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A study by Danar
Harryasdito, Bambang Santoso, and Kukuh Tejomurti of Universitas Sebelas Maret
(UNS) examines why Indonesian Religious Courts can reach different conclusions
when deciding whether collateral may be sold after a debtor defaults on Islamic
financing. Published in the Journal of Legal and Cultural Analytics in
2026, the study analyzed legal materials and two Religious Court decisions
through August 2026. Its central finding is that a debtor’s default does not
automatically give a creditor the legal authority to execute a particular
asset.
The issue matters because Islamic financing must balance financial recovery
with principles of fairness, transparency, protection of property, and
Sharia-based obligations. Islamic financial institutions still face financing
and default risks, making effective recovery mechanisms important. At the same
time, the existence of collateral does not necessarily mean that every form of
enforcement is legally available. Indonesian Islamic financing operates
alongside several legal regimes, including Law No. 21 of 2008 on Islamic
Banking, the Compilation of Sharia Economic Law (KHES), relevant DSN-MUI
fatwas, and Law No. 4 of 1996 on Mortgage Rights over Land and Objects Related
to Land.
Two Religious
Court Decisions, Two Approaches
Harryasdito,
Santoso, and Tejomurti compared two Indonesian Religious Court decisions involving
murābaḥah bil wakālah financing: Religious Court of Palu Decision No.
510/Pdt.G/2020/PA.Pal and Religious Court of Pandeglang Decision No.
4/Pdt.G.S/2020/PA.Pdlg.
In the Palu
case, the court found that the customer had defaulted on the financing agreement.
The court ordered the debtor to pay Rp268,345,786 and surrender land and a
building covered by Certificate of Ownership No. 573/Kotarindau, measuring 731
square metres, for public auction to satisfy the creditor’s loss. The decision
therefore connected the finding of default with enforcement of the collateral.
The Pandeglang case followed a different legal path. The court also found that
the debtor had defaulted, meaning the underlying financial obligation remained.
However, it rejected the creditor’s request to sell the land because the
property had not been encumbered through an Akta Pemberian Hak Tanggungan
(APHT), as required under the legal regime governing mortgage rights over land.
The court therefore found that the creditor did not have an executorial title
or preferential right over the property merely because the land had been
identified as collateral or supported by a power of attorney to sell.
Default and
Collateral Enforcement Are Different Legal Questions
The researchers
identify the key distinction between contractual liability and
enforcement legitimacy.
The first
question is whether the debtor breached a valid financing agreement and what
financial obligation results from that breach. The second is whether the
creditor possesses a legally established and enforceable right over the
specific collateral and can therefore seek its sale.
The distinction
is important because a valid debt does not automatically create a mortgage
right. Likewise, proof of default does not automatically perfect an incomplete
security arrangement. Before authorizing the sale of collateral, courts must
consider the property’s legal status, the validity and perfection of the
security instrument, statutory formalities, any executorial title, and the
applicable enforcement procedure.
The authors
describe this as a two-stage judicial reasoning model. First,
courts establish contractual liability. Second, they independently assess
whether enforcement of the particular collateral is legally legitimate.
What the
Findings Mean for Banks and Debtors
The study does
not treat creditor protection and debtor protection as mutually exclusive
interests. Instead, it argues that both should operate within the legal rights
actually established by the financing and security arrangements.
For Islamic
financial institutions, the findings highlight the importance of completing
collateral documentation and registration from the beginning of a financing
relationship. The authors argue that deficiencies in security documentation
should be treated as institutional legal risks rather than shifted to debtors
through an expansive interpretation of enforcement rights.
For debtors, the
findings do not remove the obligation to repay legitimate debts. A debtor who
defaults remains contractually responsible even when the creditor cannot
demonstrate the legal requirements necessary to execute a particular asset.
Debtor protection instead operates as a limit on the method of recovery,
rather than as immunity from the underlying obligation.
For judges and
policymakers, the study suggests that consistency does not necessarily require
every financing dispute to produce the same outcome. Instead, consistency can
come from applying a clear reasoning structure: determine liability first, then
determine whether the collateral can legally be enforced. The authors recommend
clearer guidance for Religious Courts on the relationship between Sharia
financing agreements and conventional security rights.
Authors’ Key
Insight
Harryasdito,
Santoso, and Tejomurti of Universitas Sebelas Maret argue that “default
establishes responsibility, but it does not by itself establish executability.”
In practical terms, a creditor may have a legitimate claim for repayment while
still needing to establish a separate legal basis before selling a specific
piece of collateral.
The study
describes this approach as compatible with Islamic economic justice because it
recognizes both legitimate creditor recovery and protection against coercive
enforcement that exceeds legally established security rights.
How the Study
Was Conducted
The research
used normative legal research rather than surveys or interviews. The
researchers examined legislation, court decisions, the Compilation of Sharia
Economic Law, DSN-MUI fatwas, academic literature, and selected books.
Two Religious
Court decisions were deliberately selected because they demonstrate different
approaches to collateral enforcement. The researchers then compared the cases
according to the basis for determining default, the status of collateral,
compliance with formal security requirements, the creditor’s enforcement
rights, and debtor protection. The legal materials were reviewed through August
2026 and analyzed through legal interpretation, classification, comparison, and
normative evaluation.
Author Profiles
Danar
Harryasdito is affiliated with the Master of Notarial Law Program,
Faculty of Law, Universitas Sebelas Maret, and is the corresponding author. Bambang
Santoso and Kukuh Tejomurti are affiliated with the
Faculty of Law, Universitas Sebelas Maret. The article identifies their
university affiliations but does not provide their academic degrees or
individual fields of expertise, so those details cannot be specified from the
published source.
Source
Article:
“Divergent Judicial Reasoning on Collateral Enforcement in Islamic Financing
Disputes: Balancing Creditor Recovery and Debtor Protection”
Authors: Danar Harryasdito, Bambang Santoso, Kukuh Tejomurti
Journal: Journal of Legal and Cultural Analytics (JLCA)
Publication: Volume 5, No. 3, 2026, pp. 565–584
DOI: https://doi.org/10.55927/jlca.v5i3.17269
Official Journal: https://journal.formosapublisher.org/index.php/jlca
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