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Fatwa CenterProfits from a defective Mudhaarabah contract
Question
Assalam-o-Alaikum, Dear Sir, I had invested an amount of 400 thousand Pakistani Rupees in a business in the name of Mudarabah. The detail is that i haven't handed over the money directly to the Mudarib but through another person whom according to my belief was a pious and a trustworthy faithful person. I was told that i will get upto 35 % profit after 3 months. I have obtained a profit of some 33 % after three months of investing the money. I have further invested the principal amount i.e 400 thousand rupees for the next 3 months period while keeping the profit with me. i have fulfilled all my legal obligations (Zakat etc.) due on my worth. Now, before the maturity period of this 2nd time investment some ups and downs appeared. The business was vanished and rumors appeared in the media that in fact it was a mudaraba scandle and was not real mudarabah rather a fraud to forfeit the innocent people. I was successful to get back my principal amount i.e 400 thousand rupees, however many of the innocent people have lost thousands of hundreds and million rupees in this so called business. Now, i am very much reluctant about my profit which i have received in my first stage. Please guide me in this regard. Allah bless you
Answer
All perfect praise be to Allah, The Lord of the Worlds. I testify that there is none worthy of worship except Allah, and that Muhammad 
is His slave and Messenger.
One of the conditions for the validity of Mudhaarabah (profit sharing or co-partnership) is that the investor's profit is determined as a percentage of the overall profit, and it is not valid if the profit is a percentage of the capital money. So, if the agreement was a profit of 35% of your capital money, then this is a defective Mudhaarabah, and the profit resulting from a defective Mudhaarabah contract is for the owner of the capital money, and the worker (who carries out the Mudhaarabah) takes a fee of a worker who does similar work. But if it is clear that there is no real Mudhaarabah, then you are obliged to dispose of those profits by spending them on the general welfare of Muslims.
On the other hand, if the agreement was on a known percentage of the profit, and it was said that it may reach 35% of the capital money, then the contract is valid.
Anyway, since it has become evident that it was not a Mudhaarabah but rather a form of deception to consuming people’s money unjustly; then, in our view, you should dispose of it as we have already mentioned.
For more benefit, please refer to Fataawa 94668and 87149.
Allaah Knows best.
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