Reference is made to the penultimate paragraph of the last article wherein I stated that the aggregate excess amount paid by the unrestricted agent over and above the market price while carrying out purchases in terms of the Wakalah arrangement shall be recovered from the agent so as to compensate the principal.
Will that be the satisfactory chastisement for a dishonest agent? Of course not. A thorough investigation ought to be carried out as to where else the hapless principal was taken for a ride by the unscrupulous agent.
This may include the sale of Wakalah goods or assets made by the agent, whether these were carried out at par with the market price or lower than that. Similar to the pattern of purchasing at higher than the market price discussed in the last article, if it is found that the agent has been selling the Wakalah goods or assets at lower than the market price and that also to a select few buyers, it will be established beyond any doubt that the agent has been deceitful to the principal.
Here too, the list of all sale transactions undertaken by the agent in terms of the Wakalah arrangement shall go through a microscopic examination so as to be able to arrive at the aggregate amount shortchanged by the agent to the principal, and which amount now needs to be recovered from the agent for payment to the principal.
Did you notice the same scheme of things found here too, ie the agent’s willful misconduct to purchase costlier than the market price and sell cheaper than the market price by restricting the activity to a select group of merchants? Such a practice undoubtedly leads to considerable diminution of the originally invested Wakalah capital by the principal.
The next logical step shall be to determine the actual Wakalah profit and its comparison with the business plan submitted by the agent, assessment of the eligible profit amounts payable by the agent to the principal as the Wakalah profit (net of any agent’s incentive) during the Wakalah period and its comparison with the actual profit amounts received by the principal. Any deficit here too shall be on account of the agent.
All said and done, I personally believe it is not easy to make a convincing argument against the agent when the suspicion has arisen in the mind of the principal against the agent. It is normally assumed that the criminal mind is always two steps ahead of the investigative brain, unless of course if the investigation is carried out by the probing minds, having full command and expertise in unearthing white-collar crimes. After all, every criminal usually unintentionally leaves one or two clues for an agile detective to pick up. Here, the role of qualified Shariah auditors with vast expertise comes into play.
What if the agent has bought the Wakalah goods at equal or lower than the market price, but these are turned out to be defective and therefore cannot be disposed of? If the agent purchased the defective goods intentionally, it will be liable to retain them for and on its own behalf and not for the Wakalah entity. Nevertheless, if the agent discovered the goods to be defective without playing any role in the situation, it will not be held responsible for the loss to the Wakalah capital.
Let me explain the aforementioned point. In the first situation, if the agent purchases the goods from the local market, there is no justification for the agent not to be able to thoroughly inspect the goods prior to concluding the deal and making payment out of the Wakalah capital. The agent can also avail the facility of appointing a third-party verifier should it not be possible to inspect the goods personally by the agent.
If the goods are purchased from abroad through a letter of credit (LC) or collection basis, the agent has the option to conclude the deal on a deferred payment basis (usance LC/collection). This will ensure that the agent gets hold of the goods prior to making payment and in case of any mishap related to the quality of goods, the agent shall be in a stronger position to protect the Wakalah capital.
If the supplier insists on the LC or collection terms to be on sight, the agent can seek the goods to be inspected prior to shipment by a world-reputed surveyor firm. If the unrestricted agent does not adopt the industry standard protective measures, it will be liable for any damage caused to the Wakalah capital.
The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions of the Dubai Islamic Economy Development Centre, nor the official policy or position of the government of the UAE or any of its entities. The purpose of this article is not to hurt any religious sentiments either consciously or even unwittingly.
Sohail Zubairi is the senior advisor with the Dubai Islamic Economy Development Centre. He can be contacted at [email protected].
Next week: Discussion on the subject of Wakalah shall continue.