Does a seller have the right to reclaim the specific sold merchandise upon the buyer's bankruptcy, superseding the rights of other creditors?
General Chapter
Al-Mughni
Book of the Insolvent (Bankruptcy)
Primary text
If a sequestered bankrupt person still possesses the exact commodity he sold, the seller has the option to rescind the sale and reclaim his merchandise, provided the specific conditions are met. This view is supported by Uthman, Ali, Abu Hurairah, 'Urwah, Malik, Al-Awza'i, Al-Shafi'i, Al-Anbari, Ishaq, Abu Thawr, and Ibn al-Mundhir. The evidence for this is the authenticated Hadith narrated by Abu Hurairah: The Prophet, peace be upon him, said, 'Whoever finds his merchandise in kind with a person who has gone bankrupt, he has the right to it.' This right of rescission is optional; the seller may choose to reclaim the item or remain an equal creditor with the rest of the creditors. This right exists whether the value of the item equals, exceeds, or is less than the price owed, as insolvency permits rescission but does not mandate it. This rescission does not require a judge's ruling because it is a rescission established by explicit text.
Supporting text
Al-Hasan, Al-Nakha'i, Ibn Shubrumah, and Abu Hanifah hold that the seller is on par with the other creditors (aswah al-ghurama'). They argue that the seller relinquished the right to retain the item when he delivered it in exchange for payment, and bankruptcy should not allow him to retract that delivery, similar to a pledge holder who returns the pledge to the pledgor. Furthermore, they argue that since the seller and other creditors share the same basis for their entitlement (a debt owed), they should share equally in the right to the assets.