chacha silas maisa 2 others vs komarera hertage gold mine company limited 2022 tzhccomd 60 15 march 2022

IN THE HIGH COURT OF TANZANIA

COMMERCIAL DIVISION

AT MWANZA MISCELLANEOUS CIVIL CAUSE NO. 03 OF 2021

IN THE MATTER OF THE WINDING UP OF KOMARERA HERITAGE

GOLD MINE COMPANY LIMITED

BETWEEN CHACHA SILAS MAISA ( The Administrator of The estate of the late Nyamhanga Maisa)......... 1st PETITIONER RAPHAEL IHANDE MAKI................................. 2nd PETITIONER GIDEON MAGAGA............................................. 3rd PETITIONER

AND

KOMARERA HERITAGE GOLD MINE COMPANY LIMITED............................................. RESPONDENT Date of Last Order: 09/02/2022 Date of Judgment: 15/03/2022

JUDGMENT C. P. MKEHA, J The Petitioners are moving the court for the following orders: i (i) A declaration that all the contributors who did not honour their contractual obligations that led to the formation of the Respondent have lost each and every right to be contributors of the company and their failure has rendered the respondent a fit case for winding up by the court; (ii) A declaration that the allocation of shares of 3,750 worth TZS. 187,500,000/= (One hundred dnd eighty seven million and five hundred thousand shillings) to Ms. Ghati J. Mponzi by Dr. Ponziano Raphael Mponzi, was without consent of the other shareholders and contributors; (iii) A declaration that the Respondent is not operating in accordance with the provisions of the Companies Act Cap 212 R.E. 2019; (iv) That Komarera Heritage Gold Mine Company Limited be wound up by the court under the provisions of the Companies Act Cap 212 R.E. 2019; (v) That Mr. Thomas Mtarima Kohi, a well-experienced liquidator be appointed as the liquidator of the company and be tasked to 2 pay the debts of the company and distribute the remaining assets to its deserving members; (vi) Costs be provided for and (vii) Such other order as the court thinks fit. The Petition is made under sections 275, 279 (1) (d) and (e), 281 (1), 282 (a) to (b), 284 and 294 of the Companies Act as well as Rule 95 (1) of the Companies Insolvency

Rules. The affidavit verifying the petition was also filed in court. The same is deposed by the Petitioners (Minority Shareholders). Whereas Dr. Rugemeleza Nshalla and Heri Kayinga learned advocates represented the Petitioners, Mr.Silas John learned advocate represented the Respondent. According to Dr. Nshalla learned advocate, the reasons for the petition are found in ground 5 (I) to XIII of the petition. The learned advocate submitted that, on 30/06/2018 an agreement was signed by the Petitioners and Dr.Ponziano Raphael Mponzi for establishment of the Respondent. Under the agreement, the Petitioners, Mr. David Mwita and Kibwabwa Nyamhanga (The Minority Shareholders) had to 3 contribute to the capital by surrendering their Primary Mining Licences to wit, PML No. 2242; PML No. 861; PML No. 873; PML No. 1197; PML No. 1199 and PML No. 68 equivalent to TZS. 1,312,500,000/= (One Billion Three Hundred and Twelve Million and Five Hundred Thousand Shillings). The learned advocate submitted that, the Minority Shareholders did actually surrender their respective Primary Mining Licences. On the other hand, under the agreement, Dr. Ponziano Raphael Mponzi would be the Majority Shareholder, taking up 66,250 shares equivalent to TZS. 3, 312,500,000/= as a real hard cash capital of the Company. In the learned advocate's words, under the agreement, Dr. Mponzi was tasked to mobilize sufficient

resources. In terms of its certificate of incorporation, Komarera Heritage Gold Mine Company was formed on 30th January, 2019. To the Petitioners' dismay, up to the end of the year 2021, the company was yet to commence operations, leave alone including a person who was not a party to the agreement signed on 30/06/2018 which aimed at only those with primary mining licences. In view of the learned advocate, the 4 fact that a stranger has been included in the company stands uncontroverted. The learned advocate went on to submit that, not only has the company failed to commence operations but also, it has no office, employees, Tax Identification Number, stationeries or books of accounts. According to the learned advocate, for failure to do what it was formed for, the company has lost its substratum. The learned advocate submitted further that, the company does not have the requisite capital because of failure of the majority shareholder to contribute to the capital for even a single cent. The learned advocate insisted that, not only the company had failed to commence operations; it also failed to procure the requisite mining licence. It was also submitted that, the Certificate of Amalgamation of Primary Mining Licences (Annexture K2) was acquired after the filing of this petition. The learned advocate condemned the Respondent for failure to hold necessary meetings. According to the

learned advocate, through a resolution passed on 12th January, 2020 the reason for failure to convene meetings was the effects of COVID 19 which is a lie as 5 Tanzania registered her first patient on 16th March, 2020. The learned advocate contended that, the affidavit in opposition contains a lie. He invited the court to rely on Ignazio Messina Vs. Willow Investments, Civil Application No. 21 of 2001 to ignore the said affidavit in opposition. In his further endeavor to demonstrate lies in the affidavit in opposition, the learned advocate submitted that, Mr. Gideon Magaga has never been a Secretary to the Company as indicated under paragraph 8 of the said affidavit. It was submitted that, Mr. Magaga sworn an affidavit disputing having ever been a Secretary to the Company. The learned advocate invited the court to expunge the said affidavit leaving the petition unchallenged. The learned advocate submitted also that, the contributors and all the Directors are not in speaking terms and because of that, the petitioners sought assistance of the District Commissioner who attempted to resolve the dispute. According to the learned advocate, the agreement reached before the District Commissioner was not honoured. It was 6 submitted that, when the Directors and the contributors are not in speaking terms, the company has to be wound up. Lastly, a prayer was made for appointment of Mr.

Thomas Mtarima Kohi as a liquidator. A prayer was also made for costs of two advocates. Mr. Silas John learned advocate for the respondent commenced his reply submissions by adopting the affidavit in opposition sworn by Dr. Ponziano Raphael Mponzi. He then submitted that, in terms of section 24 of the Companies Act, pre-incorporation contracts do not bind a newly formed company. According to the learned advocate, Dr. Mponzi had to be given 70% of the shares of the Company. He had to use those shares to form group of other investors who later on would finance the operations of the company to be formed. Also that, Dr. Mponzi was given a task to amalgamate all the primary mining licences to a mining licence. The learned advocate submitted that, the respondent purchased all the primary mining licences. The learned advocate submitted further that, while Dr. Mponzi is blamed for failure to fulfill the agreement, he had managed to amalgamate all the primary mining licences. He added that, since the process to obtain 7 a mining licence takes a long time in our country, it would not be possible for the respondent to start operations before obtaining the requisite licences. It was further submitted that, there was no secret in making Dr. Mponzi's wife a subscriber. It was also submitted that, all the subscribers signed the memorandum in front of a lawyer. Regarding commencement of

business, the learned advocate submitted that, the company commenced business few months after its inception. The learned advocate submitted that, the term commencement of business is understood to mean that, the company has to engage into business activities. Reference was made to Halsbury's Laws of England, Paragraph 7 (2) at page 1092. The learned advocate added that, according to Investopedia, business activities mean: All the economic activities carried out by a company during the course of business including operating, investing and financing activities which have a purpose of creating value for shareholders. The learned advocate submitted that, the process of amalgamation is a business process as it created value to shareholders. Leasing of a house for office of the company was also added to the list of business processes. A lease agreement had been annexed as Annexture K 4. The learned advocate 8 added that, the respondent was about to procure mining equipments worth USD 40ML. As to raising of capital, the learned advocate submitted that, the petitioners had failed to show that the company has no assets. Also that, the petitioners had failed to show that, the respondent has been operating under loss. The learned advocate added that, whereas there was no evidence that the company had failed to hold meetings, there was also no evidence that the company had suspended its

business. It was insisted that, since the company had four Directors, it was incorrect to say that the company had no employees. The learned advocate went on to submit that, there was no loss of substratum since there were still minerals and that, the company was about to start operations hence, the main objective was still intact. He insisted that, while the assets could withstand any liability, there was no claim which stood unpaid. The learned advocate renounced presence of a deadlock between the petitioners and the contributors. He added that, it was not true that the 9 members were in bad terms. It was insisted that, there was no proof of hostility between the members. As for "just and equitable ground", the learned advocate submitted that, the said ground could only be exercised if there were no other effective alternatives. In view of the learned advocate, the petition was unreasonable for seeking the last resort in circumstances where there were other alternatives. He finally pressed for dismissal of the petition with costs of two advocates. Dr. Nshalla's rejoinder was to a large extent, reiteration of what had been submitted in chief. He urged the court to grant the petition with costs. The only issue for determination is whether the grounds for the petition have been established by the petitioners. Of all the grounds for the petition, the ground regarding failure to

commence business is considered by the court, to be determinative in the circumstances of the present petition. It was the petitioners' position that, whereas the company was incorporated on 30/01/2019, it had failed to commence business as on 23/08/2021 when this petition was filed. 10 The learned advocate for the respondent was of firm position that, the company commenced business activities few months after its inception. According to him, business activities ought to include all economic activities carried out by a company during the course of business such as investing and financing activities which have a purpose of creating value to shareholders. According to the learned advocate, amalgamation of the primary mining licences and leasing a house for company office, were some of the business activities done by the company. The broader definition of the term "commencement of business" as suggested by the learned advocate is perhaps based on the wider nature of the usual objects clause, just like the respondent's objects clause, which makes a company, unlikely to be unable to commence some type of business within the statutory period given for business to commence. In my considered view, gauging should be pegged on the main object or at least one of its main objects. I do not subscribe to the view that, merely carrying on a business which is ancillary to the company's main

object should be interpreted to mean that, the company has commenced business. It is my holding that, if the business is found to be based on an ancillary activity or it consists of simply the 11 holding of board meetings as it is on part of the respondent, winding up order may be made. There is no denial that, the company's main object is mining of minerals. For more than one and a half years since its incorporation, the company failed to commence its main object, mining of minerals. Under section 279 (1) (b) of the Companies Act, a company may be wound up by the court if the company does not commence its business within a year from its incorporation. It is for the foregoing reasons I grant the petition thereby winding up the respondent company, KOMARERA HERITAGE GOLD MINE COMPANY LIMITED. The court appoints Mr. Thomas Mtarima Kohi as the liquidator of the company to pay debts of the company and distribute the remaining assets to its deserving members. DATED at DAR ES SALAAM this 15th day of MARCH 2022. C. P. MKEHA

JUDGE 12 15/03/2022 Court: Judgment delivered in the presence of Mr. Silas John, counsel for the respondent, through virtual court this 15th day of March, 2022.

JUDGE 15/03/2022 13