The Kerala High Court on Thursday (3rd Feb, 2011) dismissed petitions challenging the Kerala government’s decision to establish India’s first Islamic Bank which will work on the principles of Shariah.

The order came from a Division Bench comprising Chief Justice J Chalameswar and Justice P R Ramachandra Menon, which rejected petitions filed by Janata Party President Subramaniam Swamy and another. The petitioners contended that the state establishing a bank which will work on the principles of a religion will violate the principle of secularism enshrined in the Constitution. However, the court did not agree.

Reacting to the HC verdict, Swamy said he will consider appealing to the Supreme Court after going through the full text. “I will challenge the same if it was dismissed on merits,” he said.

Bear in mind that the KSIDC (a govt body) will have an 11% stake in the bank – which conceivably goes against the notion of the state staying away from religious matters.
***
Jai Ho “Secular” India.

…Even while the Centre was considering the idea of introducing Islamic Banking, the Kerala state government took a fast decision in mid-August and approved a project report prepared by Ernst & Young.

In its order dated 14 Oct., the Kerala government accorded sanction for registration of an Islamic finance serving company by Kerala State Industrial Development Corporation, to provide financial service as per Sharia laws.

Kerala State Industrial Development Corporation, the designated agency for the formation of the bank, would have 11% stake in the proposed banking company and it would be initially registered as a non-banking finance company and later get transformed into a full-fledged Sharia-compliant bank. The government had planned to complete all registration formalities in 2009, so that the NBFC could become operational in 2010.

In a reply (CHN/RIA/09/985/22 dated 10.11.2009) to the application of one Mr. T.G. Mohandas under ‘RTI Act’ of 2005, Kerala State Industrial Development Corporation represented by its Managing Director stated that: KSIDC is taking steps to promote Islamic Financial Institution; it is a company promoted by the Private Promoters and KSIDC; the proposed institution will not collect interest or charge interest for financing. It will function with full compliance of SHARIA PRINCIPLES. Advertisements for filling up vacancies for the positions of Chief Executive Officer (CEO), Company Secretary and so on have been placed in the website (http://ksidc.org/) and in the terms of reference for CEO, it is stated that he will report to the Sharia Advisory Board.

…
This move of the Kerala Government was challenged by former Union Minister and Janata Party President Dr. Subramanian Swamy in the state High Court.

…In his PIL, Dr. Swamy contended that public money was being appropriated to favour a particular religion in a secular country, as KSIDC has 11% stake in the multi-crore bank.

He said, “The government’s participation is clear instance of state favouring a particular religion. The Sharia is the canon law of Muslims. A financial services company set up with government participation which would follow the canon law of a particular religion is a clear instance of the state favouring a particular religion. This is violative of Article 14 and 25 of Constitution which promises equality before law and right to freedom of religion. A 7-judge bench of the SC had ordered that no public money should be used for promoting institutions of a particular religion.”