The High Court last Thursday overturned a verdict ordering the payment of the highest penalty in Maldives’ history.
A civil agreement struck between some civilians stipulated the payout of MVR 227,000, with the condition that a penalty amounting to 80 percent of the principal amount would be charged daily from the day the deadline expired.
As the defendants failed to settle the amount even four years after the deadline, the Civil Court in 2016 ordered them to pay MVR 286 million as penalty to the plaintiff. Per the order, the defendants would have to pay minimum MVR 20,000 per month, which would drag the total payout across more than 1,000 years.
Following the verdict’s appeal, the High Court ruled last Thursday that penalties should not be exorbitant. Noting that although charging late penalties was allowed in Islamic law, courts had the power to reduce the amount to a reasonable amount as per a resolution passed by the International Fiqh Academy.
In the appellate court’s ruling, it was stated that the penalty could only exceed the principal amount if the recipient suffered damages worth more than the latter due to the second party’s failure to pay them. The High Court asserted that the recipient was not able to prove in court that they suffered damages worth MVR 286 million.
Hence the High Court overturned the Civil Court verdict, instead ordering the second party to pay the principal amount of MVR 227,000 as penalty, and to settle the payment within one month.
The case was presided by the judges Shuaib Hassan, Mohamed Niyaz and Mohamed Faisal.