Bantul Religious Court Decision No. 700 of 2011: Mudharabah Profit Sharing

The 12 plaintiffs claimed that they were prospective cooperative members that had deposited money into a futures fund with Koperasi Serba Usaha Syari'ah Baitul Maal Wat Tamwil Islam Sejahtera (BMT ISRA) for family reasons that may emerge in the future. The plaintiffs alleged that the first and second defendants, the Director and Chairperson of BMT ISRA respectively, did not implement a cooperative system, viz. cooperative funds or capital sourced from a principal pool of funds and obligatory funds from cooperative members. Rather, the plaintiffs alleged that the defendants had sourced funds from customers who were members of the cooperative, prospective members of the cooperative, as well as those who were neither. The defendants did, though, obtain a share of profits (nisbah), and in their management of the funds, used a shari'a-style system that did not involve interest (riba).

Initially, the plaintiffs received their share of the profits promptly, but when their profit share for November 2010 did not materialise, the plaintiffs sought to bill the defendants for it, and to retrieve their futures investment. BMT ISRA, however, had closed. The plaintiffs had learned from news circulations that it was not only the Brebes branch that had closed, but almost all BMT ISRA branches. They had also learned that the first and second defendants, as director and chairperson, were legally implicated. The plaintiffs alleged that the defendants had shown a lack of good faith with respect to them, and collectively sought from the defendants IDR 282 million in initial funds not yet returned, as well as IDR 62,286,3000 in unpaid profit share (total: IDR 344,286,300).

In addition to dismissing the plaintiffs' claim in its entirety, the second defendant argued that the court was precluded from adjudicating the matter as the plaintiffs had deposited monies in Brebes, not Bantul. Moreover, both the first and second defendants objected on the grounds that they were not director and chairperson respectively, according to the deed of establishment of BMT ISRA, and that Koperasi Serba Usaha Syariah Baitul Maal Wat Tamwil Islam Sejahtera was not included in the deed. The defendants also maintained that they themselves had not entered into an agreement with the plaintiffs.

The court dismissed the second defendant's objection, finding it was authorised to adjudicate the case. It also found that the parties had indeed entered into an agreement together, pursuant to which the plaintiffs were entitled to the return of investment funds already paid (IDR 193 million), but not the resulting profit share (IDR 38,693,700). Neither were they entitled to the IDR 79 million not yet paid and resulting IDR 23,592,600 in profit share.

The court cited Fatwa No. 7 of the National Shari'a Board - Indonesian Council of Ulama, noting that a Mudhorobah financing agreement entails the shari'a financial institution financing 100 per cent of the project, while the customer(s) acts as the enterprise manager. Moreover, that the parties to the agreement are to agree on when funds are to be returned, and when profit shares are to be distributed, and that the shari'a financial institution is to bear all financial losses resulting from the agreement, except for that resulting from the customer's fault (intentionally or negligently) or contravention of the agreement. With regards to profit sharing, the Fatwa dictates that it must be divided between the two parties, and the percentages of the proportions to be divided must be included in the agreement. Unfortunately for the plaintiffs, as their agreement did not adhere to the latter point, the court could not order the defendants to pay to them the IDR 38,693,700 in resulting profit share.

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