Does Avalokiteshvara speak through the Buddha in the Heart Sutra? Or how is it that Avalokiteshvara speaks to Shariputra?

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There are two parts to this question that need to be addressed in order to answer you:

Is it the case that “Avalokiteshvara was a cosmic being representing the compassion of all Buddhas” or was he a bodhisattva/mahasattva who was present when the Buddha taught?”

And, does “Avalokiteshvara speak through the power of the Buddha or is just that Avalokiteshvara's compassion is "part" of the Buddha since he is indeed fully enlightened?”

In the first matter, clearly, in many Mahayana sutras Avalokitasvara is present as the Buddha taught. But was he a ‘cosmic being’ that presumably would not be present in that way? Although he has and continues to be depicted that way, there is some evidence that this is an inappropriate characterization that leads those that hear him being described as the “lord of the world” to also believe that he would not be present in the way that you and I might have been present if we were alive when the Buddha taught. According to Alexander Studholme in his book, “The Origins of Om Manipadme Hum: A Study of the Karandavyuha Sutra:”

"Avalokitasvara eventually became Avalokiteśvara, it seems likely, due once again to the force of another folk interpretation of the name, here based upon the identification of the bodhisattva as a lokeśvara. This is a generic term meaning, literally, “lord” (-īśvara) “of the world” (loka-), applied to a wide range of supernormal beings in Indian religious thought. Bearing in mind, then, that very few people would ever have seen the name of the bodhisattva in written form, it is quite understandable that the pronunciation of the -asvara ending should have slipped to the h*m*phonic -eśvara, thereby producing a name—Avalokiteśvara—that would actually have seemed a more appropriate title for a being understood to be a great lokeśvara."

There is no need to confuse the bodhisattva/mahasattva Avalokitasvara as a “lord of the world.” And if that is let go of, then we can see this bodhisattva/mahasattva for what he was: a realized being and the perfect embodiment of “Great Compassion” (Mahākarunā), which is the activity or function of Emptiness.

In his description of his meditative practice leading to his enlightenment, he says:

First, because I did not listen to sounds and instead contemplated the listener within, I can now hear the cries of suffering beings throughout the ten directions, and I can bring about their liberation. (Surangama Sutra)

This power that he accomplished by discarding sound at this point in his practice in order to contemplate the meditator, which is to say, meditating upon the nature of hearing—given the presence of uncaused, unborn, and unending inner spontaneous sound—Avalokitasvara disengaged himself from both sense organs and their perceptions, enabling the direct realization of this all-embracing (Mahākaruṇā) Buddha naturing of all living beings and actual things. This is the nature of ‘mind’, which is the necessary direct insight for further progress along the path.

But the most important point of his statement is this: using the practice that is described by Avalokitasvara very quickly results in what I describe as an alchemical change in the practitioner, which is normally only accomplished much, much later along the path to enlightenment. Here at this very early stage in his practice, Avalokitasvara attests to being able to hear the cries of suffering beings and respond to them so that they can be liberated from their suffering. This is the result of having used inner spontaneous sounds, which are nothing other than the intrinsic Emptiness. They are not a manifested phenomenon of Emptiness, but rather the resonances or reverberations of the activity of Emptiness manifesting (dharmata) the world and all beings and things.

You see, by initially meditating on these sounds and using them to break free of sense perceptions and senses in order to have a direct experience of this intrinsic naturing, your hearing faculty is very quickly liberated from, and no longer constrained to, sensed sound. Hearing the cries of suffering beings is not the same as our mundane hearing sounds of crying. I cannot stress this point enough, but only those that have accomplished this hearing will truly understand this.

Although this might seem to be off the point, I bring his description and my commentary on it in order to point out the answer to your question: “does Avalokiteshvara speak through the power of the Buddha or is just that Avalokiteshvara's compassion is ‘part’ of the Buddha since he is indeed fully enlightened?”

Avalokitasvara does speak through the power of the Buddha, but only in the sense that the Buddha is the expression of Emptiness here in this world, as is Avalokitasvara. The result of enlightenment is the removal of our ignorance that blocks the true way the world ‘works’ from our view and understanding. Once that ignorance is let go, like removing blinders from one’s eyes, we realize directly that all beings, all teachings, all compassion, is the direct functioning of Emptiness.

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In my understanding, Sariputta (aka Shariputra, aka Sharadvatiputra) was long gone ("dead") by the time Bodhisattva Avalokiteshvara was undergoing his training.

Shariputra left a large legacy of teachings, mostly in the style of Abhidharma analysis and enumeration of various dharmas and mental/emotional phenomena.

This teaching was seen by some of the advanced students to be misleading, because it focused (or should I say, obsessively hung up) on theoretical categorization, neglecting the higher teaching of Buddha such as the signlessness and 'atammayata'.

As a response to Shariputra's students' obsession with psychological theory at the expense of actual liberation, the advanced practitioners formulated the teaching of Prajnaparamita which focuses on transcending the basis of all suffering and entering true suchness.

So when Avalokiteshvara addresses Shariputra, he addresses him posthumously so to speak. It's a figure of speech, "hey Shariputra, I wish I could talk to you and explain how confused you were about the true meaning of Buddha's Liberation" - that's the idea.

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The Heart Sutra is a definitive sutra of the Second Turning of the Dharma whose purpose is to reveal the deep and profound meaning of the Dharma. Avalokiteshvara is a Bodhisattva (one who has taken a vow to become a Fully Enlightened Buddha to help fulfill the wish of liberation for all sentient beings) who has spoken to Shariputra in this sutra to reveal this deep and profound meaning.

OP: "I thought Avalokiteshvara was a cosmic being representing the compassion of all Buddhas."

There are many sutras and commentaries which depict Avalokiteshvara in various ways. Some treat Avalokiteshvara as already a Fully Enlightened Buddha who manifests as a Bodhisattva in the here and now to guide sentient beings to liberation. Others describe Avalokiteshvara (or Chenrezig in Tibetan) in cosmic terms and other fantastic language. It is a widely held belief in many Tibetan Buddhist communities that His Holiness the 14th Dalai Lama is himself a manifestation of Avalokiteshvara.

It is important to note that for the purposes of this question that the Heart Sutra itself says little of the nature of Avalokiteshvara other than that he is a great Bodhisattva and an Arya being.

OP: "As such he would not be a person who found himself in the Buddha's presence as He delivered his Dhamma discourses, right?"

This is incorrect. If you grant the supposition that Avalokiteshvara is such a cosmic being (which the Heart Sutra itself is silent on), then why would you assume that such a cosmic being was incapable of manifesting in the Buddha's presence? There are numerous sutta in the Pali Canon of various gods and beings manifesting and speaking to the Buddha.

In fact, you can find in the Pali Canon that the leader of the Brahma Gods manifested in front of the Buddha and requested that he teach the Dharma:

And as the Buddha reflected like this, his mind inclined to remaining passive, not to teaching the Dhamma.

Then Brahmā Sahampati, knowing what the Buddha was thinking, thought, “Oh my goodness! The world will be lost, the world will perish! For the mind of the Realized One, the perfected one, the fully awakened Buddha, inclines to remaining passive, not to teaching the Dhamma.”

Then, as easily as a strong person would extend or contract their arm, he vanished from the Brahmā realm and reappeared in front of the Buddha. He arranged his robe over one shoulder, knelt with his right knee on the ground, raised his joined palms toward the Buddha, and said:

“Sir, let the Blessed One teach the Dhamma! Let the Holy One teach the Dhamma! There are beings with little dust in their eyes. They’re in decline because they haven’t heard the teaching. There will be those who understand the teaching!”

SN 6.1

The Buddha himself was also capable of manifesting and speaking to such cosmic beings. Indeed, here is a sutta which has the Buddha manifesting in heaven in front of such a being:

“At one time, mendicants, I was staying near Ukkaṭṭhā, in the Subhaga Forest at the root of a magnificent sal tree. Now at that time Baka the Brahmā had the following harmful misconception: ‘This is permanent, this is everlasting, this is eternal, this is whole, this is imperishable. For this is where there’s no being born, growing old, dying, passing away, or being reborn. And there’s no other escape beyond this.’

Then I knew what Baka the Brahmā was thinking. As easily as a strong person would extend or contract their arm, I vanished from the Subhaga Forest and reappeared in that Brahmā realm.

Baka saw me coming off in the distance and said, ‘Come, good sir! Welcome, good sir! It’s been a long time since you took the opportunity to come here. For this is permanent, this is everlasting, this is eternal, this is complete, this is imperishable. For this is where there’s no being born, growing old, dying, passing away, or being reborn. And there’s no other escape beyond this.’

MN 49

As you can see the idea that a cosmic being is not capable of manifesting and speaking in front of the Buddha or other sentient beings is just a completely foreign idea to Buddhism including the Theravada tradition.

OP: "So, does Avalokiteshvara speak through the power of the Buddha or is just that Avalokiteshvara's compassion is "part" of the Buddha since he is indeed fully enlightened?

Who is it that answers Shariputra? Is the one abiding in the Prajnaparimita Gotama Buddha? I don't really understand."

There is nothing in the Heart Sutra that speaks to this interpretation. Rather, the Heart Sutra says that this occurred during Gotama Buddha's and Shariputra's lifetime on the peak of Rajagriha with the great Bodhisattva Avalokiteshvara among the retinue that day.

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