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IN THE HIGH COURT OF THE UNITED REPUBLIC OF TANZANIA (COMMERCIAL DIVISION) AT PAR ES SALAAM MISCELLANEOUS COMMERCIAL CAUSE NO. 8135 OF 2024 IN THE MATTER OF COMPANIES ACT NO 212 OF 2002 (CAP 212 OF 2002) AND IN THE MATTER OF PETITION FOR COMPULSORY WINDING UP OF DOVETEL (TZ) LIMITED t/a SASATEL TANZANIA BY THE ADMINISTRATOR GENERAL.............................................. PETITIONER AND DOVETEL (T) LIMITED t/a SASATEL TANZANIA....................... RESPONDENT RULING Date of last order:30/08/2024 Date of ruling: 06/09/2024 AGATHO, J.: Before me is a ruling on opposition against the petition for winding up of DOVETEL (T) LIMITED t/a SASATEL TANZANIA a limited liability company incorporated under the Companies Act, Cap 212, formed for conducting the businesses of Information and Communication Technologies (ICT) in Tanzania. The verifying affidavit is sworn by Samwel Cosmas Mutabazi, a state attorney from the office of the petitioner, THE ADMINISTRATOR GENERAL. 1 The opposer is Dr. Peter Jonas Chitamu, a natural person, founder, chairman and one of the Directors of the company who has duly sworn an affidavit in opposition of the petition. In pursuing this matter, the petitioner was represented by Samwel Cosmas Mutabazi, state attorney and for the opposer, Dr. Chitamu was Eliaicha Aron Ndowo, learned Advocate. The arguments for and against the opposition were by way of written submissions. As hinted earlier, the hearing of the matter was ordered to be conducted by way of written submissions. To achieve this, the court on 15/07/2024 in the presence of both parties, did set a schedule for submissions as follows: - the submission in support of opposition was to be filed on 29/07/2024. This order was observed. The reply to this submission by the Petitioner was to be filed by 12th August 2024. However, the petitioner did not honour this order ad filed the submission later on 14th August 2024. It has been a good practice of courts in our jurisdiction that court orders must be observed as they are. Failure to do within a prescribed period, attracts an application for extension of time. As the extension was not sought for then I need not emphasize that failure to file written submission on the dates scheduled by the Court is as good as non appearing on the date fixed for hearing. (See the CAT case of National Insurance Corporation (T) Ltd & Another Vs. Shengena Limited, Civil Application No. 20 Of 2007) among many other cases. Since the petitioner herein did not seek leave to file the submission out of time, without hesitancy I proceed to expunge the reply by the petitioner from record as it was clearly filed out of time. That said, the 2 court will consider the oppositions submitted by the opposer to be uncontested by the petitioner. In his written submission, the opposer against the petition has advanced the following grounds:- i. The petitioner is lacking capacity to bring this petition ii. The petitioner failed to perform key administration duties iii. Compulsory winding up has the effect of killing the company completely, which company still has great potential not only to be revived but also to offer innovative products and services and high tech employment opportunities iv. No evidence established by the petitioner indicating that the company run at loss to the extent that it cannot pay its creditors debts and government taxes before the same was put under administration. v. The company is a start up which has a bearing on assets debts and liabilities. vi. The company since its incorporation had realised profits and had assets of over Tshs 25 billion to the extent that it was capable of paying its debts if any. I have had the liberty of going through the documents found in record of this matter in extenso. I will start deliberating on the first ground by the opposer against the petition that the petitioner lacks capacity to file the petition. It is vivid that the petitioner herein was first appointed to the position of administrator of the company by virtue of Misc. Commercial Application No 195 of 2021 on 12/07/2022, a tenure he was supposed to hold for a period of six months i.e to 11 January 2023. 3 Upon its expiry, he applied for extension of time in Misc Commercial Application No 212 of 2022 and the administration period was extended for further 12 months from 29th March 2023. The extended period of administration was therefore supposed to end on 29th March 2024. This petition was filed in court on 23rd April 2024, almost a month after the extended period for administration had lapsed. Admittedly, the petitioner has brought this petition for winding up of the company when his tenure in the office of company administrator had already ended. The Companies Act under Section 281.-(I) provides for persons who are eligible to petition for winding up of a company. It goes as thus:- Zl/7 application to the court for the winding up of a company shall be by petition presented, subject to the provisions of this section, either by the company or by any creditor or creditors (including any contingent or prospective creditor or creditors), contributory or contributories, or by an administrator, or by all or any of those parties, together or separately However, most probably due to the advent of overriding principle where courts concentrate on attaining substantive justice rather than technicalities, this misdemeanour did not seem to prejudice the interest of the opposer of the application. This is noted as he still submitted on the opposition extensively. It is with this same spirit that this court too is taking note that the administrator has approached this court with a winding up petition rather belatedly but for the interest of justice, this matter will be determined on merit. 4 The second grievance advanced by the opposer was that the petitioner failed to perform key administration duties. To support this, the opposer explained that under Section 255 of the Companies Act, the administrator has the following duties among many others:- 255.-1) The administrator of a company shall, on his appointment, take into his custody or under his control all the property to which the company is or appears to be entitled. (2) The administrator shall manage the affairs, business and property of the company. It is the opposer's view that the petitioner herein has not advanced any evidence on how he tried his best to manage affairs, business and property of the company. Thirdly, the opposer submitted that compulsory winding up has the effect of killing the company completely, which company still has great potential not only to be revived but also to offer innovative products and services and high-tech employment opportunities. It is his submission that the company has many great chances of being revived, he referred to the statistics of TCRA internet subscriptions shown under annexture DOV-13 to the affidavit in opposition. He blames the backdrop of the company progress to the fake investment scheme and mismanagement of company funds that was instigated by a fellow shareholder. At page 6 of his written submission, the opposer has listed options which if applied may lead to revival of the company for the betterment of the nation's economy. The opposer in the fourth ground contends that the petitioner has advanced no evidence to indicate that the company did run at loss to the extent that it could not pay its creditors debts and government taxes before the same was put under administration. 5 To put the rest of; the grounds together, briefly the opposer is of the view that the petitioner has done nothing viable in its capacity to rescue the company from its hardship as ordered by the court. The opposer further avers that the assets owned by the company used to be worth over 25 billion shillings by June 2012 but by June 2023 the assets have dwindled to worth only 457 mil due to mismanagement but the administrator has not done any effort to follow this up. Also, it is Dr. Chitamu's contention that the company has not failed to pay its debts but the situation has been occasioned by the dubious share purchase agreement between PME and First Seal Company, a fake investor who happened not to inject any funds into the business. He further contends that the company is a start up entity which hardly in two years in operation quickly demonstrated its capabilities if given an opportunity with assistance can stand back up. In addition, that the company was a source of employment to 120 staff including 40 engineers who are now unemployed and so does not pay tax to the government. The opposer submits that the possibility of the company licence to be revived still exists and so the company should not necessarily be wound up. It is without doubt that parties in this case have been in and out of court on a regular basis. Record has it that the Administrator General, the petitioner herein is the fourth administrator to be appointed by the court so as to manage affairs of Dovetel Limited but they all failed. With regard to the application for winding up, the grand question is whether the company should be wound up? Winding up of a company entails closing or dissolving a company by settling its debts, distributing any remaining assets to shareholders, and ultimately terminating the company's legal existence. It marks the formal end of a company's 6 operations and the cessation of its business activities. Before arriving to the decision, the important question for the court is whether it is in the best interest of the company and the nation at large that a particular company be wound up? I have considered the submissions by the opposer in this application. I agree with Dr. Chitamu that the petitioner herein has ran to the option of winding up of the company rather rashly. I too am of the opinion that the primary function and role of an administrator is to manage the company's affairs during a period of financial distress, with the goal of rescuing the company or achieving a better outcome for creditors than to rush to petition for winding it up. In fact, administration is a company rescue mechanism. Indeed, nobody promised that this task would be easy. A proper administrator will strive to revive the company back regardless of the difficulties. This is because normally, an administrator is appointed when a company is facing financial difficulties but is not necessarily insolvent. The aim of administration is to restructure or rescue the company rather than to liquidate it immediately. The administrator General, the petitioner in this matter is inviting the court to see that Dovetel (Tanzania) Limited fulfills the requirement for winding up as itemised under Section 279(1) (a) & (d) of the Companies Act [CAP 212 RE 2019] which are:- a) The company has by special resolution resolved that the company be wound up by the court; b) The company does not commence its business within a year from its incorporation or suspends its business for a whole year, c) The number of members falls below two, d) The company 7 is unable to pay its debts, e) The court is of the opinion that is just and equitable that the company should be wound up. In most cases the most echoing reason for company winding up is that it is unable to pay its debts. In this matter, the petitioner has not brought any cogent evidence that the company has not been able to pay its debts. On the contrary it is the opposer who has brought up evidence that the effort to arrange payment with creditors were always blocked by company director(s). It is clear from annexture DOV 5 that administrators appointed by the court have been facing difficulties in performing their functions by not getting any cooperation from the company directors. I have scanned through letters DOV- 6a, DOV-6b, DOV- 6c by previously appointed administrators and also DOV- 6d. They all point towards one shareholder hindering progress of the company and acting against court orders. In law under section 280 of the Companies Act, a company shall be deemed to be unable to pay its debts (a) if a creditor, by assignment or otherwise, to whom the company is indebted in a sum exceeding fifty thousand shillings or such other amount as may from time to time be prescribed in regulations made by the Minister, then due has served on the company, by leaving at the registered office of the company, a written demand requiring the company to pay the sum so due and the company has for twenty-one days thereafter neglected to pay the sum or to secure or compound for it to the reasonable satisfaction of the creditor; or (b) if execution or other process issued on a judgment, decree or order of any court in favour of a creditor of the company is returned unsatisfied in whole or in part; or (c) if it is proved to the satisfaction of the court that the company is unable to pay its debts as they fall due; or (d) if it is 8 proved to the satisfaction of the court that the value of the company's assets is less than the amount of its liabilities, taking into account the contingent and prospective liabilities of the company. The petitioner in this case has not laboured to substantiate any reasons for winding up as required by the earlier quoted provision. The petitioner seems to have turned a blind eye on real matters that has led to malfunctioning of the company and hastened to apply for a winding up order. It is very clear from record that the company was put into economic hardship by actions of its directors, actions which are seen and evident from the record. The most important duty of the administrator was supposed to be revival of the company. This in my view is an attempt to resist the duties to revive the company operation. The administrator has not accounted for what she has done to remedy the problems complained of in the company using her powers as an administrator. The Administrator General was expected to make sure that against all odds the company stands up on its feet again. It is not always that a winding up petition is allowed. I find persuasion in the Matter of Compulsory Winding Up of INETS Company Limited between Ephraim Solomon Swila and INETS Company Limited, Misc. Commercial Cause No. 48 of 2022, where this very court observed at page 9 that: "It is the settled position that the Court can issue a winding up order if it is satisfied that it is just and equitable to do so. I have asked myself whether this is a fit case to issue an order of winding up of a company. My answer is in the negative. Section 281, the Companies Act guides that: 9 (4) Subject to subsection (3), on hearing a petition, the court may dismiss it, adjourn the hearing conditionally or unconditionally, or make an interim order or any other order that it thinks fit. Since in the era we are in, the telecommunications industry plays a crucial role in economic development, there is a strong demand for telecom services globally let alone in Tanzania. It does not require any hustle to realize that there is a growing need for telecom companies in our country. Companies like Dovetel (T) Limited are there to expand infrastructure and services to meet the increasing demand for connectivity national wide. This court is not staged to discourage innovations especially local start ups as this. That being the case, giving an order of winding up of a potential start up will be way out of interest of the public. In the circumstances of this case and on the strength of evidence and arguments by the opposer to the petition, I proceed to dismiss the petition for winding up, with no orders as to costs. Order accordingly. DATED at DAR ES SALAAM this 6th Day of September 2024. U.J/AGATHO JUDGE 06/09/2024 io Date: 06/09/2024 Coram: Hon. UJ. Agatho J. For the Petitioner: Samwel Cosmas Mutabazi, Senior State Attorney For the Respondent: Eliaicha Ndowo, Advocate C/Clerk: E. Mkwizu Court: Ruling delivered today this 6th September 2024 in the presence of Samwel Cosmas Mutabazi, Senior State Attorney for the petitioners, and Eliaicha Ndowo, for the respondent. U. J.AGATHO JUDGE 06/09/2024 li