1.

TRANSMITTAL LETTER _______________________________________ April 21,

2015 Institute of Business Management, Karachi Dear Mr. Mansoor Ali Shahani We are
submitting to you the report, due April 21, 2015, that you requested. The report is titled
“ISLAMIC BANKING V/s CONVENTIONAL BANKING.” The purpose of the report
is to determine how Law that is Shariah Court plays role in this system of banking.
Sincerely, Pawan Kumar Ali Zain Sagar Sarib Sadiq
2. 4. iii LETTER OF ACKNOWLEDGEMENT In the Name of ALLAH the most Merciful
and Benevolent. As we present this report, we would like totakethis opportunity to pass
our gratitude to our respected teacher, who gaveus this opportunity and guided us during
the course of our endeavor to accomplish this task. We have taken efforts in this report.
However, it would not have been possible without your kind support. We are highly
indebted to Mr. Mansoor Ali Shahani for his guidance and constant supervision as well as
for providing necessary information regarding the report. We would like to express our
gratitude towards our colleague’s for their kind co-operation and encouragement, which
help us in completion of this report.
3. 5. iv Table of Contents TRANSMITTAL
LETTER .............................................................................................................ii LETTER
OF ACKNOWLEDGEMENT ........................................................................................iii
EXECUTIVE
SUMMARY ............................................................................................................vi
INTRODUCTION ................................................................................................................
.......... 1 SCOPE OF
BANKING................................................................................................................... 2
What is Bank and what history is behind
THIS? ........................................................................ 2 
BANK............................................................................................................................... 2
 HISTORY OF BANKING............................................................................................... 2
ISLAMIC
BANKING..................................................................................................................... 3
ROLE OF ISLAMIC
BANKING ............................................................................................... 3 PRINCIPLES
BEHIND ISLAMIC BANKING ......................................................................... 3
MODES OF ISLAMIC
BANKING............................................................................................ 4 
MURABAHA................................................................................................................... 4
 IJARAH............................................................................................................................
4  IJARAH-WAL-
IQTINA .................................................................................................. 4 
MUSHARAKAH ............................................................................................................. 4
 MUSAWAMAH ..............................................................................................................
5  ISTISNA'A.......................................................................................................................
5  BAI MUAJJAL................................................................................................................
5
MUDARABA................................................................................................................... 5
 BAI SALAM.................................................................................................................... 5
CONVENTIONAL
 BANKING.................................................................................................. 6 ROLE OF
CONVENTIONAL BANKING................................................................................ 6
Products of conventional
banking............................................................................................... 6 
TRANSACTIONAL ACCOUNT.................................................................................... 7 
SAVINGS ACCOUNT .................................................................................................... 7
 CERTIFICATE OF DEPOSIT.........................................................................................
7  CREDIT
CARD ............................................................................................................... 7  DEBIT
CARD.................................................................................................................. 8 
MORTGAGE LOAN ....................................................................................................... 8
 UNSECURED DEBT (Personal loan) .............................................................................
8
4. 6. v 
LOAN............................................................................................................................... 8
DIFFERENCES B/W ISLAMIC AND CONVENTIONAL
BANKING .................................... 10 CASE STUDY
1 ........................................................................................................................... 11 Study
based conclusion:............................................................................................................ 11
Case study
2 .................................................................................................................................. 12
RELATIVE SHARES OF TOTAL FINANCIAL INTERMEDIARY
ASSETS, .................... 12
CONCLUSION:.....................................................................................................................
....... 13
RECOMMANDATIONS : ...................................................................................................
........ 13
5. 7. vi EXECUTIVE SUMMARY The Conventional banking is very dependent upon the
interest in every aspect of banking, while the Islamic banking is totally against the
interest in every aspect of banking so due to the interest. The Islamic banking and the
Conventional banking, have very differences, which are mainly in product. Products are
offering just like the interest banks offers credit cards, debit cards, loans on interest
,leasing on interest, but the Islamic banking offer different products which are totally on
the Islamic halal rules Murabaha ,Ijara ,Ijarah-Wal-Iqtina ,Musharakah ,Musawamah
,Istisna'a ,Bai Muajjal etc. So these products are totally different from that of
Conventional banking.
6. 8. 1 INTRODUCTION This report is undertaken to understand the concept of Islamic
banking and Conventional banking, the difference between the two systems and their
economic implications for an economy. The prime source of revenue and cost of funds to
conventional banks (interest-based banks) is charging interest through lending and
accepting deposits for interest respectively. Interest is the major driver of operations of
conventional banks although other valuable services including guarantees, funds
transfers, safety of wealth, facilitation in international trade etc. also form a substantial
part of income of banks. Islamic banking, on the other hand, is a banking system, which
is in consonance with the spirit, ethos and value system of Islam and governed by the
principles laid down by Islamic Shariah. Interest free banking is a narrow concept
 denoting a number of banking instruments or operations, which avoid interest. Islamic
banking, the more general term, is based not only to avoid interest-based transactions
prohibited in Islamic Shariah but also to avoid unethical and un

7. COMPOUNDING OF OFFENCES
8. [Section 345, Cr.P.C.]
9. Sentence in non-compoundable cases. Where the offence is not compoundable but the parties to avoid
further bitterness and litigation compromise the matter. The Supreme Court reduced the sentence to
already undergone. (SC) 1976 SCMR 193 Khursheed Ahmed.
10. Compromise and sentence. Compromise and pardon by the aggrieved party to the convict in case u/S.
302, PPC. offence though not compoundable death sentence reduced to life imprisonment by the High
Court. (DB) PLJ 1979 Cr.C. (Lah.) 305. Pathana; 1979 P.Cr.LJ 354. Law has been changed now Sec.
302 PPC is now compoundable.
11. Compromise in murder case. Accused and deceased closely related. Heir of deceased compromise
without compensation and forgave the accused. Supreme Court reduced death sentence to life
imprisonment. 1982 PSC 624. Iftikhar Ahmed; NLR 1982 Cr. 295; PLJ 1982 SC 238. Muhammad Bashir
PLD 1982 SC 139. 1982 PSC 724. Muzaffar Mustafa. (Benefit of Sec. 382-B, Cr.P.C also given in life
sentence.)
12. Accused appellant forgiven for offences u/Ss. 302, 324/34 PPC and also absconding accused in the
name of ALLAH by legal heirs of the deceased and swore affidavits to that effect supported by their
statements in the Court. Appeal accepted. Appellant and absconding accused set at see PLJ 1997 Cr.C.
(Lah.) 1122, Muhammad Iqbal etc.
13. Murder compromise and Federal Shariat Court. Federal Shariat Court holding that death penalty was
very harsh and inconsistent with Shariat. Held, benefit of judgment not available to murders committed
before pronouncement of judgment. (SC) NLR 1981 Cr. 153. Karam Khan. 
14. Compromise in non-compoundable cases is patently against law. Acceptance of compensation does not
cure illegality. Appeal ordered to be disposed of on merits. 1976 P.Cr. LJ 94 Ghulam Nabi.
15. Compromise in non-compoundable cases. Where the injured man in a non-compoundable case being on
friendly terms desires a reduction of sentence ends of justice will be met by reducing the sentence under
section 307, PPC. (DB) AIR 1944, Pat, 37 Sona Pant v. Emperor 44 Cr. LJ 336 (Now the offence is
compoundable).
16. Compromise in non-compoundable cases. Appellants sentenced to 5 years R.I. u/Ss. 307, 365, 149, 148
PPC parties compromising and producing compromise deed in Court. Sentence reduced to already
undergone, (about 23 months) NLR 1984 Cr. 553. Gul Anar etc.
17. Compromise in non-compoundable cases, compromise for offence u/S. 352, PPC accepted and
sentence reduced to already undergone. NLR 1988 Cr. 614 Jan Muhammad etc. NLR 1988 Cr. 620
Kamir etc.
18. Acceptance of compensation by parents of deceased and pardoning of convict appellant can be treated
as mitigating circumstance in light of Muslim Jurisprudence. Sentence of death reduced to life
imprisonment and fine remitted as compensation had already been paid. (SC) NLR 1982 Cr. 190.
Muhammad Bashir: 1982 PSC 297. (Law has been changed.)
19. Sections 324 and 148 , PPC. Case under section 324 and 148, PPC allowed to be compromised by the
Magistrate and acquitted the accused. Held section 148 not compoundable. Retrial order under section
148, PPC (DB) PLD 1950 Lah. 86 Crown v. Muhammad Hussain.
20. Police opinion should not be sought by the Magistrate before allowing composition. 38 Cr. LJ 589 Partap
Singh v. Emperor.
21. Case initiated under section 325, PPC.,  on police challan. Compromise deed not bearing signature of
complainant. Magistrate's order acquitting accused based on such compromise held in violation of
mandatory provisions of section 345, Cr.P.C case remanded for trial according to law. (DB) PLD 1965
Pesh. 265 State v. Muhammad Asif.
22. Proof of factum of composition. In an offence compoundable without the permission of the Court, one
party alleged that the case had been compounded outside the Court and other resiled from compromise
and denied it. In such a case it is competent for the Court to take evidence regarding the factum of
compromise and if compromise is proved he should acquit the accused 39 Mad. 946 Muhammad Kani v.
Pathani 41 Mad. 685 Kumarasami v. Kupusami.
23. High Court allowed compromise in revision where the Magistrate refused to allow compromise without
sufficient reason. 23 Cr.LJ 85 Sewa Singh.
24. Composition of offence with some of the accused does not in law have the effect of an acquittal of the
remaining accused, and therefore, the conviction of the remaining accused is not illegal. (FB) ILR 5 Lah.
239 Anatia v. Crown; (DB) ILR 1 Lah. 169.
25. Partial compromise. In case of partial compromise that judge must hear the appeal before he reduces the
sentence. (DB) PLD 1956 Dac. 102 Sardar Ali. v. Samad Ali.
26. Forfeiture of bond. Composition under section 345 does not bar forfeiture of bond to keep peace. PLD
1956 Pesh. 65 Umar Daraz Khan.
27. Accused pleading guilty. Nevertheless the appellate Court can allow composition in compoundable cases
though the accused cannot challenge his conviction in appeal. 1975 P.Cr. LJ 616, Khadim Hussain etc.
28. Non-compoundable offence compromised. Soon after murderous assault complainant compromising with
the accused, a cousin. Sentence reduced to already undergone. 1977 P.Cr. LJ 154 Muhammad Sadiq.
29. Compromise allowed by Supreme Court for an offence under sections 324/34, 325/34, P.P.C PLJ 1980
SC 161 Abdul Haq. 1977 SCMR 51. Munir Ahmed.
30. Compromise in case u/S. 325, PPC made in Supreme Court accepted and the appellant acquitted. 1983
SCMR 408. Abdul Razaq.
31. Effect on sentence. The effect of composition on sentence: see sentence.
32. Compounding of murder case. When offence was committed before the Criminal Law (Second
Amendment) Ordinance VII of 1990 came into force, offence committed in the case could be
compounded on account of provisions of sections 338-E read with 338-H. PPC PLD 1991 202 Safdar Ali
etc.
33. Payment of badal-i-sulah. On payment of the value of diyat, which is the value of 30,630 grams of silver,
that is Rs. 1,71,000, the Supreme Court granted permission to compound the offence. (Sections 310 &
323, PPC ref). The entire amount of Rs. 1,71,000 was brought in the Court and paid to the heirs of the
deceased. PLD 1991 SC 202 Safdar Ali etc. PLJ 1991 SC 256. PLD 1991 SC 202.
34. Badal-i-Sulah. Offence of qatl-i-amd committed by three offenders by murdering one individual. The
number of accused would be of little consequence when the heirs of victim where satisfied with the
amount of diyat, being paid to them. Sum of Rs. 1,71,000 was held to be fair badl-i-sulah for
compounding the offence keeping in view the financial position of the convict and also of the heirs of the
victim. PLD 1991 SC 202 Safdar Ali etc. PLJ 1991 SC 256.
35. In pending appeals where offence is compounded the appellant is to be acquitted u/S. 345 (2) & (5), Cr.
P.C PLD 1991 Lah. 347. Muhammad Ashraf.
36. Promise by one heir of deceased, death sentence reduced to life imprisonment. PLJ 1991 Cr.C. (Lah.)
272 Manzoor Ahmed.
37. U/S. 845, Cr.P.C When appeal is pending  the offences u/Ss. 302, 307, PPC can be compounded by
leave of the Court and such composition shall have the effect of acquittal. When the judgment has
attained finality the Courts cannot give effect to the compromise. Punishment by way of Tazir cannot be
awarded by the Courts when the offence has been pardoned. (FB) PLD 1991 Lah. 347 Muhammad
Ashraf.
38. Compromise by father of deceased u/s 345 (2) Cr.P.C. In the presence of father, brothers and sisters do
not inherit from the deceased, as they are not the legal heirs. Therefore, compromise by father of the
deceased is competent. PLJ 1995 Cr.C (Kar) 40, Bashir Ahmed.
39. Composition of offence u/s 302 PPC read with Sec. 311 PPC by Father of the deceased is competent
when the deceased was childless. Brothers and sisters of the deceased are excluded by father. (D.B)
PLJ 1996 Cr.C. (Q) 1662, Niaz Muhammad.
40. Compounding of murder case when accused sentenced to life imprisonment, question of the heirs of the
victim compounded their right of qisas would not arise and such a case would fall u/S. 345 (2), Cr. P.C.
as amended by Criminal Law (Amendment) Ordinance 1991. PLD 1991 SC 202. Safdar Ali etc. PLJ 1991
SC 256.
41. Compounding of offence and the right of minors can be guarded by the payment of the amount to the
natural guardian; in this case the mother of the minors. PLD 1991 SC 202. Safdar Ali etc. PLJ 1991 SC
256.
42. Compounding u/S. 345 Cr.P.C. in the Supreme Court. No compromise can be accepted without
satisfaction of the Court for which 3 stages have been prescribed. Application for compromise and filing
of the proforma prescribed by the Supreme Court to be taken seriously. The office to entertain
compromise application only when the proforma is properly filled. Secondly the parties must satisfy the
Judge in chambers that each entry of the proforma is correct. Thirdly in the Court only that compromise
 shall be accepted wherein there is no doubt or dispute left. price of 30,630 grams of silver is to be
mentioned in the proforma. 1992 SCMR 1218, Abdul Ghafoor and 3 others = PLJ 1992 S.C 215.
43. Unless all heirs of victim consent case against the accused cannot be compounded u/S. 345(2) column
(3) Cr.P.C. and sec. 309 (2) PPC is not applicable. Compromise rejected. PLJ 1997 SC 1260, Sh.
Muhammad Aslam v. Shaukat Ali etc.
44. Heirs of both the deceased who were majors  stated in the Supreme Court that they had forgiven the
accused petitioners. Appeal allowed. 1996 SCMR 525, Liaqat Ali.
45. Compromise by the heirs of the deceased in the Supreme Court u/s 345 Cr.P.C. after receiving Diyat
amount. Compromise found to be genuine. Accused acquitted. The petition had submitted compromise
proforma to the Supreme Court after conviction by the High Court alongwith necessary affidavits which
were scrutinised through Chamber proceedings. Petitioners acquitted. 1996 SCMR 523, Khalid Zaman.
46. Compromise in murder cases. Any doubt regarding compromise by free will shall entail rejection of the
compromise. Proforma prescribed by the Supreme Court for compromise to be filled carefully and filed
with compromise application. PLJ 1992 S.C. 215, Abdul Ghafoor etc. = 1992 SCMR 1218
47. Supreme Court directed enquiry to be conducted by District Magistrate to ascertain terms of compromise
its genuineness, voluntariness and also for reporting whether interest of minors had been properly
ensured when all the heirs of the deceased were not present on the date hearing to confirm compromise.
1992 SCMR 694, Muhammad Azam.
48. When case is compounded u/s 345 Cr.P.C. for offence u/s 302 PPC the question of tazir u/s 311 PPC
does not arise, the accused is to be acquitted. PLD 1992 Pesh. 176, Nazir Ali etc.
49. Pardon in the name of Allah, waiving the right of Qisas or Diyat in murder reference before the High
Court, father and mother of deceased identified by lamberdar and ex-councillor. Deceased unmarried.
Compromise allowed u/S. 345 Cr. P.C and appellant acquitted. 1994 P.Cr. LJ 980. Basharat.
50. Parties compounding the offence to which no objection raised by the prosecution. Petition converted into
appeal, compounding of offence allowed and appellants acquitted. 1995 SCMR 342, Muhammad Iqbal v.
The State.
51.