Question:

I wish to enquire the following regarding the mudharabah partnership:

1)   Is the rabbul maal allowed to interfere in the business that he had given to the mudharib to run and derive profits to be shared between the two of them, with the understanding that the rabbul maal clearly indicated his intentions of wanting to retire, therefore hired a mudharib to run his business as he deems fit, taking into consideration-n the mudharib’s expertise in such a business?
Interference meaning his occasional coming into the business and making changes with merchandising, pricing/costing, some vital staff decisions – these decisions and changes visibly having a negative impact on the business.  In spite of him being informed of his interference as such, with the rabbul maal insisting that he is still the boss/owner of that business and can therefore do as he wills, contrary to the initial agreement that they had entered.  Also taking into account that the expected profits the rabbul maal had in mind are being achieved through the efforts of the mudharib.
2)  What are the limitations of the Rabbul maal?
3)  Is the mudharib allowed in anyway to reprimand the rabbul maal about his so called interference?

Answer:

In the Name of Allah, the Most Gracious, the Most Merciful.

As-salāmu ‘alaykum wa-rahmatullāhi wa-barakātuh.

Mudharabah is a partnership where an investment is injected from one party and the labour is executed from another party.  The working partner will invest the funds provided aiming to generate profit.  Proceeds will be distributed according to the contract mutually agreed upon.[i]

The rabbul māl has the right to direct the mudharabah and intervene as long as the funds he has invested remain in the possession of the mudhārib.  The rabbul māl has a right to regulate the mudharabah before and after the contract is signed as long as his funds have not been invested.  Once the mudhārib invests the funds, the rabbul māl does not have the prerogative to intervene in the management of the mudharabah. [ii]

The sensitivity of business partnerships requires that the Islamic laws of conduct and manners be upheld in business partnerships.  The mudhārib may discuss the issue of limitations with the rabbul māl.

The mudhārib may consider informing the rabbul māl and at the most, he can offer his suggestions regarding the business and he (the mudhārib) may consider his suggestions.  He is not bound to implement those suggestions.

And Allah Ta’āla Knows Best

Mufti Faraz Adam