The applicants claimed that, since 2003, the first applicant had been a customer of the first respondent, via its shari'a Bukittinggi branch (PT. Bank Bukopin Cabang Syari'ah Bukittinggi). Prior to becoming a customer of the first respondent, the first applicant had been a debtor of PT. Bank Rakyat Indonesia (BRI) Cabang Bukittinggi, to which it owed IDR 483,2333,530 as at June 2003. At that time, the first applicant's business was experiencing financial difficulties, leading the first applicant to apply to the first respondent for a financial loan for financial support, as well as to pay his debts with PT. BRI Cabang Bukittinggi. After examining the relevant securities documents, the first respondent agreed to enter into an Al-Murabahah (sale-purchase) agreement with the first applicant. Once the relevant documentation was executed, the first respondent provided to the first applicant IDR 500 million, with which it paid its debt to PT. BRI Cabang Bukittinggi. The first respondent then took from PT. BRI Cabang Bukittinggi the deed of title of a property in the name of the second applicant (the second applicant was already an authorised guarantor pursuant to the agreement between the first applicant and first respondent).
In the Al-Murabahah agreement document the first respondent had agreed to make available items for the first applicant to the value of IDR 500 million, and the first respondent was to sell those items to the first applicant for IDR 794,816,460. (In an Al-Murabahah agreement there is an absolute requirement that there be items for sale subject of the agreement.) As there were no items purchased by the first applicant from the first respondent, the agreement had no legal authority. The agreement was further prohibited, according to the applicants, because it allowed the first applicant to borrow from the first respondent a sum of money, secured by a stationary object (the property) for a period of five years, with an additional payment for the first respondent which, according to Islam, constituted riba (usur or interest).
The Supreme Court, in the first instance, declared that the relationship between the first applicant and first respondent was one based on borrowing a sum of money, secured against a stationary object. Furthermore, that profit instalments provided by the first applicant to the first respondent were to be treated as payment instalments against the debt it owed to the first repsondent, because providing additional payments outside the scope of the principal to the lender would be contrary to shari'a. The other relevant documents, including the debt notice, the applicants claimed, were also null and void.
In addition, another Al-Murabahah agreement had been made by, and before, the first co-respondent, tying the first applicant and first respondent to the sale and purchase of items valued at IDR 581,230,044, with a sale price of IDR 350 million, and a murabahah profit for the first respondent of IDR 231,230,044. This was to be paid in instalments over 60 months, tied to a debt notice and mortgage deed, both of which were prepared by, and before, the first co-respondent, secured by the same property. Similarly, however, this agreement had no object for sale or purchase.
The total of both agreements resulted in the first applicant being in IDR 850 million debt to the first respondent. After the first applicant had paid to the first respondent IDR 363,611,240, the remainder owing, it claimed, was IDR 486,388,760. However, while the first applicant had originally owed PT BRI Cabang Bukittinggi no more than IDR 500 million, it now claimed the first applicant owed IDR 1,376,046,504 (this was the principal debt combined with interest). The first applicant maintained, however, that he had paid to the first respondent IDR 363,611,240 in instalments up until March 2006.
The Bukittinggi State Court had already issued a notice stating that the property held as a security would be auctioned on 16 August 2006. The first applicant, upon becoming aware of the fact that the two Al-Murabahah agreements were null and void, sought to prevent the first respondent from auctioning the property. Despite being made aware of, and reading, the notice, the second respondent went ahead with the auction. Accordingly, the applicants claimed that the auction should have no legal authority, and pursuant to art 49 of Law No. 3 of 2006 on the Religious Judiciary, the civil courts were precluded from resolving shari'a economy-related matters anyway.
The applicants also objected to the conduct of the third respondent, the purchaser of the property and a staff member of the legal team of the first respondent. The applicants alleged that the third respondent knew the auction reserve price and therefore only had to pay a little bit over the reserve to secure the property.
The applicants sought damages for actual loss, as well as pain and suffering. They claimed that the land was worth IDR 2.5 billion, and yet the third respondent had only paid IDR 993,600,000 as the purchase price. Moreover, they sought IDR 500 million in damages for the stress and emotional strain incurred from the entire ordeal.
The Bukittinggi Religious Court (lower court) had declared the two Al-Murabahah agreements null and void, and declared the relationship between the first applicant and first respondent a financial loan (Al-Qardh). The IDR 850 million debt owed by the first applicant to the first respondent was reduced to IDR 486,388,760, taking into account the instalments paid by the first applicant totalling IDR 363,611,240. The first respondent had also been ordered to transfer to the applicants the profit from the auction, minus the remaining debt of IDR 486,388,760, leaving the respondents owing the applicants