PARTNERSHIP IN ISLAM

Introduction of PARTNERSHIP IN ISLAM

 “Shirakat” (شراکۃ (is an Arabic word. It is a noun. Its root letters are ک ر ش which means partnership. A partnership deed ( المتشارکین بین عقد (is a document or instrument in which the terms of partnership contract are written and authenticated by the parties. Each one of the party is called a partner .(شریک)

The partnership firm is called Shirkat .(شرکۃ) Partenrship or shirakat contract signifies the conjunction of two or more persons to carry on a business to share the profits by joint investment as prevalent at the legislative period. It may be a partnership, 

 in a specified amount of capital; 

 in labour or contribution of labour and skill; and 

 partnership in credit where no capital is contributed and the partners buy and sell on credit under an understanding that they shall divide the profits. A partnership of mixed character may be in cases of capital and labour, agricultural fields and labour; industrial enterprises and similar things.

1  Where the contract of partnership is to share capital and profit it is called `Aqd bayn al-Mutasharikayn ( بین عقد .(المتشارکین 

2. Where partnership is not in profit but in the capital it is called ۔(مضاربۃ)Mudarabat 

3. Where partnership is neither in capital nor in profit it is called ۔(بضاعۃ) at`Bida The essential element of partnership is joining or mixing up with each other of the capitals.

IS PARTNERSHIP BUSINESS ALLOWED UNDER THE SHARI'AH? 

Partnerhsip per se is permissible in Shari`ah. The Holy Qur’an says:

12. In what your wives leave, your share is a half, if They leave no child; but if They leave a child, ye get a fourth; after payment of legacies and debts. In what ye leave, their share is a fourth, if ye leave no child; but if ye leave a child, They get an eighth; after payment of legacies and debts. if the man or woman whose inheritance is In question, has left neither ascendants nor descendants, but has left a brother or a sister, Each one of the two gets a sixth; but if more than two, They share In a third; after payment of legacies and debts; so that no loss is caused (to any one). Thus is it ordained by Allah. and Allah is All-knowing, Most Forbearing. [4:12]

24. (David) said: "He has Undoubtedly wronged Thee In demanding Thy (single) ewe to be added to His (flock of) ewes: truly many are the partners (in business) who wrong Each other: not so do those who believe and work deeds of righteousness, and How few are they?"...and David gathered that we had tried him: He asked forgiveness of His Lord, fell down, bowing (in prostration), and turned (to Allah In repentance).

[38:24]

In the Hadith it has been stated:

کنت شریکی فی الجاھلیۃ فکنت خیر شریک لا تداری ولا تماری

عبد الرحمن بن مهدي عن سفيان عن إبراهيم يعني ابن مهاجر عن مجاهد عن قائد السائب عن السائب

أنه قال للنبي صلى الله عليه وسلم كنت شريكي فكنت خير شريك كنت لا تداري ولا تماري

The Messenger of Allah ( صلی لله علیہ و آلہ وسلم ) said: You were my partner and you were a good

partner.You neither were showy nor disputing with the customers.

Partnership business is valid according to the Shari`ah. People used to do their business by forming partnerships during the period of the Messenger of Allah صلی لله علیہ و آلہ وسلم) ) and the Messenger.

2 See Sunan Abu Da’ud, Sunan Ibn Majah, Musna Ahmad bin Hanbal and Mustadrak Hakim who have transmitted this hadith in their collections on the authority of Al-Sa’ib

.(رضی لله تعالیٰ عنہ) 6

of Allah ( صلی لله علیہ و آلہ وسلم ) did not

object to do so. Rather he ( صلی لله علیہ وآلہ

وسلم ) made in prevalent on better terms.

The Messenger of Allah ( صلی لله علیہ و آلہ

وسلم ) said: Among two partners I am a

third partner till they do not commit

dishonesty. But when a partner commits

dishonesty I exit out of them.

Shirkat in its literal sense means to join two parts in such a manner that there remains no distinction of one from the other. An `Aqd shirkat is also called shirkat even if there is no such mixing or

joining. Technically, it signifies a contract which takes place concerning the capital and the profit. The where the shirkat is only in profit it is termed as mudarabat and where the shirkat is only in capital it is

called bida`at.3

Shirkat and Shirakat are synonyms. People of different kinds and different approaches of minds join in partnerships and run the business by division of work. For Partnership more than one person is

needed otherwise it will be no partnership. There must be at least two persons to make a partnership and there my be more than two persons.

According to Imam Quduri : Shirkat means a contract between two persons to do a business and being

partner in the capital and the profit and loss.

The essential elements of Shirakat are:

• Offer and acceptance.
• Two or more persons contracting to run their business or trade on partnership basis.
• There must be capital and labour.
• Partners are entitled to well determined share both in profit and loss according to the ratio of their investment or services.
• Where a partner is given a fixed amount he will not be a partner.
• Action of one partner is action of another as well.

For More Details: You can read through PDF file.

Content Credit: 

Justice (R) Dr. Munir Ahmad Mughal

Punjab University Law College; Superior Law College

Date Written: December 24, 2011