19990920 TZHC Dar es Salaam

IN TIIE IIIGII COllltT OF TAN7.ANIA (OAR ES SALAAM UISTIUCT IU~GISTR\') AT OAR ES SALAAM MISCELLANEOUS CIVIL CA USE NO. 155 OF 1998 (CONSOLIDATED W.ITH MISC. CIVIL CAUSES NOS. 146, 147,148, 149, 150, 151, 152_, 153, AND 154 BY ORDER OF THE COURT DATED 16TH JULY, 1999) ' IN THE MATTER OF THE COMPANIES ORDlNANCE AND IN THE MATTER OF FAHARI IJOTTLERS LIMITED IJl(T\,VEEN FAHARI BOTTLERS LI.MITED ....... APPLJCANT/PETITJONER AND THE REGISTRAR OF COMI>ANIES ................... RESPONDENT AND NBC (1997) LIMITED AND OTHERS ............... OBJECTORS. RULING A group of 10 ?SSociated Companies has presented itself before this court - segmented into ten (10) simultaneous winding up petitions. These sister Companies are Ziggi Bottlers Ltd, I(jJima Bottlers Ltd, Mwanza Bottling Company Ltd, Ruaha Bottling Co ..Ltd, Shinyanga Bottlers Ltd, Serengeti Beverages Ltd, West Lake Bottlers Ltd, .Faqari ·. . . Fruit Products Ltd, Southern Higland Bottlers Ltd and Fahari Bottlers Ltd. The petitions were assigned Nos. 146/98, 14 7/98, 148/98, 149/98, 150/98, l 5 l /98, I 52/98, 153/98, 154/98, and 155/98 respectively. Prayers sought in all the petitions are similar in terms. Simultaneous with the winding up petitions the petitioners, by way of chamber summons supported by affidavits of their respective Directors, have applied for appointment of Provisional Liquidators. As is the case with the Petitions for winding up, the prayers in this aspect are the same and on similar terms. .In order to appreciate their import I herebelow reproduce tl~em as they appear in one of the petitions:- "1. 11,at tlte court exercise its discretion under S.183(1) of the C.'ompanies Ordinance, Cap 212 ("Cap 212" or "tlte Ordinance) and t: ... I ' 2 i,: ,._ .1i Rule 31(1) of tlte Windilig Up Rules, (1929) (Imperial) ("Wim/i,,g Up Rules'? and appoints: a) Mark Danlti Romani of Bomani & Co., Peugeot House, 39 Upanga Road, P. O.Box 740, DAR ES SALAAM; b) Paul lloward Finn, FCA of Finn Associates, temple Cltambers, Temple Avenue, London EC4Y ODT., and Peugeot House, 39 Upa11ga Road, clo P. O.Box 740, DAR ES SALAAM; c) Kevin Antlumy Murphy, CA <~{ Fi1111 Associates Temple clwmhers, Temple A,•,mue, J.,mulm, IJ:C4l' 0/J'J:, mu/ l'eugeot l/m1.,·,•, 39 Up,111g11 Road, clo P.O. Box 740, DAR ES ,\'AL'1AM. as Provisional Liquidators of the company with further Order that: * they shall take possession of all the fixed and current assets of the company, whether of a tangible or intangible nature; * they shall act with the powers conferred by S.190(1)(a) - (f) and 190(2)(a)- (h) of the said Ordinance; * within four weeks (or such other period as the Court may direct) they prepare a Scheme of Arrangement and make application to the court unders.154(1) of the said Ordinance for the purpose of convening a meeting of the compnny's Cn•ditors to consider nnd vote upon the Schl•me; * for the purpose of S.187(4) of the said Ordinance they shall act jointly and severally in all matters; * their remuneration be determined by 1·eference to S.187(2) of the said Ordinance nt the rnte of 12.5'¼, of gross renlisntio11s(o1· nt nny other rntc ns the Court shall deem fit) to be divided by agreement between them; * the costs of appointing an advocate under the provisions of S.190(l)(c) or agents under the provisions of S.190(1) (g) of the said O1·dinnnce be defrnyed from the assets within the hands of the P1·ovisional Li<Juidntors; * t.he cost of J>roviding any security as may be determined by the Com·t - ' 3 1111cle1· Che prnvi.sions of S. IH4(t•) of Hae ,o;nitl Onli11111u·c he ,h·f1·11) t•cl f.-0111 fht• 1 assets within the hands of the Provisional Liquidator·s; * That, pursuant to s.171 of the Ordinance, the prnceedings in any suit, application, case, petition, or matter pending in this court or in any other subordinate court or tribunal be stayed pending the Order for winding up the company or further Order; "' That, pursuant to S.170(1), the hearing of the petition be adjourned to a date to be fixed following the meeting of the company's creditors to vote upon the proposed scheme of nrnmgcmcnt. 2. Tit at tlte costs of tltis application be defrayed from tlte assets of tlte Company. 3. That sue/, other Order be made in the premises as the court shall deem to be just a,id tltinks fit " As the petitions and chamber summons are hinged on similar and same terms, for convenience and avoidance of duplication, with consent of the Court, the Counsel struck a compromise to the effect that the various petitions should be consolidated and argued together in Misc. Civil Cause No. 155 of 1998 hence the presence of proceedings leading to this ruling in the said record. Arguments were made by way of written submissions. AH the petitioners were advocated by Eric Ng'amaryo while the Respondents/objectors had services of various respective Counsel as follows - Capt. Kameja for NBC (1997) Ltd, Dr. Sinare for TRUST BANK, Mwandambo for TIB, Rwebangira (Ms) for KIOO Ltd, Dr. Tenga for CONTINGENT CREDITORS (Girish T. Chande, Ashok T. Chande, Ravi T. Chande, J.V. Textiles & Garments Ltd and MIS Juthalal Vesji Ltd), Mbiro for GROWN CORK COMP ANY (EAST AFRICA) LIMITED, Mujulizi for ST ANBIC BANK (T) LTD and M&M COMMUNICATIONS LTD. One last objector, ABDILLAH MIKIDADI appeared on his own. I 4 In their counter affidavits the objectors except KIOO LTD which also has a preliminary objection specifically directed to Fahari Bottlers Ltd and insists on winding up, do not object to the appointment of Provisional Liquidators. Again, except KIOO Ltd which supports one KEVIN MURPHY all objectors object to the trio proposed by petitioners for appointment as Provisional Liquidators because of conflict of interests - FINN and MURPHY because they allegedly participated in the proposed restructuring scheme while BOMAN! has been acting for the 'Fahari group' including provision of services by his chambers to the petitioners. Not only that but also they all object to the proposed powers and duties of the Provisional Liquidators. All except NBC ( 1997) Ltd are opposed to the proposed scheme of arrangement - restructuring. They insist that the Provisional Liquidators to be appointed should be for the purposes of maintaining the status quo, fully investigating the affairs of the relevant Companies, compilation oflist of creditors, collection, prossession, and preservation of the properties till the winding up order. NBC ( 1997) Ltd on the other hand agrees on the making of a scheme of Arrangement; agrees on the appointment of the Provisional Liquidators but differs with Petitioners on the proposed trio and the powers to be conferred on whoever is appointed. While insisting on winding up, ST ANBIC and M & M feel that "reconstruction" or "re- organisation" could be one of the options to be adopted by liquidators with approval of creditors and the Court but that not on terms as proposed. Objectors also, object to the proposed 12 1/2 % of gross realisation as remuneration to Provisional Liquidators suggesting less instead and fair amount ranging from unspecificity to 5%; propose Joseph Warioba as Provisional Liquidator, and call for rejection of the original Provisional Liquidator's Report. Just to clarify on the last issue of the "original Provisional Liquidator's Report", I should point out at this point that this was the report compiled by Provisional Liquidators so appointed by this Court when the present Petitions were filed. Following wanting and conflicting orders and decisions by different judges in these petitions and in Civil Case No. 9 of 1998 the Court of Appeal, suo motu, opened revision proceedings vide Ci,,if I 5 Rel1isio11 No. 1 of 1999 in which, among others, it was ordered "the proceedings for appoint mc11t or Provisional Liquidators be and are quashed". By then however the Provisional Liquidators appointed and charged with the duty of restructuring had already commenced their work and the report which had already been compiled is the one being referred to. With that let us now turn to the submissions. Mr. Ng'amaryo for Petitioners, painstakingly and in a length submission argued 011 what can be summarised as follows (for ease of reference I wi_ll adopt the paragraphs and entitling he designed): (A) that PROVISIONAL LJQUI/JATION PROCEDURE JS ESSENTIAL TO FACILITATE THE RESTRUCTURING PROCESS OF THE J(J PETITIONING COMPANIES - that the "winding up order" was not the intention nor the contemplation of the petitioners at this stage but were forced to seek protection of this process because, legally, Provisional Liquidators cannot be appointed under S.183 oft/re Companies Ordinance unless" winding Petition is filed. - the three proposed liquidators should be accepted because, (a) Only seven out of tlte 10 petitioning Companies /,ave persons objecti11g (b) Only 32% (8 persons) out of 26 who filed Notices to appear put up an objection (c) Creditors who nel1er objected or filed notices to appear are in excess of JOO, tlte vast majority, ltence tlte mi11ority wlticlt objects is just less than 10% of the creditors 6 there is "m 1envl,e/11iing need to proceed wit!, the restructuring proces.\· in order to maximise the realization for the benefit of all the creditor.\· <?f tlte ten Companies and therefore facilitating the recapitalisation process of the Pepsi Cola Business i11 Ta11zaniu, wit!, tl,e cm1seq11entia/ benefits also to the workers and the nation" - Detailing why he is urging for restructuring, Mr. Ng'amaryo insists that : reasonably, e••ery creditor is co11cerned with rec<wery of its debt. : only restruct11ring can prm1ide short term and opportunity to creditor to collect all or part of its debt from an inso/lient Company : Pursuing a winding order and full liquidation wlticlt results into 110 realization w/u,tsoet•er i.-. 11nreaso11ah/e : Macro-economic benefits would include " (i) Tlte project re,,e1111e ge11eratim1 for the period I 999 to 2003 i.-. Shs.35 Billion. (ii) Mi,jor Ttmz1111i11 .mppliers ofgood.Ii am/ sert•ice.~ will get b11.ti11ess worth 011er Slu·.28 /Jillim, betweeu 1999 - 2fJ(JJ. (11,e will pay taxe.i; . including VAT). (iii) 25,000 retailers will make a gross profit of .S'Ju.33 Billion durillg the period 1999 - 2003 from sale of Pepsi-Co/a products. (They will pay taxes including VAT to the Government). (iv) The overall benefit to the economy from tlte abm1e 3 sources is Shs. 96 Billion m 1er the next 5 years. (,',) Direct and indirect employment will be created/or 9000 workers. 7 (1 1i) Competition - resulting ;,, lower prices, better quality and more advertising and promotion - including sponsorships of sports, leisure mu/ cultural activities in Tanzania. (vii) The consumers and customers will benefit by competition between two world class brands. Tlie court may be lllvare from tlie press of the historically unprecedented drop oft/re Pepsi Cola prices by 25% fol/owe,/ by otl,er too. (viii) Inward Im 1estment <?f m 1er 20 million US Dollars. (ix) Improved prm.pects of rea/i.5ation and dit 1itlemls by 1msec11red creditors". - that under the restructuring process the Provisional Liquidators will within four weeks of their appointment prepare a scheme of Arrangement, make an application to the Court under s. 154 of cap 212 for the purposes of co,n,ening a meeting of the Petitioner's/ creditors to consider and vote on that scheme as well as any other matter brought up aml\or arising as a result of the enquiries conducted by the Provisional Liquidators, that if appro11ed the scheme would be presented to the Court for apprm1al or ,,ariation after which, the role of "tlte Provisional Liquidators as 'Midwives' of the restructi,ig a,id recapitalizatio,i lapses", that if this fails the petitions/or wimli11g up will be activated. Mr. Ng'amaryo ve/1eme11tly mai,itains that u11der this process "there is no possibility .. of any lawful rights of the creditors as a body, and individually (including tlte objectors) bebig trampled upon in anyway", a,id t/,at it is tlte creditors collectively wlw /mow am/ s/,011/d fi11ally decide exactly what is best for them a1td what is a mere sham. 8 lfo c:m1d111/etl /~~• .'ifati11,: t/1111 the "f'f'licatim, mu/ propo.fifim, i.ffair,}1ut and equitable to all tlte creditors as a hotly'·'. (/J) RESTRUCTURING l~ ESSENTIAL AND INDISPENSABLE CONIJ/1'/0N PUECEl>ENT TO 1'1/B llECAl'ITALIZATION OF TIIE PEPSI COLA JJUSJNE.\:Y JN TANZANIA - tltat tlte restructuring process leading to recapitalization i.'i to enable a prospective ilwestor "led by a South African based Company called /11tenwtimwl Pep.'ii-Cola Bottlers /,n 1estme11t Limited (IPCIJJL) wit/, tlw support of Pepsi-Lola lntematio11a/, wlto are slwrelwlder.'i in ll'C/J/1, and are also Franchisers of all tlte Pepsi-Cola Carbonated soft drinks bottled in Tanzania, to recapitalize the Pepsi-Cola business presently run by tlteir Francltisee, namely Fa/u,ri /Je,•erages Ltd" - that tlte Court should note Finn's report wltich shows that tlte Maxinuun realization to NBC (1997) Ltd is only 2.37 Million ll..S' dollars at 30th April, 1998. - that tltatfigure should now be less due to escalating and continuing costs, losses, claims made (i.e. Civil Case No. 98/98 and 42/99) and potential claims including, another factor that is, payments due to preferential creditors i.e. Tanzania Rei•enue Authority and.terminal benefits of the Employees, - that "......... in liquidation and auctio11ing the remaining assets, there will be no realisation whatsoel'er for a1ty unsecured creditors and some objectors will also face t/ie prospects of claims and suits similar" to those facing NBC (1997) Ltd (C) THE QUESTION OF 11/E APPOINTMENT OF PAUL HOWARD FINN AND KEVIN AN11/ONY MURPHY AS PROVIS/ONA/., LIQUIDATORS is RES JUD/CATA 9 - that the Gmrt <?f Appeal tlecitletl tl,at tl,e appoi11tme11t of tl,e two Provisional Liquidators was proper as tl,ere was no conflict of i11terests and that tlte "Matter tlterefore ougltt to and mu.~t rest. No one can or should bring it up again unless, and if !iO, only through further revisional proceedings in the Court·of Appeal". (/J) THE PROPOSED APPOINTMENT OF MR. BOMAN/ AS PROVISIONAL LIQUIDATOR CANNOT BE FAULTED - that Bomani is eminently qualified and a ma,i whose standing, clllihre cannot compromise his integrity and that consenting to the use of his cl,ambers by creditors and interested persons wl,en contacting Petitioners' advocates do not make l,im partisan or agent of addressees in the sameway the Court whose registries are used to clear mrious correspondences between opposite parties do 11ot carry that negativity. (E) THERE IS NO APPLICATION BEFORE THE COURT FOR THE APPOINTMENT OF MR JOSEPH SINJJE WARIOJJA AS PROVISIONAL LIQUIDATOR OR EVIDENCE AS TO HIS QUALIFICATIONS AND PROFESSIONAL EXPERTISE - that Warioba camwt be appointed a Provisi011a/ Liquidator as there is no chamber application supported by an affidavit to that effect in terms of Rule 8 (2) of THE WINDING UP RULES, (1929) (IMPERIAL) (WINJJJN(,' UI' RULES) mu/ t1s e/11cic/11tecl by the Court of Appe11/ i11 Cfril Revision No. 1199; that in any case objectors l,a,1e not prm1ided hi.~ qualifications and expertise let alone a defect apparent in the purported consent wl,ich re, 1ea~-an irrelei1ant company "JV Group of Companies Lttl" 10 (F) THE REMUNERA110N OF 11-/E PROPOSED PROVISIONAL LIQUIDATORS IS FAIR AND REASONABLE - that the 12 112% of the gross realization in reference to s. 187 (2) of CAP 212 is neither 1mreasonable 1tor unfair considering, the "enormity an,l complexity of the task of the provisional liquidators as exemplified by the volume of the interim report submitted by the previously appointed liquidators, aml acti1 1ities to be covered which are.far-flung 1111d over the whole co1111try mu/ ,\pecffically cm1.\·ideri11g "the atltletl dijjiculty in trmtsport am/ electronic c01111111111icatio11 between the O,mp~mie,'i, the nulime11tary am/ m11m111/ reeord lw,•pi11g 1111d tl,e relati•1ely short time required to complete their ... task" (G)-"TIIE COURT SHOULD SEE ULTERIOR MOTIVE IN THE EFFORT JJY A HANDFUL OF CREDITORS TO OPPOSE AND FRUSTRATE THE RESTRUCTURING PROCE,SS AND RECAPITALIZATION OF THE PEPSI-COLA 1JUSINESS IN TANZANIA. THE SAID HANDFUL OF CRE_Dl;TORS SEEftf TO /JE ALL MAKING A JOINT EFFORT TO DO SO. ·. · - that the various affidavits of creditors and g1,4ara11tors seem to . , '" compliment each other, that some creditors_appeat:prepared to write off ' ..· ..·". their debt albeit jeopardizing other credi(or~ ~ chanc.es of recovery as well as kill the Pepsi-Cola business in Tanzania. .. .· .... - thatt/ie-self-injurious aml-unreasonable efforts b~ the o~;ectors in blocking.genuine. andfru,tjiil efforts by Petitioners seeking Com1s assistance in restructllrlng should be seen as aiming at boosting Coca- Cola. JJ11sill1?ss in '11rmza11ia ' .• (11),FOR.CREDITORS TO ADDRES8 THIS COURT.JN OPP0S/110N. OF-TJllSvt-P.PJ.;IOATION;· PROOF OF JJEJJT MUST HAVE BEEN 'SUBMlTTED · 11 - that the 9 Creditors should have proi,ed tlteir debts; "11iey must lta1 1e pr01•ed that ..... Applica11ts/Petitio11ers owe them the .mm.-. they ha11e i11dicated in the Counter ,~ffidavits. 17te mms am/ responsibility.falls 011 them to do so, someone can11ot simply appear and say I am a creditor, produce 110 e11idence and expect to be heard by the Court." - Regarding the co11ti11gent "creditors they should ha,,e adduced e••ide11ce of the existence <if the loans and guarantees. - that none of these has a locus standi l THE REPORT OF THE INITIAL PROVN,'IONAL LIQUIDATORS AND THEIR WORK SO FAR DONE SHOULD NOT BE WASTED - that the interim report relates to a task almost half way through and the same should be adopted in order to allow completion of the task wit/1i11 tl,e co11templated timefn1111e mu/ save effort and expenses so.far injected therein. - that this will have sense if Finn and Murphy in conjunction with Bomani will he allowed to complete the task from where they left <~ff because othenvise it will he to "reinvent the wheel" if new Provisional Liquidators are appointed J. POWERS OF THE PROVISIONAL LIQUIDATORS SHOULD NOT BE LIMITED (this was not so framed by Mr. Ng 'amaryo as he put it u,ider item (a) ab01 1e, but co,isidering its importance in the dispute I have deemed it proper to give it a separate title) - that though powers of Provisional Liquidators are ,iot specifically spelt out under the cap 212 the said CAP juxtaposes provisions relating to Liquidators with those relating to Provisional Liquidators in se••eral sections including ss. 176, 180 (1), 184, 186 (5) proviso, 186 (6), I 88 thus leadi11g 01,e to reasm,ably conclude that the same powers required 12 by a Liquidator are needed by a Provisional Liquidator albeit for a .<1pecific period - that /es.'i powers tlum tltose m,lwdfor will delay tlte proce.'i.'i as tlte Prm 1i.\·ional Liquidators will have to co11sta11tly seek spec~fic Court orders to enable them carry out tlteir duties and obligatiotts respmuibly - that as much as tlte Court may limit and restruct the Prm•isimwl Liquidator's powers under s. 182 (2) CAP 212 or Liquidators powers under s. .190 so also it is a natural inference tltat the Court ltas power to gil1e other or ,ulclitimial specific powers to Prm•isional Liquiclator.'i a.'i circumstances of the case may require. - tltat it is unimaginable tltat Provisional Liquidators cannot lta•1e powers to "spearhead" restructuring process but at tlte sametime It ave powers to investigate, collect, presen1e assets, prepare statement of affairs and related - that ''powers and order less titan those prayed for, particularly powers as meagre as those proposed by objectors will delay the efforts, tlte process, hamstring tlte Provisional Liquidators and.frustrate tlte restructuring process". The above is a summary of a very lengthy submission by Mr. Ng'amaryo. This attracted a formidable joint counter by the objectors. As they are all launched on the same vein, and being almost similar in substance, I will summarise them jointly and together save for limited areas where they part, in which case, I will deal with those elements separately. I will start with Ms Rwebangira's submission on preliminary objection. Ms Rwebangira has raised a preliminary objection to the effect that the Petition in respect of Fahari Bottlers Ltd was presented in bad faith and should be stayed pending hearing and determination of legal issues as follows:- 13 (i) " Wltet/,er ti comp,my wltic/, is ,mder compu/.<wry wi11di11g up proceedings by a Creditor, enters i11to a settleme11t agreement 1111der which it promises to pay a compromise amount and thereby persuades the (,}editor and the Court to mark the matter as settled and, as a result of which issue a decree but soon thereafter and, without payi,ig the said compromise amount thereto, fraudulently, amllor i11 an attempt to avoid liability under the decree is entitled to proceed, to a "vol,mtary" Winding Up 011 grounds of alleged illsofrency or restructuring or has to show "cle,m /1a11ds" before it can be heard (ii) In what circumstances would a Petitioner be allowed to de.feat the rights of a decree holder, when such judgement had been entered with the consent of the Petitioner,fully aware of its alleged insofrency hut ,iot disclosed to the decree holder? (iii) Whether a company which goes i11to liquidation immediately ,~fter it /,as agreed to settle part of a debt i,i a compromise and /,as 11ot paid that compromise amount did so fraudulently or not. (il'.) Whether a company which transfers its assets (and business) to another company without transfe"ing its liabilities with the said assets and immediately petitions for Voluntary Winding Up, that company to wltic/1 the assets were transferred should not be wound up or at least the assets so transfe"ed be brought into the liquidation process. Facts leading to this objection include the following - In Misc. Civil Cause No. 133/98 filed on 5/8/98 Kioo Ltd petitioned for the winding up ofFahari Bottlers Ltd. Before the petition could be heard, precisely on 15/8/98, parties entered into an agreement which was recorded by the Court on 19/8/98. The terms were as follows: 14 1. Falrnri Bottlers Ltd to pay a sum of Tsh.225/- Million to Kioo Ltd towards settlement of its claim within 55 days from the date of this agreement provided the investment was in place by then. 2. If as a result of investment into Fahari or reconstruction it was able to pay Kioo Lfd n fureh,•r sum townnls full s,•Ul<•m,•11( of the dnim. it would do so. If not the sum paid .......... shall be the full agreed settlement. 3. Kioo agreed to withdraw the petition (also consent to lifting of the injuction) and defer further steps in the action for a period of 60 days from the date hereof. If during this period, as a result of investment into Fahari or reconstruction, Fahari took any steps such as transfer of assets or formed a .ioint venture, Fnhnri undertool< not to prejudice l{ioo's rights under thei1· claim. Fahari further undertook to inform Kioo in writing within one week . of any such step which may have been taken which could prejudice Kioo's rights. This persuaded Kioo Ltd to apply to the Court to mark the matter as settled which prayer was granted accordingly. According to Mrs Rwebangira, the Fahari Bottlers Ltd had a hidden agenda, for, " Surprisingly on the same day of 19th August, 1998 the Petitioner entered its own resolution for Voluntary Winding up and filed petition for Voluntary Winding up on the next day", and the assets were "hived-down" to a newly formed Company - Fahari Beverages Ltd. Mrs. R webangira argues, " the Petitioner deliberately misled the creditor and the court into settlement simply to get the Creditor's petition off the court record so that it could present its own and seek winding up or its so called "1·econstruction"/ 15 "l'esh·uctu.-ing" under its own terms. We submit that this was fraud. The Petitioner concealed the fact that its current investment and assets could not meet the initial sum of Shs.225,000,000. l.t also concealed the fact that it was about to make it impossible for Kioo Ltd as decree holder to execute the decree" or "take further steps" to recover the decretal amount by reason of its new J>etition. This concealment of material facts dfrectly relevant to the agreement, settlement and consent to the lifting of the injuction amounted to fraud and we pray that its petition should not be allowed to stand". In response to this, Mr. Ng'amaryo, citing Mukisa Biscuit manufacturing Co. Ltd v West End Distributors Ltd (1969) EA 696 argued that the above cannot be a preliminary objection known in law as it contains facts which have to be proved (and not points of law); that even if it is one it has been raised prematurely as what is before the Court now is an application to appoint Provisional Liquidators and not the hearing of the Petition. With respect to Mrs.Rwebangira I am on all fours with Mr. Ng'amaryo that this is not a preliminary objection known in law. Authorities on what is a preliminary objection abound and the authority cited above summarises what the legal stand is. As was observed by, Law, J.A, at page 700 of the cited Report, "..... So far as I am aware a preliminary objection consists of a point of law which has been pleaded, or which arises by clear implication out of the pleadings, and which if argued as a preliminary point may dispose of the suit. Examples are an objection to the jurisdiction of the court, or a plea of limitation, or a submission that the parties are bound by the contract giving l"ise to the suit to refer the dispute to arbitrntion .... " While I dont agree wih Mr. Ng'amaryo in his arguments that the debt of Shs.225,000,000 · due to Fahari Bottlers was not proved and that the "settlement agreement alleged must be 16 proved", for, the decree on record speaks for itself and he would surprise the world if he pretends ignorance of the same when he was a participant thereto, I cannot associate myself with an argument by Mrs Rwebangira that the existence of that liability is a point of law which should bar the filing of a Petition for winding up as was the case here. I am pursuaded, without prejudice to subsequent decisions on the matter, that on the facts at hand, Fahari Bottlers Ltd's acts are very very suspicious - offering debt settlement terms today only to file a Petition for winding up tomorrow, and even then without notifying the party you struck the agreement with, when the terms of the said agreement so provide, and not only that but also going furthe~ to transfer the assets excluding liabilities to another newly formed Company cannot be compatible with honesty, genuiness or faithfulness. There is something very wanting if not fishy. But that is the maximum we can comment at this point. Mrs Rwebangira's arguments are relevant when it comes to the he_aring of the Petition. Those are strong and relevant points that can be fronted to convince the Court that the petition for winding up should not be granted. _ Even then they cannot even be raised as preliminary objection for they don't legally qualify. There is no unlawfulness or illegality in the filing of the Petition. Mrs Rwebangira cannot be heard to say "this petition was unlawfully filed" or "this petition is illegally before the Court." What she can be rightly heard to front is, "though filed, this Court should not grant this petition as petitioners are before this Court shrouded with dirt". This is defferent from fronting a preliminary objection. In the premises the preliminary objection is over-ruled. Going back to the main substance I should outrightly state that the objectors ably submitted, and at length for that matter. For consistency I will summarise the objectors' response along the paragraphs and titles as numbered in respect of Mr. Ng'amaryo's submissions. 17 All objectors cancede that in law provisional liquidators can be appointed but insist (save NBC (1997) Ltd) that these would be for the purpose of maintaining the status quo, in that they would only collect, preserve and protect the Petitioners properly. Except NBC ( 1997) Ltd, they don't agree that their duties should eross over lo restructuring or working on a scheme of Arrangement. Stanbic Bank and M & M concede to some extent that that could possibly be one of the duties of the Provisional Liquidators. Regarding the indispensability of restructuring as a condition precedent lo recapitalization objectors who are against it insist that the restructuring is for the benefit or the Petitioners and more so because they entered in a scheme. of Arrangement without involving interested parties, i.e. Creditors; that they "hived-down" their assets into a new Company "without carrying the liabilities as well and leaving themselves being empty shells and without Considering Creditor's interests." The gist of the charges is well reflected in one of the objectors submissions as follows - " ...... the Petitioners directors .... grossly mismanaged the debtor companies, have dispated their properties and assets including illegal transferring thereof to a third party, namely Fahari Beverages Ltd whose directorship composes of the Petitioners' advocate". They strongly oppose the proposed trio as Provisional Liquidators - Finn, Murphy and Bomani as they are interested parties. They insist that the latter was not only used in clearance of Petitioner's correspondences but was actively involved in various negotiations while the former were involved in the restructuring scheme and advises to petitioners - hence none can service and command the confidence of objectors. They stand surprised over the alleged res judicata regarding the appointment of Finn and Murphy as it is not supported by the Court of Appeal decision in Misc. Civil Revision No. 9/99. They all (except the contigent objectors who have no particular preference) urge for the appoint of Joseph Sinde Warioba as a Provisional Liquidator for they have trust and confidence in him. They argue that once there is a chamber application for 18 appointment of a Provisional Liquidator, proposals that follow don't require a chamber application; that the consent made by Warioba is proper and the wrong name of the Company (JV Group) was by slip of the pen which can be rectified if need be. On the remuneration, while they all object to the 12 11:2% of the gross realization they stand divided on what should be given. The majority propose 5% while NBC ( 1997) Ltd maintains that the person appointed should make a proposal for determination by the Court. They dispute existence of any ulterior motive in their objections arguing that rather it is the Petitioners who harbour the same by engaging in actions which touch their interests but without involving them. Regarding their locus standi objectors are surprised by this argument because Petitioners conceded of being insolvent; that they (objectors) have clearly stated the extent of indebtness in affidavits; and that in any case this is not the occassion to prove debts. Lastly, they argue that the initial Report by the Provisional Liquidators should be disregarded as it was Composed by people whose appointment was declared null and void, and that powers of the Provisional liquidators to be appointed should be limited to protect objectors' rights. Mr. Ng'amaryo did not have much in rejoinder. He reiterated what he stated in the main submission. He insisted that the proposal of Mr. Warioba is against Rule 31 ( 1) of the rules; that decision of majority creditors is of pursuasive force (cited Amira! Meghji - the Debtor (1970) HCD 230) and Indian Building Constrators Ltd. v RB Purohit (1965) E.A 342, In Re st. Thomas'Dock Company (1876) 2 CLO 116, In re Uruguay Central and Hygueritas Railway Company ofMonte Video (1879) 11 CLO 372, Re Home Remedies, Ltd ( 1942) 2 ALLER 552), and that Chandes (Contigent creditors) by the end of June, 1998, were totally controlling and managing the affairs of the Petitioner 19 Companies, thus "they and their associated companies are ....... accountable for the affairs and financial position of the companies" and that their acts would be scrutinised and decided upon by creditors' meeting if prayers are granted. He insisted, "Fahari Beverages Ltd is a Company floated by the Chandes for the purpose of restructuring and hive down. This is mentioned in the letters ........ signed by Chandes". I have detailed the submissions and arguments purposely. Although the application seems to be a simple one a decision thereon affects a substantial group of companies let alone other interested parties including objecto~s. Arguments and submissions regarding their fate therefore should clearly be put to the fore. l should start by stating that I stand indebted to the Counsel's ( of both sides) able submissions. Not only that but also for availing me copies of authorities cited - I think, in a responsible recognition of the wanting nature of our Library facilities. For an organised flow of findings I will not follow the sequence of titles and paragraphs as designed by Mr. Ng'amaryo and paraphrased at the beginning of this ruling. Where necessary I will interchange them or argue them together. I will start witlt tlte question of tlte objectors' Locus standi. As rightly submitted by the objectors I have been at pains to understand what Mr. Ng'amaryo meant by insisting that in order for the objectors to have a locus standi they should have proved the existence of debts! The objectors duly filed notices upon the Petitioners' advertisements regarding their petitions for winding up. They duly appeared before the Court represented by Counsel. Their respective Directors swore affidavits showing the extent of indebtness by Petitioners - Crown cork, U$ 186,288; Kioo Ltd, Tshs.1,139,814,293 Fout which Tshs.225,000,000/= form a Court decree; Stanbic Bank, U$.1, 193,199.99; M/S M & M Communications Ltd, Tshs.68,333,909/20 arid U$.773.39, subject of(HC) Civil Case No. 268/98; Abdillah Mikidadi, 10 Million Tshs for wrongful termination, subject of Civil Case 20 No. 283/96 at Kinondoni District Court; NBC (1997) Ltd, a total ofTshs.7,300,378,428 [broken up as follows:- Ruaha Bottlers - Tshs.298,541, 705, Southern Highlands Bottling Coy-Tshs.137,679,230/=; Fahari Fruits Products Ltd -Tshs. 184,409,767/=; West Lake Bottlers Ltd - Tshs.130, 787, 172/=; Fahari Bottlers Ltd - Tshs.6,399,463,939/=], Shinyanga Bottling Company Ltd - Shs.149,496,615/=; Trust Bank (Tz) Ltd, Tshs.688,000,000/=; TIB, Tshs.269,036,877/92. The Directors of the contingent Creditors (Girish T. Chande, Ashock T. Chande, Ravi T. Chande, J.V. Textiles & Garments Ltd, MIS Juthalal Verji Limited) swore affidavits to show that they guaranteed various loans extended to Petitioners. What else does Mr. Ng'amaryo wish to be proved in order for these parties, who stand to lose in case the Petiti~ners die miserably insolvent, to be able to stand in Court to defend their interests? The objectors' notices to appear in the Petitions and their affidavits stand as sufficient evidence conferring unto them the locus standi required in the respective Petitions. As rightly submitted by them, in any case, this is not the right moment for proving the exact debts/liabilities. Coupled with this, the petitioners who self-confessed of being ml¥ indebted to various parties <lid not challenge the objectors' amdavits re~pi.n;rthe debts nor regarding the contingent Creditors that they guaranteed various w,ps. Mr. Ng'amaryo who knows it well, being a seasoned lawyer, is aware that an i}.ffi,avit is evidence and cannot be assailed by mere submissions as he is trying to do. Suffice to conclude that the objectors are properly and legally before this Court. Next to consider is wl,etl,er it is proper to appoint a Prm 1isional Liquidator. This should not detain us at all. All Counsel concede that this is purely legal and the law so provides. S. 183 (1) of Cap 212 (COMPANIES ORDINANCE) provides, "Subject to tlte prm1isions oft/tis section tlte Court may appoint" liquidator or provisionally at any time after tlte presentation of a winding up petition and before tlte making of a windilig - up order, and eitl,er the official receiver or any otlrer fit person may be appointed". 21 • Rule 31 of the Companies (Winding up rules, 1929) provide further, "After the presentation f~f a petition, upon tlte application <?fa creditor, or of a contributory, or of tlte Company, and upon proof by af/idtll'it <!( sufficient ground for tlte tlppointment of a Provisional Liquidator, the Court, if ittltinl,sfit tllld upon such terms as in tlte opinion t~ftl,e Court sltall be just and necessary, may make tlte appointment". Do.fact:,""'' circ11111,-,tam:e.1o· t?f t/,e co11trm,ersy before thi.-, Court 11•m·ra11t appoi11tme11t of Proi,isional Liquidators? On this point the Counsel have made reference to various pursuasive foreign decisions on what the Court should consider in exercising its discretion towards that end - (Re Dry Docks Corporation of London ( 1888) 29 Ch. D 112, Re Hammersmith Town Hall Company (1877) 6 Ch. D 112, Re High-field Commodities Ltd (1984) 3 All. ER 884). The enunciated principles boil to what is contained in the headnote to the report of the judgement in Re High-field's case " The Com·t would not usually exe1·cise its powers ..... to ap1>oint a Prnvisional Liquidator unless there was at least a good prima facie case for a winding up order. However, the Courts' Power to appoint a provisional liquidator (is) general in scope and (is) not restricted to cases where the Company wns obviously insolvent or where it was otherwise clear that it was bound to be wound up, or where the Company's assets were in jeopardy. Furthermore, the power (is) discretionary, and in addition to be being required to be exercised judicially the need for the exercise of the discreation should outweigh the consequences to the Company ...... ln pa1·ticular whe,·e the grounds for winding up Petition .... was expedient in the public interest, the public interest should be given full, though not conclusive, weight". The above quoted being a common law stand and not in derogation of the law as already quoted has full blessing of this Court, for, it portlays what the law is in this country as well. 22 The Petitioners have self-confessed of being in deep insolvency. They have filed petitions for voluntary winding up. Prima facie therefore a winding up order is likely to issue. The Petitioners have categorically stated " all the ten Companies are interlinked in their businesses, finances, directors and shareholde.-s", and have confessed of having "hived-down" their assets to another newly formed Company. Naturally, this state of affairs sets in uncertainity r~garc.ling the stability anc.l safety of the assets let alone the dealings, and loudly threatens the interests of the Creditors and Shareholders. In the circumstances, a Provisional Liquidator is required, among others to investigate these dealings, collect and protect the assets. For that reason I answer the question I had posed at the beginning, positively. · Following on /,eels to tire a/Jm,e is- wl,at powers should tltis Prm•isimtal Liquidator lta••e. The objectors save NBC ( 1997) Ltd urge for very limited powers and not as insisted upon by Petitioners. They insist instead that the Provisional Liquidators are only appointed for preservation of the petitioner's assets - maintain status quo, and that legally a Provisional Liquidator cannot engage in restructuring or composition of any Scheme of Arrangement ( cited the Re Dry Docks and Hammersmith cases whose citation has already been provided above). On whether restructuring is essential and indispensable to recapitalisation of Pepsi-Cola business in Tanzania they argue that Petitioners being insofvent and out of6usiness no meaningful restructunng can be made; that it is superflous to the petitions and that Creditors should not be compelled on a course whose extent of the alleged benefit has not been disclosed and more so in relation to creditors. 23 I should start by stating the obvious that neither the Companies Ordinance nor the "Rules" made thereunder specifically provide powers which have to be conferred upon Provisional Liquidators. S. 183(2) of the Ordinance and Rule 31 of the Winding up Rules, refer to powers of a Provisional Liquidator in an assumptive manner. They provide, " 183(2) Where a Liquidator is provisionally appointed by the Court, the Court may limit and restrict his powers by the order appointing him". Under Rule 31 the Court, (regarding a Provisional Liquidator), "(i) ... .if it thinks fit and upon such terms as in the opinion of the Court shall be just and necessary, may make the appointment (ii) The order appointing the Provisional Liquidator ......... shall state ........... the duties to be performed by the Provisional Liquidator" On the basis of the quoted law it is clear that the Court is vested with unlimited discretion regarding what powers should be bestowed on Provisional Liquidators. For that matter I am in full agreement with Mr. Ng'amaryo that the Court is empowered to give powers including those provided to the Liquidator under s. 190 through 193 of the Ordinance. What powers should be given are left to the wisdom of the Court. I cannot therefore buy the objectors' contention that Provisional Liquidator's powers is limited to only investigating the affairs of the Petitoners, collection and preservation of the Petitioner's assets. Depending on the facts of a particular case Provisional Liquidator's powers can loom into restructuring action and making of a scheme of arrangement or any other activity deemed proper by the Court to be in the interests of the creditors/shareholders. The counsel for both camps cited authorities in support of their respective stands- some of the objectors cited Re Dry Dockm Re Hammersmith and Highfield's cases while Ng'amaryo for Petitioners cited, among others, Re Amirali Meghji (1970) HCD 230; Indian Building contractors Ltd v RB. Purohit ( 1965) EA 342. The latter cases show that a Provisional Liquidator has powers even to make restructuring or arranging a Scheme of 24 Agreement, which stand, I fully support in view of the blank cheque given by the law (above quoted) to the Court. There is yet another support from a recent commonwealth decision, decided just last year ( 1998) (Mujulizi, learned Counsel, stands commended for unearthing it) which shows that Provisional Liquidators not only can they be given powers to preserve but also to dispose off the Petitioner's property (In the Matter of Peregrine Investment Holdings Ltd AND In the Matter of the Companies Ordinance Cap. 32, decided by the High Court of Hongkong Special Administrative Region, Companies Winding Up No. 20 of 1998). An excerpt from the judgement runs as under - " Provisionnl Liquidntors were nppointed ··················•········································································································ The order appointing the Provisional Liquidators provided that the Liquidators could sell or dispose of any assets by way of private treaty tender or auction upon such terms as the provisional Liquidators may deem appropriate subject only in the case of sales of subsidiaries or entire business divisions to the Liquidators obtaining leave to do so from the Court". I am satisfied that as the law stands now Provisional Liquidators can be bestowed with any powers ranging from investigating Petitioners affairs, collection of assets to selling or disposing of the same or some other duties including designing a Scheme of Arrangement that would be beneficial to all the parties involved and which the latter should agree to before presentation to the Court for approval or otherwise. Now, back to the specific question, on the facts of this particular case what specific powers should be conferred on the Provisional Liquidator? My first reaction is that they should not be limited as proposed by the majority objectors but rather should be wide enough to cover a formulation of a scheme of . Arrangement. I have reached this conclusion because of the following, first, it would 25 seem that there is a confusion regarding the centre of controversy. The arguments presented by the objectors seem to suggest that there is already in place a scheme of arrangement which they are being called upon to agree to. One of the object.ors charges thus: " It is therefore manifestly clear that there has ah·eady been a transfer or attempt to transfer the assets. What then are the Provisional Liquidators to take charge uf? Aren't they being appointed simply to inhe.-it and adopt the already prepare,f scheme, and thrust it at the creditor-s, call for a vote from a number of already app.-oving creditors who are in the majority any way? .Isn't the Cour·t being called on to rubber-stamp an _already made scheme, with the secured creditors being sidelined as mere by-standers?" And yet another lauched a similar serious attack in the following words, " It is ridiculous therefore my Lord for a debtor to compel a creditor to agree · to a course of action of whatever description which does not aJ>pear to be beneficial to him considering the fact that there is no real guarantee that the recapitalisation process will deliver any positive results. My Lord, it is our fm·ther submission and we pray that this honourable court of law should not be used as conduit pipe for debtors finding their lee way of technically avoiding debts on sheer mechanism such as restructuring and recapitalisation which were at their disposal long way ago to the detriment of the creditors". To clear the air, I should say that I am surprised by these submissions. I know from the record that Finn and Murphy had already embarked on a formulation of a scheme of Arrangement. I also get a feeling that whatever was proposed arose serious misgivings among the objectors. Well, that may be correct but for the purposes of tit is application tltere is no scheme whatsover in existence. The Petitioners and objectors · alike may feel that in case Provisional Liquidators are empowered to formulate a scheme 26 of Arrangement the already compiled proposal may find its way into the new scheme. That should not be our concern now. A decision to utilise which material and from which source will lie with the person appointed - that,-, wl,y t1 neutral, 1111bit1sed per.Wm i.-. required At the sametime, it is not. correct to say that a scheme of Arrangement would· be brought to the Court for simply rubber stamping. The scheme will have secured the blessings of the creditors/shareholders. The Court's duty is not to rubber-stamp but rather to scutinise the scheme of Arrangement formulated, satisfy itself on the response of creditors/shareholders and whether the scheme itself is fair and equitable and for the benefit of all parties concerned. Only after being satisfied with the above perfection would the Court approve the scheme. It is not mandatory that the Court should approve such scheme. It may reject the same or order for amendments. While still on that it should be noted that it is not mandatory that such a Provisional Liquidator must formulate a scheme of Arrangement. He would be empowered to formulate one but during his investigations he may get convinced that a scheme of Arrangement is unworkable in the circumstances or not beneficial to the creditors. In such situation he is not bound to formulate any. He would then inform the Court accordingly for winding up process to proceed. What is the gauge of his duties? Whatever he does should be in the best interest of the creditors/shareholders. Thats why I have not and will not bother to make a finding on the weight to be attached to percentages of creditors as regards their support on the scheme orchestrated by Mr. Ng'amaryo and elaboratively responded to by the objectors' Counsel. It is premature to argue on the percentage of creditors that support a scheme or not, for, at this point there is none. Insisting on merely winding-up without giving a lee-way to the Provisional Liquidator to survey for another beneficial option may not lie in the interests of creditors. 10 Companies are invlolved. They have effected a hive-down on the assets to a newly created Company. They are miserably indebted to both secured and unsecured creditors 27 (just one creditor claims over Tshs 7 billion). Even if a winding-up order is made there may not be enough money to pay creditors. Let a Provisional Liquidator investigate, scan and come out with what is good for the parties. Arguments have been presented that only limited powers should be given and that the Provisional Liquidator would be at liberty to apply to Court for specific additional powers to embark on restructuring or a scheme of Arrangement if he soon discovers its necessity. Well, this is one mode of approach but compared to what I am suggesting the latter saves time, expedites matters and removes unnecessary delays. Let him leave the Court clothed with all the authority and powers. Let him join. the battle armed with all armaments available. It defeats common sense for a fighter to join the battle with a scheme that he has to check on the strength of the enemy first then rush back to the armoury to equip himself well! That said, what should these wide powers encompass? We have two versions. The Petitioners' as they appear at the begining of this ruling, and NBC (1997) Ltd's. Having carefully considered the arguments, the law, the state in which the I 0 Petitioners are, the way the "hive-down" has been effected, I settle, with minor variations on NBC (1997) Ltd's proposals regarding powers which should be exercised by a Provisional Liquidator as follows:- 1. To carry out full investigation into the affairs of the Petitioners in order to identify their (Petitioners) assests and property including the hive-down exercise carried out by the Petitioners 2. To take possession of all the property and assets of the Petitioners wherever they are and by whomever held and preserve them for the benefit ~f the creditors until a suitable scheme ofArrangement is proposed and agreed upon, or 28 if no such Arrangement is reached, pending a Winding Up Order and the appointment of a Liquidator. 3. To prepare a list of all creditors which should be submitted to the Court within 3 weeks. 4. To prepare a statement of the Petitioners' affairs within 5 weeks 5. To prepare a proposal for a Scheme of Arrangement, iffound.feasible, within 6 weeks and apply to the Courtfi,r cm order to cm1ve~1e a creditors' meefillK to consider and vote upon the scheme. 6. To appoint such persons as he may deem fit to assist him discharge his duties. The schedule within which to take the steps, for one reason or another, may prove insufficient. In that case, he will be allowed to apply for extension of time. The question of restructuring and its indispensability being a condition precedent to the recapitalization should not take much of our breath. We have provided wide powers to the Provisional Liquidator. Armed with that he will investigate full activities of the Petitioners and will come up with whether restructuring is necessary and in what form and thats why he is empowered to formulate a Scheme of Arrangement, which has to be accepted by the creditors and approved by the Court. The benefits enumerated by the Petitioners should not carry the show of the day for the Provisional Liquidator has to go into them thoroughly and satisfy himself that they are real and workable and a not a "sham" (to borrow the language of one of objectors' Counsel). While still on this I should touch the argument that the initial Report of Provisional Liquidators and their work so far done should not be wasted. I am afraid this Court cannot issue an order for its utility. The Provisional Liquidator should be left free to " 29 decide on how to collect the required information. However, common sense would dictate that the Provisional Liquidator will go for all relevant materiab and contacts, and that report is one of them. It is not of insignificance that the initial Provisional Liquidators will be paid for whatever they did before being barred. In effect therefore the initial report is the property of the Petitioners. Tltat said, wlto shollld be appointed a Provisional Liqllidator? I should in very certain terms declare that neither Finn, Murphy nor Bomani is fit to be appointed as Provisional Liquidator - they are disqualified because of their association with the Petitioners. Conflict of interest is very glaring. I was surprised if not sturned to hear a seasoned lawyer ofNg'amaryo's calibre gathering guts and audacity to say that the Court of Appeal in Civil Revision No, 1/99 dicided on the appointment of Finn and Murphy. He asserts that the matter is res judicata. He declared, " the matter therefore ought to and must rest. No one can or should bring it up again unless, and if so, only though further revisional proceedings in the Court of Appeal". With respect, I am sure that Mr. Ng'amaryo is aware that that submission is fallacious. The Court of Appeal observed, " There is not much to say about the appointment of the two other provisional liquidators (i.e. Messrs Finn and Murphy). At first we had the impression that both resided outside the jurisdiction of the High Com·t, that is, in London, but on closer examination of the reco1·d, it appears that they have an address within the jurisdiction of the court and is [sic] qualified for appointment as a liquidator". ' ' ( . 30 The Court of Appeal did not appoint (and could not in the circumstances) Provisional Liquidators. If so, as rightly fronted by the objectors, why bring the same matter before this Court which is subordinate to the Court of Appeal? Although Mr. Ng'amaryo capitalises on those observations he forgets or deliberately, fails to make reference to the final order of the Court, which among others states, "The proceedings for appointment of Provisional Liquidators be and are quashed". Clearly, and as rightly submitted by the objectors, the observation of the Court relied upon was obita dicta. In any case, having quashed the proceedings which appointed them, on which ground then can the purported appointment stand? The suitability or otherwise of M11rpl,, Fi,m as is the case with JJonumi is now what is before this Court for determination. And I have already indicated that the trio do not qualify because of conflict of interests. As was stated in Peregrine case already referred to above, " It is the task of the Provisional Liquidators to get in the assets on behalf of the creditors and shareholders. They stand in the position of trustees ....... . .............................................................................................................................. Trustees are never permitted to be or remain in a situation where they have a conflict of interest. That rule is crucial to the proper administration of the relevant tr.ust. The dual role of the Liquidator's firm should have been disclosed to·the Court at the earliest opportunity". In that case the Provisional Liquidators had been performing auditing duties to the ofhPif party and this was concluded upon to be client relationship hence existence of a P1~ifipn of having conflict of interests. 31 Again, in Re: Charterland Goldfields 26 T.L.R 132 a liquidator was disqualified for similar reasons-it was stressed, 'the liquidator of the company must be a person who will act independently, aspecially of those against whom there may be pending claims, and will discharge his duties without favour to either side. Where it appeared that the liquidator in the voluntary Winding Up of a company had an intimate business connexion with several of the dir·ector·s of company, who were also directors of other companies between which and the company in question there had dealings requidng investigation, the court being of the opinion that he was not in a position to take independent cour·se in making the necessary investigations, made an order removing him from the office of liquidator, and appointed another li<1uidator in his pince". The objectors in here have sufficiently proved that there is client relationship between Finn, Murphy and Petitioners. The two personalities have bee~ engaged in the negotiations with some of the creditors on behalf of Petitioner, let alone formulation on the restructuring proposal long before the petitions were filed. They have been negotiating with NBC on behalf of Petitioners regarding their indebtness proposing in the process debt - compression. The objectors' fears that they may put into effect whatever plans and recommendations they have had in their capacity as Professional advisors to the Fahari Group are not far fetched. On the other hand it has amply been proved that Mr. Bomani's Chambers were being used by the Petitioners for clearance of their Correspondences. Mr. Ng'amaryo's urge that the relationship ended at that has been contradicted by evidence that fees were paid for services. Also it has not been explained why, if the services ended at Mail delivery arrangement, didn't they use Eric N. Mahayo Partnership Chambers just within reach. In any case, there are very telling correspondences whose copies were sent to Mr. Bomani and which clearly show that he was engaged in some negotiations between the 32 newly formed Company, Fahari Beverages Co Ltd and NBC. The former is the Company to which the Petitioners transfered their assets. Even an angel would not trust that Mr. Bomani would not take sides in a conflict, as the one in existence, between objectors and Petitioners. As Provisional Liquidators are expected to protect the interests of the creditors any person who has any connection in terms of business dealing between him and Petitioners is outrightly disqualified from appointment to that position, for, conflict of interest is the very obvious. Here it is not a question of qualification and experience. The trio no doubt excel in this. And it is not a question of acting ir the interest of the creditors. It must actually be seen that it is done. Provisional Liquidators must not have tainted let alone suspicious trust in the eyes of the creditors. The trio is obviously netted in the latter and is accordingly disqualified. Who should be appointed? The objectors propose Mr. Joseph Warioba. The Petitioners object to the proposal arguing that there is no application as such as Rule 8 ( 1) of the «Rules" has not been complied with; that he has not given his consent as the one he submitted is in respect of a different company and that his qualifications and expertise have not been proved. Indeed, for an application for a Provisional Liquidator to be properly before the Court there must be a chamber summons supported by an affidavit - the Court of Appeal in Civil Revision No. 1 of 1999 is clear on this as is Rule 8 (1) of the "Rules". However, with respect to Mr. Ng'amaryo, what the objectors are proposing is not an application for appointment of a Provisional Liquidator as much but who should fill in that position once an application to appoint is allowed. The Petitioners were the ones who applied for appointment of Provisional Liquidator and that is the application which is before us. Proposing a name is just ancillary to the main application. The Petitioner could even have simply filed the application without naming a person leaving it to the Court to 33 scan around and pick a fit person. The objectors are simply proposing whom they think, once the application is granted, can fill up the position. I cannot imagine the legislature passing such unreasonable a law which sets up a procedure as proposed by Mr. Ng'amaryo. I am of the settled view that in proposing a name of a person fit to be appointed a Provisional Liquidator by objectors after the Petitioner or any person has filed an application for his appointment does not require the filing of a chamber application supported by affidavit. That requirement stands only for the initial application, in this case, the one filed by Mr. Ng'amaryo for the Petitioners. Concerning the argument that Warioba did not give co1_1sent, while conceding that he made an error when he consented to be being appointed a Provisional Liquidator to "JV Group of Companies" because there is no Petitioner going by that title, I am inclined to agree with the objectors that that was a slip of a pen. In any case, the law does not state that such consent should be secured before appointment. It may be desirable in order to avoid inconvinience because a person may refuse to take up the task if arbitrarily picked but the law as it stands puts up no such condition to the Court before so appointing. The sam_e j~ the case with qualifications and expertise. The Court simply picks on a "fit" person. In doing that the Court will rely on various factors including judicial notice of the stan9:ip_g of particular person or upon receipt of proposals. The objectors have come up wit~ t proposal. As was observed by the Court of Appeal Civil Revision No. 1 of 1999, "....... After all the provisional Liquidators w~re expected to protect the interest ot the creditors, and it is only fair.that such creditors be given opportunity to play a part in the proceedings.fur appointment of Liquidators .... " The objectors, all of whom except one are represented by advocates, and able on~, ,f?rthat matter, have proposed Mr. Warioba. Is it possible that this formidable group c~ff · _:po111e up with a personality who is incapable of protecting its interests? I am not _;-~ui;su_a_ded by Mr. Ng'amaryo in this respect. I thus hold that Mr. Joseph ·Warioba is' m . p~r~on to be appointed a Provisional Liquidator of the Petition~rs. In any case, he is 1H,f ff , . :t i' • 34 Provisional Liquidator. The task will surely involve engaging various professionals and thats why it has specifically be~n provided that he can appoint any fit person to assist him. For that matter, he is not precluded from seeking assistance from Finn, Murphy or Ilomani. What is important is not who does what but who controls what is being done, who decides on direction to be taken, who makes a decision before matters are presented to creditors and to Court. We come to the remuneration to which the Provisional Liquidator is entitled. Here we have three scenarios proposed 12 112 % by Petitioners, 5% by the rest oft he objectors except NBC which proposes that the Liquidator be _called upon to chart his duties and activities and quote his charges. The contingent creditors leave it to the wisdom of the Court. It is unfortunate that neither the Ordinance nor the Rules provide a definite answer. The counsel are agreed on this. Those who propose 5% argue that this is the commonly applied practice iri Tanzania in respect of receivership and Liquidation and this is in consonance with the requirements of English Property Conveyancing Act, 1881 as applied to tanzania by Cap. 114 of the laws. While I have not been able to understand the basis 9f~r- Ng'amaryo's urge to have his clients pay a higher charge of 1 2 112 % (he argue& that the enormity and complexity of the task call for that percentage) I have been pursuaded by the Counsel for NBC that using a "percentage" criteria on tlte gross realisation in awarding the Provisional Liquidator's remuneration is wanting. What is that "gross realisation"? This would have no problem~ in winding up proceedings for there would be sales and disposals. Now, in our case, regard being had to the ~yvers and duties we have placed on the Provisional Liquidator which realisations will '1''. lJf!!J/ke? If he manages to formulate an acceptable Scheme of Arrangement no sales will Mi, reen made and even if that fails and winding-up proceedings activated he will only niri follected assets. We have given him no powers to sell. How then will we calculate l~f ff of the gross realisation? Again, on this, I am pursuaded that the only logical step 35 to take is to call upon Mr. Warioba to chart out his duties, and the task ahead of him as he perceives it and quote his charges which would then be tabled in Court in the presence of objectors for comments and observations before the Court makes a decision on an appropriate remuneration. Finally, I will make a brief observation on what the petitioners call ulterior moth 1es by objectors. This charge is too unfortunate, for, there is no scintilla of evidence suggesting what is alleged and I am glad that though while thus charging the Petitioners concede in the same submission, "there is no direct evidence thnt the objectors nre actunlly making a proxy effort to kill the Pepsi-Cola business". The Petitioners' conduct, including unclear "hive-down" of some of the assets into another newly formed Company would naturally generate suspicions, resistance and mistrust on the part of objectors/creditors. Their reactions cannot therefore be faulted. In conclusion therefore: (a) The preliminary objection by Mrs. Rwebangira for Kioo Ltd that the Petition by Fahari Bottlers should be thrown out for having been filed in bad faith is dismissed. (b) The prayer by Petitioners that Objectors be declared to have no Locus standi is dismissed (c) The Application for appointment of Provisional Liquidator in respect of the Petitioners (the 10 Companies) is granted (d) The prayer that Mark Danhi Bomani, Paul Howard Finn and Kevin Anthony Murphy should be appointed Provisional Liquidators is dismissed on basis of 36 Conflict of interest and instead Joseph S. Warioba is appointed. (e) The prayer that the Provisional Liquidator's Powers should encompass all powers of a Liquidator under s. 190 (1) (a) to (f) and 190 (2) (a) to (h) of the Ordinance Cap 212 is dismissed except as embodied in this ruling, and which powers are wider than mere collection and preservation of Petitioner's assets, for they include formulation of a Scheme of Arrangement (f) The prayer that the Provisional Liquidator's remuneration be 12 112% of Gross realization is dismissed and instead the person appointed Provisional Liquidator should sketch his duties and submit his quotations which shall be tabled in Court in the presence of parties for decision within 7 days of the delivery of this ruling (g) Other prayers, that Costs of appointing an advocate and providing security; that all other proceedings in this Court, subordinate Court or Tribunal be stayed pending the winding up order or further, order; that hearing of the petition be adjourned to a date after the creditor's meeting to vote on the Scheme of Arrangement, if any, and that costs of the application be defrayed from the assets of the petitioners, stand allowed. (h) The Provisional Liquidator will be at liberty at any time, to apply to the Court for directions and guidance on anything he deems proper and which has a bearing to Petitions. L.B. KALEGEYA JUDGE .. \., 37 ,t \ . Order: To be dilive1·ed by the SDR-.HC on 20/9/99 ;. .. ~ - -·"~·· ---- ....... _,.. , ...... _ I,