bank of baroda t ltd vsfb contractors 2021 tzhccomd 3350 28 august 2021

IN THE HIGH COURT OF TANZANIA (COMMERCIAL DIVISION) AT MWANZA COMMERCIAL CASE NO. 13 OF 2019. BANK OF BARODA (T) LIMITED................................... PLAINTIFF VERSUS FB GENERAL CONTRACTORS.................................................... 1stDEFENDANT FELIX RWEBANGIRA................................................................ 2ndDEFENDANT BONANZA GAREYA..................................................................... 3rdDEFENDANT Date ofLast Order: 23/08/2021 Date ofJudgement: 27/08/2021 JUDGEMENT MAGOIGA, J, The plaintiff, BANK OF BARODA (T) LIMITED by a plaint filed under summary procedure instituted the instant suit against the above-named defendants jointly and severally praying for judgement and decree in the following orders: - a. Payments of Tshs.83,760,890.54 comprised of principal amount, accrued interest and bank charges as per paragraphs 15 and 20 hereinabove b. Compound interest on the outstanding amount stated at (a) above at the contractual rate of 21% (normal and penal i interests) per annum from 31/12/2018 to the date of judgement c. Interest on the decretal amount at the courts rate of 7% from the date of judgement to the date of payment, in the event of failure to pay the amount from (a) to (c) hereinabove. d. Sale and vacant possession of the mortgaged property, Plot No 75, Nyakato Satellite Area, Mwanza registered over the certificate of Title No 2388. e. Sale of all fixed and floating assets of the 1st Defendant charge under the chattel Mortgage; f. The costs of the suit; and g. Any other relief(s) that the court may deem fit to grant in favour of the plaintiff. Upon being served with plaint, the 1st and 2nd defendants successfully applied for and were granted leave to defend the suit. In their joint written statement of defence filed on 23rd July, 2020, the 1st and 2nd defendants disputed all prayers by the plaintiff on ground that they fully repaid the loan. Further they averred that, there was procedural illegality on the creation of the mortgage and eventually, the 1st and 2nddefendants prayed that the instant suit be dismissed with costs. J 2 As to 3rd defendant was dully served by substituted service in Mwananchi newspaper but did not enter appearance or make any application for leave to defend. So the case against him preceded ex- parte. The brief facts of this suit are imperative to be stated for better understanding the gist of this suit. According to the plaint, it is averred and not disputed by 1st and 2nd defendant that, on 27th February, 2015 at the request of the lstdefendant, the plaintiff extended to the 1st defendant an overdraft facility Tshs.75,000,000.00 for the purpose of meeting day to day working capital requirement for running the business of the 1st defendant. The said facility, among others, was to attract an interest of 19% per annum and upon default an additional penal interest rate of 2% was to be charged and was to be paid within a period of one year. As a security for such overdraft, the 2nd defendant created a legal mortgage in favour of the plaintiff over his landed property located at Plot No 75, Nyakato Satellite Area in Mwanza registered under CT No 2388, the first ranking chattel mortgage in favour of the plaintiff over the defendants fixed and floating assets for TZS 93,750,000.00 and personal guarantee of the 2nd and 3rd defendants. 3 Further facts were that the 1st defendant failed to repay the overdraft as agreed. Thereafter, the 1st defendant requested for rescheduling of the amount due to overdraft loan and requested for a term loan of Tshs.5,600,000.00. On 30th June, 2018 a term loan amounting to Tanzania Shilling Five Million and Six Hundred Thousand (5,600,000.00) was disbursed to the principal debtor, with the condition that, the loan be repaid within twelve (12) months. Following the disbursement of term loan, the debt was deducted and reduced the outstanding balance of the debt as per 31st August, 2018 the outstanding debt to be TZS. 77,702,477.53 as an overdraft. As such all defendants jointly and severally, failed, neglected and ignored to repay the said credit facility standing at Tshs 83,760,890.54 as per 31st August, 2018. It was against this background, the plaintiff issued notice of default to all defendants but which was not heeded, hence, this suit. The plaintiff at all material has been enjoying the legal services of Mr. Libenti Rwazo, learned Advocate. On the other adversary part, the 1st and 2nddefendants at all material time were enjoying the legal service Mr. Innocent Kisigiro, learned advocate. 4 Before hearing started, the following issues were framed, recorded and agreed between the parties for determination of this suit, namely; - 1. Whether the procedure for mortgage creation were properly followed; 2. Whether the 1st defendant defaulted in servicing the loan; 3. If the issue no 2 above is in affirmative whether the plaintiff was entitled to commence recovery measures; 4. Whether the plaintiff followed the rightful loan recovery procedures; 5. To what reliefs parties are entitled. At the outset and before going into the testimonies of the parties, I would like to point out that on 6th November, 2020 when this suit was called on for orders, the learned counsel for the plaintiff informed the court that, the 3rd defendant, one Anatory Mufundi Blandes is no more and prayed that his name be struck out from the pleadings. The prayer was granted and subsequently the name of the 3rd defendant was dropped and the 4th defendant became the 3rd defendant, so this suit, then remained with three defendants. Therefore, the suit against the 3rd defendant was heard exe-parte despite being served by substituted service for failure to apply for leave to file defence. 5 The plaintiff in proof of her case, called one witness, VICTORIA KAVISHE (to be referred these proceedings as "PWl"). PWl through his witness statement adopted and admitted as constituting her testimony in chief PWl told the court that, she is the plaintiff's Branch Manager, Mwanza branch, hence, conversant with the fact of this case. It was the testimony of PWl that, on 27th February, 2015 an overdraft facility amounting to 75,000,000.00 was advanced to ^defendant as principal borrower who accepted terms and conditions as contained in the facility letter. According to PWl, the terms and conditions of the overdraft were that, the overdraft was for period of 12 months renewable, secured by legal mortgage in favour of the plaintiff over plot No.75 Nyakato Satellite area in Mwanza registered under CT. No. 2388 in the name of the 2nd defendant, first ranking Chattel mortgage on fixed and floating assets of the 1st defendant at the tune of Tshs.93,750,000.00 personal guarantee issued by 2nd, and 3rd defendants at the tune of Tshs.93750,000.00. Not only that but, PWl told the court that, the loan was to attract interest of 19% per annum and penal interest of 2% in case of default per annum over and above the applicable rate. The said securities were accordingly perfected after obtaining the spousal consent of Revina Rwebangira the wife of the 2nd defendant in respect of CT. No2388. 6 PW1 went on to testify that, despite the plaintiff complying fully with terms of the facility letter, the 1st defendant failed to service the overdraft in accordance with the terms of the facility letter. It was further testimony of PW1 that, on 29th June, 2018, the 1st defendant requested that the overdue amount plus interest be converted into a term loan and further requested a term loan of Tshs. 5,600,000.00. The request was granted on the same old terms, pointed out PW1. PW1 went on to testify that, the lstdefendant utilized the same accordingly and things went on well. According to PW1, in early 2018 the 1st defendant started to delay to deposit money to service the overdraft loan and interest. In the circumstance, the 1st defendant applied for conversion of overdue amount of TZS 5,600,000.00 into a term loan so as to pay the overdue amount. Further testimony of PW1 was that, on 30th June, 2018 a term loan was granted to the tune of Tanzania Shillings Five Million Six Hundred Thousand only (TZS.5,600,000.00) to the principal debtor for conversion of overdue amount of the overdraft. PW1 testified that, despite the conversion of the overdue amount into term loan and reduction of the debt, the 1st defendant failed to continue servicing the loan as a result on 31st August,2018 the outstanding debt was TZS 77,702,477.53 which 7 comprised principal debt TZS 75,000,000.00 and 2,702,477.53 as an accrued interest and bank charges on an overdraft account. It was further testimony of PW1 that, the said loan was secured by different securities, which are legal mortgages of right of occupancy in the name of 2nd defendant, located at Plot No 75, Nyakato Satellite Area in Mwanza registered under CT No 2388, the first ranking chattel mortgage in favour of the plaintiff over the defendants fixed and floating assets for TZS 93,750,000.00, personal guarantees of the 2nd and 3rd defendants in favour of the plaintiff at TZS 93,750,000.00, the outstanding exposure to cover the facilities and any other related expenses and interest accruing thereon. PW1 went on to testify that, the creation of the legal mortgage of the 2nd defendant was accompanied with 2nd defendant's spouse consent of one Revina Felix Rwebangira which it was perfected on the same date with other securities prior to the execution of facility agreement. PW1 went on to tell the court that, the principal borrower defaulted in payment of the loan. The plaintiff, on 29th June 2019 served all defendants with 60 days notice of default seeking full payment of (TZS 83,760,890.54) which is principal sum plus interest. 8 It was the testimony of PW1 that, the efforts by the plaintiff to have defendants paid back the money has been in vain, hence this suit claiming the reliefs) as contained in the plaint. In proof of the case the plaintiff tendered in evidence the following exhibits, namely; a. Facility letter dated 27th February, 2015 as exhibit Pl b. Mortgage right of occupancy dated 6th March,2015 as exhibit P2 c. Spouse consent dated 6th March,2015 as exhibit P3 d. Chattels mortgage dated 6th March,2015 as exhibit P4 e. Personal guarantee dated 6th March,2015 as exhibit P5 f. Letter dated 29th June,2018 as exhibit P6 g. Default notice dated 19th June,2019 as exhibit P7 h. Demand notice dated 12 June,2019 as exhibit P8 a-c i. Letter dated 3rd September,2019 from 1st defendant as exhibit P9 j. Certificate of authenticity, Bank Statement in respect of overdraft account No. 96040400000003 and term loan account no 96004060000142 dated 25th April, 2019 collectively admitted as exhibit P lOa-c k. Bank statements for loan term and overdraft dated 30th June, 2018 are collectively admitted as exhibit Plla-b 9 Under cross examination by Mr. Kisigiro learned advocate for the 1st and 2nd defendants, PWI told the court that, the loan was to be paid for one year, and stated that an overdraft loan was to be serviced by depositing some money in the account. PWI when asked in regard of deposited cheque she admitted on to have seen cheque deposited by 1st defendant, however, she was quick to state that, the deduction was only done at the end of the month on the amount taken plus interest and not otherwise. PWI when show exhibit Pl lb admitted that, it is true that Tshs. 22,900,000 was deposited and the interest of Tshs. 1,018,718.85 was deducted. Further, PWI told the court that, since March 2018, 1st defendant was in default as he was not been servicing her loan as a result on 30th June 2018 he was availed with TZS 5,600,000.00 so as to be converted into term loan and be used in payment of overdue amount of an overdraft. PWI told the court that following the grant of the term loan the debt was reduce to 77Million. PWI further pressed with questions admitted that on 27th August, 2019 1st defendant deposited TZS. 550,000.00 which reduced the loan to 76, Million, however, the amount raised up to 80 Million because the 1st defendant was not servicing the loan and therefore the interests and io bank charges kept on accumulating. PWI when further cross examined in regard of payment schedule, she told the court that, she does not recall if 1st defendant was given payment schedule. PWI when asked on regard to discrepancies of dates in document she admitted that, according to exhibit P4 shows that it was registered on 28.01.2015 before the contract of 6th March 2015. Nevertheless, PWI pointed out that discrepancy in dates was mistakenly signed by the Registrar of the document and not the Bank. Under re-examination by Mr. Rwazo, learned advocate for the plaintiff, PWI told the court that, all documents were registered on the same date, that is, on 6th March, 2015. On the issue of payments of the debt PWI told the court that, TZS 5,600,000/= reduced interest of March, April, May and June 2018 and the balance was reduced to 74,739,622.89. However, on 31st October, 2016 the outstanding balance raised to Tshs. 82,855,218.7. On 11th November,2016 the 1st defendant deposited 81,808,724.07 the loan was reduced and the outstanding loan remained Tshs 1,808,724.07, but unfortunately on the same date the 1st defendant withdrew Tshs 10 Million and on 14th November,2016 he withdrew 60 million as the result the loan shot Tshs 71,808,724.07. PWI further told the court that, the bank statement shows that by the ii time plaintiff filed this case the amount due was TZS. 77,702,477.53 on overdraft account. This marked the end of the plaintiff's case and the same marked closed. In defence, the 1st and 2nd defendants were defended by one, FELIX RWEBANGIRA (to be referred in these proceedings as ’DW1’). DW1 through his witness statement which was adopted as his testimony in chief told the court that, he is the director of the 1st defendant and guarantor of the 1st defendant, hence, aware of the credit facilities. DW1 admitted to have requested and granted an overdraft of TZS. 75,000.000/= and term loan TZS 5,600,000/=which was to be deposited every month and interest be charged on the amount used. Further, DW1 admitted to have guaranteed the 1st defendant on the landed property located at Plot No 75, Nyakato Satellite Area in Mwanza registered under CT No 2388. It was further testimony of DW1 that, the 1st defendant has repaid all loans. DW1 admitted that on 12th June 2019 they were served with statutory notice and following that notice he requested for payment schedule which was not availed to him. In proof of what has been testified above, DW1 prayed that exhibit Pll a-b be part of their defence in this case to prove that they paid all money due. 12 Under cross examination by Mr. Rwazo, learned advocate DW1 told the court that, he is not indebted to the plaintiff. When further cross examined DW1 admitted to have withdrawn 689,274,315.00 and deposited TZS 610,511,837.50. DW1 when shown exhibit P9 admitted and acknowledged that debt through the letter dated 3rd September,2019 and that the said letter was signed by him as Managing Director. Under re examination Mr. Kisigiro, learned advocate DW1 told the court that, in 2016 they paid Tshs 81,000,000/ and for that payment of money he knew the plaintiff deducted their money of Tshs 75,000,000 so to say has repaid all the loan. DW1 when asked questions for clarification told the court that when they repaid Tshs 81,000,000/ still continued to enjoy the overdraft and made further drawings. This marked the end of hearing of the defendant's case. The learned advocates for parties prayed that, they be allowed to file final closing submissions relating to this suit. I granted their prayer. I have had time to read their respective rival arguments in support of their respective stances. I truly commend them for their industrious and insightful inputs on this suit. In the course of determining this suit, I will 13 here and there refer to their points raised and argued. Having gone through pleadings, testimonies of the witnesses and final closing submission of the parties, the noble duty of this court now is to determine the merits or demerits of this suit. However, in the course of hearing of this suit, I noted some facts not in dispute and wish to point them out and narrow down non contentious issues. One, it is not disputed by the parties herein that parties entered into loan facilities which was categorized as an overdraft in terms and conditions as evidenced by exhibit Pl. Two it is not disputed that the said loan was guaranteed by 2nd defendant landed property and person guarantee of the 2nd defendant property as described in the plaint Three, it is not disputed that the 2nd and 3rd defendant guaranteed the first ranking chattel mortgage in favour of the plaintiff over the 1st defendants fixed and floating assets for TZS 93,750,000.00. And four, it is also not disputed that the 2nd and 3rd executed personal guaranteed for the lstdefendant in favour of the plaintiff at Tshs. 93,750,000.00. On that note, the noble duty of this court now is to determine the merits or demerits of this suit by answering each issue as agreed and recorded in the light of evidence on record. I find imperative to point out that, in this suit plaintiff is claiming for payment of outstanding loan balance to 14 the tune of TZS 83,760,890.54 and consequential reliefs. On the other hand, defendants are disputing the existence of the claims and that the creation of the mortgage was improperly done. With the above contention, therefore, the 1st issue was thus coached that "whether the procedure for mortgage creation were properly followed?" Having carefully considered both the pleadings, the testimonies of the respective parties' witnesses and documentary evidence tendered in their totality, I am inclined to answer this issue in the affirmative. My reasons are not far-fetched. One, the defendant don't dispute that there was no registration nor that the securities were obtained by coercion or misrepresentation or any other reason that can vitiate their creation and perfection. The mere difference on dates on one documents cannot be termed as illegality in creation of the mortgage or that the registration of the documents were not done before the facility letter as the registration of the securities was based on the condition and terms of the facility letter. Therefore, it is unimaginable to say securities were registered before the facility letter exhibit Pl. The facility letter was signed on 27th February, 2015, exhibits P2, P3, and p5 were all signed on 6th March,2015 though at the bottom the Registrar shows same was signed 28th January,2015. It is my considered opinion that, the raised point is on mere trivialities and 15 slips of the pen and as such is devoid of any useful merits. Two, the variance of dates in exhibit P4 is mere error which have nothing to do with the substantive part of or root of the main case which is loan agreement and not only that but also the wrong of the Registrar cannot be used to punish the innocent litigant. On the above reasons the arguments by Mr. Kisigiro are far from convincing this court otherwise That said and done, I associate myself to the conclusion by Mr. Rwazo that the 1st issue is to be answered in the affirmative that the procedures for mortgage creation were properly followed. This takes me to second issue which was couched that "whether the defendant defaulted in servicing the loan?" The plaintiff alleged that since 2018 defendant was in default and up to date, he has failed to repay the loan. In rebuttal the defendants have argued that they are not indebted to the plaintiff. I have carefully revisited and considered the pleadings, the testimonies PWl, DW1 together with exhibit Plla, Pl lb, and PlOb-PlOc there is no doubt defendant defaulted in servicing the loan. I am entitled to hold so because the outstanding amount as per 31st August, 2018 the overdraft is TZS 77,702,477.53 and the term loan is TZS 6, 058,413.01. More so, the loan was to be repaid for one year but up to date the defendant never repaid the loan. Moreover, 16 exhibits P6 and P9 are loud and clear that the defendant defaulted in servicing the loan and her requesting for conversation of the overdraft to term loan and rescheduling of payment on 3rdSeptember, 2021 so as to remedy the situation is other than admission of default. The arguments that loan was fully paid by the defendants is devoid of any useful merits and is rejected. That said and done, I associate with the conclusion by Mr. Rwazo that the second issue must be and is hereby answered in the affirmative that, the defendant defaulted in serving the loan. This takes me to issue number three which was couched that "If the issue No. 2 above is answered in affirmative, whether the plaintiff was entitled to commence recovery measures?" This issue will not retain this court much, obviously once terms and condition are not adhered to, then, what follows is recovery measure and this suit is one of the measures. This takes me to issue number four couched that "whether the plaintiff followed the rightful loan recovery procedures?", I should make it clear, based on the evidence, this issue was only argued by the plaintiff counsel which indicate that the defendants had nothing to submit on it. Without much ado I fully agree with the only 17 submissions by Mr. Rwazo that the plaintiff fully followed the recovery procedure as evidenced by exhibit P7 and P8 (a) (b) and (c). This trickles down to the last issue that "what relief's parties are entitled". The learned advocate for the defendants prayed that this suit be dismissed with costs. Based on my findings above, this suit is merited. The plaintiff on the other hand prayed for judgement and decree severally and jointly against the defendants for payment of TZS 83,760,890.54 being principal amount, accrued interest and bank charges as per paragraphs 15 and 20 of the plaint and consequential orders. I have no flicker of doubt that, in this suit plaintiff has discharged the burden of prove on this suit to the standard required under the civil cases. That said and done, I enter judgement and decree against all defendants jointly and severally on the following orders, namely: (a) The plaintiff is entitled to payment of Tshs. 83,760,890.54 being amount pleaded in paragraph (a) of the reliefs claimed; (b) The above amount shall attract interest as claimed in items (b) of the reliefs claimed and (c) The plaintiff is equally entitled interest as claimed in paragraph (c) of the prayer reliefs. 18 (d) The reliefs granted in paragraphs (a), (b) and (c) are to be paid within six three months from the date of this judgement. Further this court order and decreed that in case of failure by the defendants to pay the money adjudged within the period given, the plaintiff shall exercise her rights as prayed in paragraphs (d) and (e) of the plaint. In the final analysis, the suit is allowed with costs. It is so ordered. 19