Date : 09-02-2010

Question :

Two years ago, we went to court to file for financial compensation from the Department of Lands and Survey. Although the judge ruled in our favor, we received that compensation one year later along with the legal interest. This is because state law stipulates (9%) as interest against every year of delay. What is the ruling of Sharia on this interest?

The Answer :

All perfect praise be to Allah the Lord of the Worlds. May His peace and blessings be upon our Prophet Mohammad and upon all his family and companions.

The legal interest is from the explicit usury (Riba) which is forbidden for a Muslim to take, pay and help in. It is incumbent upon you (Asker) to return this usurious amount  to the state`s treasury since it is among the general rights that should be given back to the treasury, even in the form of a donation.

However, you don`t have to return the amount of this interest in case the financial compensation was less than the true value of the acquired property-including the legal quarter acquired without a compensation-and on basis of the estimate made by experts in this field. If this is the case then it is permissible for you to collect that legal interest as part of the real value of the acquired property. And Allah The Almighty Knows Best.