JUAL JANJI:

A MALAY CUSTOMARY
SECURITY TRANSACTION?

Ainul Jaria Maidin 2

 Objective of Discussion

• National Land Code 1965 is silent on the

creation & effect of Jual Janji transaction.
• This discussion focus on status & recognition of
Jual Janji as security dealing

Ainul Jaria Maidin 3

 Introduction
• Jual Janji - type of security transaction and often
classified as personal law transaction practiced
commonly amongst Malay Muslim community
principally for purposes of avoiding payment of
riba or interest that is strictly prohibited in
Shariah.

Ainul Jaria Maidin 4

Origins of Jual Janji
• Jual Janji transaction was presumed to have
come into existence after the coming of Islam to
Tanah Melayu to ensure all transactions comply
with the teachings of Islam that is to avoid the
practice of usury, which is strictly prohibited by
Shari’ah.

Ainul Jaria Maidin 5

• This practice was also prevalent among other
communities living in Malaysia.
• A.Kanapathi Pillay v Joseph Chong [1981] 2 MLJ 117
where both parties to the transaction were non
Malays.

Ainul Jaria Maidin 6

 According to Wong SY
• Jual Janji -Malay customary dealing with land.
• Nature - security transaction.
• Borrower ‘transfers’- to use the word in a loose
sense- his land to the lender who thereby takes
possession of it. Whatever profits the lender makes
out of the land will be his to keep as reward, akin
to interest, for the loan.

Ainul Jaria Maidin 7

• Borrower is entitled to resume possession of land
upon discharging the debt except where a
period was fixed for repayment of loan, default
to pay will the original arrangement into an
absolute sale, jual putus

Ainul Jaria Maidin 8

 Literal Meaning

• a sale with a promise.

Ainul Jaria Maidin 9

 Modus Operandi
• It is a contract between two parties, a Borrower
& Lender.
• Transaction involves transfer of land belonging
to Borrower to Lender for consideration of a loan
granted by Lender with a condition or promise
to retransfer land to Borrower upon full & final
settlement of loan by Borrower within an agreed
duration.

Ainul Jaria Maidin 10

Jual Putus
• If Borrower fails to redeem land within agreed duration,
transaction is declared Jual Putus.

Ainul Jaria Maidin 11

 Unregistered Jual Janji Transaction

• A Jual Janji transaction is usually not registered as it

is meant to be a simple loan transaction.
• However, parties may wish to execute Form 14A in
Escrow (executed but not registered) and add a
clause in the agreement wherein undertaking not to
sell the land to anyone else.

Ainul Jaria Maidin 12

• Alternatively in an unregistered Jual Janji transaction, Lender
can institute a civil action to recover debt owing from Borrower.
• Lender can obtain a Prohibitory Order to attach land in
execution and proceed with auction sales.

Ainul Jaria Maidin 13

 Unregistered Jual Janji… cont.
• The Lender can enter a Private Caveat over the
land to protect his unregistered interest.
• If the original issue document of title has been
deposited with the Lender as security, the Lender
can enter a Lien-Holder’s caveat to protect his
unregistered interest.

Ainul Jaria Maidin 14

Characteristics of Jual
Janji Transaction

Ainul Jaria Maidin 15

• The land used as security is usually small.
• The amount of loan is also small or little.
• The time to repay is usually flexible and not
fixed.
• The loan amount is usually fixed depending on
the needs of the Borrower and not the value of
the land.
• Jual Janji is often practiced amongst friends or
relatives.

Ainul Jaria Maidin 16

• No interest is imposed on the Borrower, as
Muslims are prohibited from imposing or paying
any interest for the money lent.
• However, there is a practice in sharing the produce
from the land e.g. padi or fruits (crop sharing). This
is considered as rent payment by the Borrower.
• The inclusion of the condition imposed by the
Lender on the Borrower to pay rent is to take
retain possession of the land to work and live on it.

Ainul Jaria Maidin 17

• Most often the contract is written, thus giving rise to
problems in interpreting the intention of the parties.
• Penghulu is often appointed as the arbitrator in the
transaction and also in settling any disputes that
arises between the partied in the event of default on
the part of the Borrower to repay the loan within the
agreed duration.

Ainul Jaria Maidin 18

Rationale of Jual Janji transactions
• To help the needy poor in times of emergency
• To prevent the exploitation of the needy poor by
the rich moneylenders
• To avoid imposing of Riba’ or interest which is
prohibited in Islam
• Land is a common security used to secure the loan
to ensure the Borrower will honour his promise to
repay the loan as agreed.

Ainul Jaria Maidin 19

Rationale of Jual Janji transactions
…cont.

• The duration to repay the loan though fixed is

often flexible.
• Jual Janji transaction is often preferred by the
Borrower as the amount of rent imposed is
flexible and is not intended to cause hardship
upon the Borrower unlike the usual interest
payment imposed in a charge transaction.

Ainul Jaria Maidin 20

JUDICIAL VIEW ON JUAL JANJI
TRANSACTIONS

Ainul Jaria Maidin 21

• The courts have recognised Jual Janji
transactions as mentioned by Briggs J in Tengku
Zahara v Che Yusuf [1951] 17 MLJ,
“The whole purpose of a jual janji transaction is
to provide a procedure for securing a loan …
Without infringing the prohibition of usury
which is binding on the conscience of all good
Muslims.”

Ainul Jaria Maidin 22

• The court’s misconception of the nature of Jual
Janji transactions gave rise to inconsistencies
in arbitrating disputes involving Jual Janji
transactions.

Ainul Jaria Maidin 23

 Judicial Opinions
• Judicial opinions on Jual Janji can be divided into
following categories:
• 1.Purely contract where time is of essence
• 2.Purely contract and time is not of essence
• 3.Application of equitable principles (mortgage)
• 4.Recognition as Jual Janji transactions
• 5.Customary transactions

Ainul Jaria Maidin 24

Purely contract where
time is of essence

Ainul Jaria Maidin 25

 Hj.Abdul Rahman v Hassan(1917)AC
209
• Facts: the transaction was registered pursuant to the
Selangor Registration of Titles Regulation 1891.
• Borrower failed to repay the loan and redeem the
land within the agreed duration. He only repaid the
debt nearly 18 years after the expiry of the agreed
duration.
• Commenced action to recover land.
• Lower Ct: applied principles of equity “once a
mortgage always a mortgage” and decided that the
Borrower has a right to redeem the land.
Ainul Jaria Maidin 26
 On appeal to Privy Council
• PC– held that the collateral agreement to retransfer
is only effective in contract. As such the repayment
after expiry of contractual period cannot be
allowed.
• Lord Dunedin said, “It seems that their Lordship is
to much swayed by the doctrine of English equity,
and not paid sufficient attention to the fact that
they were dealing with a totally different land law,
i.e. a system of registration of title contained in a
codifying enactment.

Ainul Jaria Maidin 27

 Wong See Leng v Saraswathy
Ammal [1954] MLJ 141 CA
• The court was held to have no power to extend the contractual
period for the exercise of the option to repurchase contained in
the collateral agreement once it expires.
• Time is of essence

Ainul Jaria Maidin 28

 Kanapathi Pillay v Joseph Chong
[1981] 2 MLJ 117

• The option to repurchase contained in the

collateral agreement in a jual janji transaction
does not create any equitable interest in the land
for the borrower. The option only creates a
contractual right which can be defeated by the
effluxion of time or the Statute of Limitation.

Ainul Jaria Maidin 29

Purely contract and time
is not of essence

Ainul Jaria Maidin 30

Ismail Bin Haji Embong v Lau Hong Kan
[1970] 2 MLJ 213 HC

• It was held that the time for repayment is not the

essence of the agreement, as inferred from the
conduct of the parties to the transaction where the
Borrower continued paying the monthly interest to
the Lender.
• Though time was of the essence originally
however, it was allowed to pass and the conduct of
the parties clearly showed that it was no longer so.
• As such the borrower’s contractual right to
repurchase the land can still be exercised even after
its expiry.
Ainul Jaria Maidin 31
Ahmad Bin Omar v Haji Salleh Bin
Shaik Osman [1987] 1 MLJ 338

• Ct. held that the transaction was a Jual Janji

transaction.
• He further added that even if time was originally
of essence to the contract, it has been allowed to
pass and the conduct of the parties showed that
it was no longer so.

Ainul Jaria Maidin 32

 Application of
Equitable principles

Ainul Jaria Maidin 33

 Yaacob Bin Lebai Jusoh v Hamisah Bt
Saad (1950) MLJ 255
• appellant transferred his land to respondent to secure
the loan of RM2,000.00. They executed an agreement
to resell the land at the same price within 3 years.
Appellant failed to repay the loan within agreed
duration and respondent refused to retransfer the
property.
• Ct: Real intention of parties was to create a mortgage
to secure repayment of loan. The collateral agreement
is in the nature of an equitable security transaction
wherein the right to redeem remains irrespective if
the duration has expired.

Ainul Jaria Maidin 34

Nawab Din v Mohamed Sharif [1953] 19
MLJ 12
• Followed Yaacob’s decision where the judge treated the jual janji
transaction as being in the nature of a mortgage and the right to
redeem was not affected by the stipulation as to time.

Ainul Jaria Maidin 35

 Halijah v Morad [1972] 2 MLJ 166
• Court tried to fuse equity into statutory & customary rules in
order to arrive at a decision.
• -held that respondent took possession of property as a creditor
not as a purchaser as such she is not entitled to the land.

Ainul Jaria Maidin 36

Recognition as Jual Janji
transactions

Ainul Jaria Maidin 37

 Wong See Leng v Saraswathy
Ammal (1954) 20 MLJ 141 CA
• Borrower failed to repay loan within agreed duration.
Borrower argued that there is a right to redeem.
• Court held transaction is Jual Janji - as such the right to redeem
remains irrespective of whether the period to repay has expired.

Ainul Jaria Maidin 38

Jual Janji as an Exception
to Indefeasibility of title

Ainul Jaria Maidin 39

• Abdul Hamid Saad v Aliyasak Ismail [1998] 4 CLJ
429- ct held that the conduct of parties in entering
into a second agreement after the expiry of the first
agreement meant that time is no longer of essence
and the transfer of the land to defendant was merely
a conditional transfer & not an outright sale.
• Further the court held that the the defendants title is
defeasible by reason of S.340(4)(b) NLC 1965 as
there was an obligation on the defendant to
retransfer the land to the plaintiff as agreed in the
two agreements,

Ainul Jaria Maidin 40

Recognition of Jual Janji
as a Malay Customary
Transaction

Ainul Jaria Maidin 41

• W.E. Maxwell -The Law and Custom of the Malay
with Reference to the Tenure of Land at p.123
• “the jual janji (conditional sale), the only form of
hypothecation of land known to Malay law, is, in
principal incidents, quite unlike our mortgage of
real property.
• The Malay who raises money on his holding by the
transaction called jual janji, sells his proprietary
right for a sum then and there advanced to him,
and surrenders the land to the vendee coupling,
however, the transfer with the condition that if, at
any time, or within a certain time, he shall repay to
the vendee the sum so advanced, he (the vendor)
shall be entitled to take back his land.”

Ainul Jaria Maidin 42

Jual Janji in the context of s.4(2) NLC
• Issue whether Jual Janji comes within the ambit of
s.4(2) NLC – customary transaction
• According to Teo & Khaw, Jual Janji can be
recognised as a customary security transaction
pursuant to s.4(2) & s.295(1) NLC in agreeing to
the suggestion by Salleh Abas CJ in A Kanapathi
Pillay v Joseph Chong.
• Salleh Buang also agreed with this view.

Ainul Jaria Maidin 43

Differing view on application of
s.4(2)NLC
• application of s.4(2) to cover jual janji transaction
in that it is only applicable if the parties to the
transaction belongs to the same community and
must be sharing the same personal law on a
specified class of land within that community
which will be governed by customary enactment.

Ainul Jaria Maidin 44