Fatwa No : 83037
In the event of terminating a joint business, upon whom will the responsibility of the loss fall?

In the event of terminating a joint business, upon whom will the responsibility of the loss fall?

Assalamu alaikum ! Honourable Mufti Sahib, after salutations, I submit the following: I work in solar energy (solar systems). My company’s name is Beyondgreen Solar Solution. In June 2018, we intended to begin work related to batteries. For this, we contacted people in the battery trade, and through these contacts we brought a senior, experienced battery professional, Mr. Naeem Akhtar, onto our team. Thereafter a company was formed. Since we lacked capital, we established a partnership company, with the following share structure:
• 51%company shares,
• 19%shares for the senior expert, Naeem Akhtar,
• 30%investors’ shares.
We then began approaching investors. On July 29, 2018, we prepared a feasibility study, the details of which exist and have been presented to you. We placed this feasibility before our investors and our team, and by mutual consent we commenced the work, as detailed below. According to the feasibility report we had prepared, we negotiated the purchase of a battery plant in China and held a meeting with our investors and working team. By mutual agreement it was decided that on [date] Naeem Akhtar and two company representatives would travel to China. On the very morning of the date we were all to depart, we learned that the battery plant in China, the one we intended to purchase—had been sold that day, as we had not paid any advance. Accordingly, that afternoon we decided we would not travel to China that night. A few days later, a meeting between our company and the investors resolved that, since we had not gone to China and the earlier feasibility had been prepared for a plant that had already been sold, that feasibility stood dissolved. By mutual consent it was decided that two company representatives and Naeem Akhtar would now go to China and make a decision there according to the prevailing circumstances. On November 27, 2018, we went to China and, with the investors’ mutual consent, purchased a battery plant there. We were given a delivery time of 1–2 months, so it was decided that one company representative would go to China to take delivery of the plant. When the representative went and inspected the plant, it was found that one mould did not meet the company’s specifications. After consulting Naeem Akhtar, the representative decided that, apart from that one mould, the rest of the battery plant, the SKD, and the battery materials should be shipped from China to Pakistan. In March 2019, the battery plant, SKD, and battery materials arrived in Pakistan. In April, the plant was installed. In May, the training (SKD) team from China arrived in Pakistan, and during the eight-day training the company encountered a problem with the charging software, which the Chinese team attributed to the senior expert, Naeem Akhtar. He accepted responsibility, and then the Chinese team departed. The company’s representative and Akhtar’s team also participated in that training. At the end of May, the senior expert Naeem Akhtar left the company due to personal reasons, without any notice. Eid holidays occurred during this period, and immediately thereafter Naeem Akhtar’s team also left; we informed the investors accordingly. We immediately hired new experienced personnel and notified the investors, and on that basis the battery factory was operated in June. On July 5, 2019, the company delivered its first 1,025 SKD batteries to the market. We had received 2,000 SKD batteries from China, with details as follows:
We sold 1,025 batteries in the market, and the remaining batteries were lost during the charging software and training period. During this time the company’s capital was exhausted, which we reported to the investors. The investors informed us that they had no additional capital available; with their concurrence, a new investor was brought in. After July 2019, we moved to our Process Line (the above details pertained to the SKD, i.e., the assembly line). Process Line details
The period for operating the Process Line was July to September, due to the previously mentioned delay in delivery of the mould; during this period, Chinese training for the Process Line was also conducted. The company’s own Process Line first production and deliveries began in October 2019 and continued until the March 2020 lockdown, as follows:
• October 2019: 205 batteries
• November 2019: 1,300 batteries
• December 2019: 1,040 batteries
• January 2020: 2,000 batteries
From February 2020, the company had entered mass production, and by the March 23, 2020 lockdown the company had produced 8,752 batteries. Then, due to the unforeseen calamity, a lockdown was imposed nationwide. From March to July 2020, deliveries of that stock continued; during this time, owing to the lockdown, there was no new production, though the company’s expenses continued. At the end of July 2020, in a meeting with the investors, the company informed them of the need for additional capital, which the investors refused, advising the company to arrange funds on its own. We informed the investors that if we were to restart operations without funds, it could take 6–8 months to return to production. By mutual consultation, the company commenced battery production again, and instead of making oxide in our own factory, we began purchasing it from the market. The company took advance payments and in-kind credit from the market and began producing batteries. In August, September, and October, we produced and delivered 5,800 batteries (total). In November 2020 the company produced 5,255 batteries; in December 2020, 6,131; in January 2021, 7,418; and in March 2021, 5,843. During this period, complaints began to be received regarding the batteries of December 2020 and January 2021, due to which we had to halt operations in April 2021; we informed the investors accordingly. The cause of the product defects became apparent about one to one-and-a-half months later: it was the material we had procured from the outside market, as established by a lab test. Now, upon winding up our business, upon whom does the responsibility for the losses rest? Kindly provide a detailed answer according to Shariah.

الجوابُ حامِدا ًو مُصلیِّا ً

A Mufti does not possess knowledge of the unseen; he is bound to answer according to the question presented. The responsibility for whether the question is based on truth or falsehood lies upon the questioner. Therefore, if the details mentioned in the question are indeed correct, then in the aforementioned battery business, since the questioner’s company, Mr. Naeem Akhtar, and the investors were partners in proportion to their respective investments, and since they commenced the work with mutual consent and consultation, and the company’s representatives continuously informed the investors from time to time regarding the nature and details of the business then, in such circumstances, if the company’s representatives did not act negligently in running or developing the business, and the loss occurred instead due to external factors, such as the suspension of production because of lockdown conditions, or the wastage of batteries during the charging software and training phase, or the procurement of oxide on credit from the market, or other similar reasons in which no negligence or fault of the representatives was involved, then the loss incurred by the company shall be borne by all the partners (the company, Naeem Akhtar, and the investors) in proportion to their respective investments.
However, if Naeem Akhtar had been appointed with a fixed wage for his services, then after leaving the work, he will not be entitled to any agreed wages. Likewise, an investor who entered the business after it had already begun shall not be held responsible for any losses that occurred prior to his joining; but for losses incurred after his entry, he will remain liable according to the proportion of his capital. Nevertheless, if the nature of the question is different, then both parties should approach a recognized local Dar-ul-Ifta, explain their respective positions in detail, and seek a ruling from the learned Muftis present there.

مأخَذُ الفَتوی

كما فى بدائع الصنائع في ترتيب الشرائع: واختلاط الربح يوجد وإن اشترى كل واحد منهما بمال نفسه على حدة؛ لأن الزيادة وهي الربح تحدث على الشركة. (إلی قوله) فلا تعتبر، حتى لو هلك بعد الشراء بأحدهما: كان الهالك من المالين جميعا؛ لأنه هلك بعد تمام العقد. (6/ 60)۔
وفيه ايضاً: والوضيعة على قدر المالين متساويا ومتفاضلا؛ لأن الوضيعة اسم لجزء هالك من المال فيتقدر بقدر المال اھ (6/ 62)۔