Lawyer Malik Imtiaz Sarwar said there would be an incursion of the judicial power of the federation should that authority be transferred to other bodies.
“The doctrine of separation of powers and the independence of the judiciary are basic features of the Federal Constitution and an essential part of its basic structure,” he said.
Malik supported his argument by relying on the celebrated cases of Semenyih Jaya and M Indira Gandhi which ruled that judicial power was at all times vested with the judiciary.
The lawyer made this submission today in a constitutional reference following a dispute in five commercial agreements between a financial institution and a shipping company.
Kuwait Finance House (Malaysia) Berhad (KFH) brought a claim against JRI Resources Sdn Bhd and three guarantors for alleged failure to make RM120 million payment under Islamic banking facilities, namely Ijarah facilities and asset purchase agreements.
JRI generated its revenue through charter-parties from the various vessels it operated.
Beneficial ownership of these vessels was vested with KFH under the Islamic banking agreements.
A dispute arose as to who ought to have been responsible for the payment of major maintenance work of the vessels as certain clauses of the agreements require KFH to be responsible for major maintenance works whereas certain other clauses provide that JRI be responsible for all maintenance work.
This became an issue because JRI was bearing all the maintenance cost and therefore unable to service the loan repayment.
The High Court referred to these conflicting clauses in the agreements to the Shariah Advisory Council (SAC) to determine whether these were shariah-compliant.
The SAC ruled the agreements were valid and shariah-compliant.
A question then arose if SAC’s ruling under Section 57 of Central Bank of Malaysia Act 2009 was binding on the High Court.
JRI took the position that the SAC ruling was not binding on the High Court as judicial powers were vested only with the judiciary.
Last year, JRI filed the reference to the Federal Court, but newly-appointed Chief Justice Richard Malanjum decided the matter should be heard by an enlarged bench due to its impact on Islamic banking and judicial power.
Lawyer Yoong Sin Min, who appeared for KFH, said the SAC merely ascertained whether the agreement was in line with Islamic law.
“The SAC did not determine the facts and issues in the case. They did not usurp the functions of the courts,” she said.
Lawyer Cyrus Das, who represented Bank Negara as intervener, said SAC did not encroach into functions of the judiciary as it (SAC) did not have an adjudicative function.
“The ascertainment by SAC is also not final and not enforceable, unlike a court ruling,” he said.
The bench has reserved judgment.