The first is that these obligations confer no right to participate in the proportional distribution. The second is that they do confer such a right if imposed by a ruling of the governing authority. The second is Ashhab’s view, while the first is Ibn al-Qāsim’s.

Section

The sixth section concerns distinguishing property to which a creditor has a preferential right over other creditors upon either death or insolvency, or upon insolvency alone, from property to which he has no preferential right in either case and for which he must share proportionately with the other creditors. In summary, things sold on credit fall into three categories in insolvency proceedings: goods treated as individually identifiable; money, whose treatment as individually identifiable is disputed; and services, which are not treated as individually identifiable.

As for goods, if they remain in the seller’s possession and he has not delivered them before the buyer becomes insolvent, he has a preferential right to them upon either death or insolvency, since they are like a pledge in his possession. There is no disagreement about this. If, however, he has delivered them to the buyer, who then becomes insolvent while they remain intact in his possession, the seller has a preferential right to them over the other creditors upon insolvency, but not upon death, according to Mālik—may Allah have mercy on him—and all his companions. This accords with the established Sunnah transmitted from the Prophet, peace and blessings be upon him:

“If a man sells goods and the buyer becomes insolvent before the seller has received any of the price, and the seller finds those very goods, he has a preferential right to them. But if the buyer dies, the owner of the goods stands on an equal footing with the other creditors.”

This differs from Abū Hanīfa’s view that the seller stands on an equal footing with the other creditors upon both death and insolvency, and from al-Shāfiʿī’s view that he has a preferential right to his goods in both cases. According to Mālik—may Allah have mercy on him—the seller may leave his goods and participate in the proportional distribution among the creditors. If he wishes to reclaim his goods, however, the creditors may redeem them from him by paying their price.

Ibn al-Mājishūn said that they may do so either from the debtor’s assets or from their own funds. Ibn Kināna said that they may not pay him the price from their own funds; they may only give him priority in payment from the insolvent debtor’s assets. Ashhab said that they may take the goods only if they offer more than the price, deducting the additional amount from the insolvent debtor’s debt to them. This differs from al-Shāfiʿī’s view that the creditors have no choice in any of these matters.