Who Bears the Loss in Mudaraba

Question

The two of us started a business in partnership: one put in the money and the other sold the goods. After four months it came to light that there was a shortfall of 500 rupees in the principal; the one who sold the goods also spent 500 rupees in his own household. It had been settled between us that the profit would be half and half. Some of the money got stuck in credit, and some goods were spoiled. The question to be asked is: (1) Is making up the principal the responsibility of one or of both? (2)

Answer

(1) This is a mudaraba. If five hundred rupees were short in the principal with which it had been agreed to trade — for example, three thousand had been promised but two and a half thousand were given — and the transaction has now been ended, then paying these five hundred is not obligatory. If the meaning of the question is something else, then write it out clearly! (2)

Source: Fatawa Mahmudiyya

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