Abstract

Dues to various reasons, interest in Islamic law has gained momentum in the past few decades. Not only are the Muslim majority countries persistently adopting this law and incorporating it into their existing civil or common legal structures, even the rest of the countries frequently show their interest in this millennium old legal code. Thus, we frequently find the courts in the United States and the United Kingdom etc. discussing Islamic law under the umbrella of their respective legal system, for instance, in the context of default under some Islamic financing facility. While Islamic law has multi-faceted branches, its code of commercial/business transactions has many sub branches of its own; insolvency is one of those branches dealt with under the Islamic commercial/business code. However, since this law was developed centuries ago, its insolvency code mainly dealt with individuals and not corporate entities. In any case, one of the fundamental questions addressed by all existing legal systems in the world is that whether an insolvency regime should be debtor friendly or creditor friendly? The same question is also relevant in the context of Islamic insolvency law. In this research, we argue that the Islamic law of insolvency is based on the principles of ethics and fairness whereby relevant legal injunctions are supplemented by their respective ethical set of rights and responsibilities of both the parties, i.e. the creditor and the debtor. These legal and ethical injunctions make Islamic law of insolvency unique in the sense that it simultaneously becomes debtor and creditor friendly. Thus, we find that there is a balance attained in this case by addressing the issue of insolvency from the perspective of hereafter too, a feature that is unique to Islamic law and is not found in both the common and civil legal systems