposal

Last Updated: Tuesday, January 5, 2010 - 15:04

Kochi: The Kerala High Court on Tuesday stayed the
state government`s proposal to start an Islamic Financial
Institution on the lines of Islamic Bank.

"The Government shall not commence operation of the
proposed institution," a division bench comprising Chief
Justice S R Bannurmath and Justice Thottathil B Radhakrishnan
said while hearing a petition filed by Janata Party leader Dr
Subramanian Swamy.
According to the petitioner, the government in its
October 14 order, had accorded sanction for registration of
Islamic Finance serving company by Kerala State Industrial
Development Corporation (KSIDC) to provide financial services
in accordance with Shariah law.
Under the proposal, KSIDC would contribute about 11 per
cent equity and the corporation was taking steps to promoting
Islamic financial institution. The proposed institution will
not collect or charge interest for financing, the petitioner
said.

According to Swamy, the CEO of the proposed company has
to report to the Shariah Advisory board.

After hearing Swamy, the bench observed that the matter
has to be looked into and the parties concerned have to be
heard.

The Bench admitted the petition and issued notices to the
state government and KSIDC.

It also gave a direction to implead the Union Government
and RBI as respondents in the case.

KSIDC informed the court that the company has already
been registered and that it would function as per the
Companies Act and RBI regulations.

The petitioner stated that such an institution, utilising
government funds, was against the secular principles as
enshrined in the Constitution.

PTI



First Published: Tuesday, January 5, 2010 - 15:04

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