IN THE HIGH COURT OF THE UNITED REPUBLIC OF TANZANIA

ARUSHA DISTRICT REGISTRY

AT ARUSHA
LAND CASE NO. 03 OF 2020

NSK OIL AND GAS LIMITED............................................................. PLAINTIFF

VERSUS

NATIONAL MICROFINANCE BANK PLC...................................... 1st DEFENDANT

CHARLES R. B. RWECHUNGURA............................................... 2nd DEFENDANT

JUDGMENT

21s! April & 29th May 2023

TIGANGA, J.

In this case, NSK Oil and Gas Limited, the plaintiff, was suing National

iviicrofinance Bank PLC, the 1st defendant for prematurely and unlawfully

appointing Mr. Charles R. B. Rwechungura, the 2nd defendant, as a receiver

manager of the plaintiffs properties with a prospective sale of the same. She

contended that such appointment was premature and unlawful for want of

fulfillment of all antecedent procedures leading to the appointment of a

receiver manager under the Land Act, [Cap 113 R.E. 2002]. The other

contention was that, the said appointment was in breach of the terms of the

Page 1 of 41
mortgage deed entered into between the plaintiff and the 1st defendant. She

prayed for the following orders from this Court:-

1. A declaration that, the plaintiff's (sic) appointment of the 2nd defendant

as the receiver manager of the plaintiff's properties is unlawful;

2. An order restraining 1st and 2nd defendants, their agents, and all

persons claiming title under them from entering upon the suit premises

or doing any act whatsoever that would jeopardise the interest of the

plaintiff in the said properties;

3. General damages as shall be assessed by the court;

4. Costs of this suit be borne by the defendants herein; and

5. Any other orders or reliefs as the Court deems fit and just to grant.

After being served with the plant, the 1st defendant filed a written

statement of defence contesting the claim as well as raising a counter-claim

against the plaintiff herein and one Mahesh Inderpal Burdhram Aggrawal. In

that, the plaintiff in the counterclaim averred that the 1st defendant in the

main suit who is the plaintiff in the counterclaim extended to the 1st

defendant in the counterclaim two credit facilities being an overdraft facility

of 8,000,000,000/=say (Tanzania shillings eight billion) and a term loan

facility of Tsh. 2,000,000,000/= say (Tanzania shillings two billion) is

Page 2 of 41
according to the facility letter dated 1st February 2012 as amended by the

facility letters dated 07th January 2015 and 24th March 2016 (the amending

facility letters).

The plaintiff in the counterclaim claims from the defendants in the

counterclaim jointly and severally for payment of a sum of Tshs. 12,

704,963,897.39/= as the outstanding loan amount being the principal sum

together with the accrued interest due to the plaintiff as of 29th February

2020 arising out of the two facilities. The claim is based on the breach of the

conditions of the loan particularly failure to service the loan. The plaintiff in

the counterclaim prays for the following orders:-

L. Judgment and decree for payment of money against the plaintiff

(the 1st defendant in the counterclaim) herein and the said Mahesh

Inderpal Berdham Aggrawal jointly and severally to be paid within

30 days from the date of judgment as follows:-

(a) Payment of Tshs. 12,704,963,897.39 by the plaintiff (the

1st defendant in the counterclaim) herein and Mahesh

Inderpal Berdham Aggrawal to the 1st defendant herein as

pleaded in paragraph 4 of the counterclaim;

Page 3 of 41
 (b) Interest of the sum stated at (a) above at the rate of 21%

per annum from June 2018 to the date of filing this

counterclaim;

(c) Interest of the sum stated at (a) above at the rate of 21%

per annum from the date of filing this suit to the date of

judgment;

(d) Interest on the decretal amount of the court's rate of 7%

from the date of judgment up to the date of payment;

(e) General damages to be assessed by the Court;

(f) Costs of the suit to be paid by the plaintiff herein and

Mahesh Inderpal Berdham Aggrawal;

(g) Any other relief (s) as the Court finds deem and just to

grant.

2. Should the defendants fail to pay the plaintiff within 30 days from

the date of judgment as prayed in prayer 1 above, the plaintiff prays

for:-

(a) The court to appoint a court broker to sell the securities

referred to in paragraph 6 of the counterclaim;

Page 4 of 41
 (b) Payment of general damages as prayed in prayer 1 (c)

above;

(c) Costs of the suit as prayed in prayer 1 (f) above;

(d) Any other relief that this court may deem fit and just to

grant

Before the hearing began, the plaintiff herein opted to withdraw the

main suit, hence, this court was left with the counterclaim only. In that

regard, the 1st defendant herein will be featured as the plaintiff, the plaintiff

herein will be featured as the 1st defendant whereas Mahesh Inderpal

Berdham Aggrawal will be the 2nd defendant.

During the hearing, the plaintiff was represented by Mr. Pladius

Niwombeki learned Advocate while the defendants were represented by Mr.

Andrew Akyoo assisted by Mr. Stephen Mushi both learned Advocates.

Before hearing, the following issues were framed:-

(i) Whether there was a term loan extended by the plaintiff in the

counterclaim to the 1st defendant in the counterclaim.

Page 5 of 41
 (ii) If the 1st issue is resolved in affirmative, whether there was a term

loan agreement and what were the terms and conditions of the said

term loan.

(iii) Whether an overdraft facility was extended to the 1st defendant

in the counterclaim by the plaintiff herein.

(iv) Whether the 1st defendant in the counterclaim defaulted in the

repayment of the loan facilities extended to her together with the

interest and charges as claimed by the plaintiff in the counterclaim.

(v) Whether there is a valid statutory notice of default issued to the

defendants in the counterclaim by the plaintiff.

(vi) To what reliefs are the parties entitled to from the court.

In a bid to prove the case, the plaintiffs called two witnesses that are

PWl-Paul Emmanuel Anatory and PW2-Josephat Manoni, whereas the

defendants had only one witness namely DWl-Kamaljeet Aggarwal.

It was the PWl's testimony that, he is employed by NMB Bank as head

of Special Assets Management with the duty of overseeing all non-

performing loans and making follow-ups on recovery of the same according

to' the law, NMB by-laws, and Bank of Tanzania Regulations. He told the

court that, he knows the defendants in this case who are the NMB Bank's
Page 6 of 41
clients with non-performing loans, and by his occupation, he had been

making follow-ups to them to recover the debt.

According to him, the client with a non-performing loan is recognized

by his failure or default to pay the loan or service the loan as agreed in the

terms and conditions of the loan agreement more than three times. He said,

when this happens, the management is advised to refer the client to the loan

recovery department and follow-up starts immediately. He told the court

that, the defendants had a loan through the loan statement with a term loan

of Tshs. 2,000,000,000/= (Tanzania shilling two billion) and an overdraft of

Tshs. 8,000,000,000/= (Tanzania shillings eight billion) plus the interest

which makes it Tshs. 12,587,806,681/= in total.

He tendered the loan details statement of Account No.

408CL11161410001 maintained by the 1st defendant with NMB Bank

Customer Account Statement No. 40806600374 which was printed on

24/10/2022, stamped and dispatched on 25/10/2022. It was collectively

admitted as exhibit PEI. He further testified that, the bank statement shows

two things; one, the loan detail statement of the terms loan which also

shows that it was the 1st defendant's account that received an overdraft

facility. Two, the 1st page of the statement shows the principal balance of
Page 7 of 41
Tshs. 1,508,355,261.84 with the interest of Tshs. 344,119,137.76. However,

the last page dated 20/05/2020 shows the debt owed is

Tshs. 10,852,489,497.63, which the defendants have defaulted payment.

PW2 Josephat Manoni testified that he is employed by the plaintiff as

a Senior Relationship Manager and his duties involve taking preliminary

initiatives to clients who have defaulted in paying loans by selling their

collateral or mortgaged properties. He is the custodian of the client's

documents including the ones in the matter at hand. According to him, the

1st defendant took a loan and pledged collateral for the said loan while the

2nd defendant stood as the guarantor of the said loan and also pledged to
♦
secure the loan as the 'Third Party Mortgage".

He told the court that, the plaintiff extended two loans to the 1st

defendant on three facility letters. The first facility letter dated 01/02/2012

was from the bank to the 1st defendant signed by both of them and it was

the letter that extended the loan overdraft of Tshs. 10,000,000,000/=. The

.second facility letter dated 07/01/2015 also from the bank to the 1st

defendant was the one that gave the 1st defendant an overdraft of Tshs.

10,000,000,000/=. It was also signed by both defendants. These were

tendered and admitted as exhibit PE 2.

Page 8 of 41
 The third facility letter dated 24/03/2016 also from the bank to the 1st

defendant signed by both of them, showed the bank agreeing to effect a

restructuring of an overdraft of 2015 by reducing it from Tshs.

10,000,000,000/= to Tshs. 8,000,000,000/= in which the Tshs. 2,

000,000,000/= reduced was changed into a term loan. The letter was

tendered and admitted as exhibit PE 3.

PW2 went on to narrate that, an overdraft facility is a loan that lasts

for twelve months only. To secure the loan, the 1st defendant had to bring

two mortgages and one debenture as collateral for the loans released to the

1st defendant. The first mortgage was a property on Plot No. 110C located

at Chang'ombe, Industrial Area D in Dar es Salaam with Title No. 186080/32

With the Certificate of Title that was tendered and admitted as exhibit PE 4.

Another mortgage document was signed by the Bank and the 1st

defendant was registered by the Registrar of Land on 22/02/2011. The same

was tendered and admitted into evidence as exhibit P5 and the mortgage

document dated 07/05/2012 in respect of exhibit P4 was tendered and

admitted as exhibit P6.

Page 9 of 41
 It was PW2's further evidence that exhibit P4 was pledged as a security

by the defendants to secure the loan from the plaintiff. Also, together with

exhibit P4, the defendants pledged another security on Plot No. 3, Semi

Industrial Area in Arusha with Title Deed No. 4662 owned by the 2nd

defendant. The title deed in respect of that security was tendered and

admitted as exhibit P7. According to PW2, exhibit P7 was registered by the

Registrar of Titles as a security to secure a loan from the defendant together

with their variations registered in 2009, 2011, and 2012. The mortgage deed

of the variation dated 12/11/2009 was tendered and admitted as exhibit P8

while the ones dated 25/01/2011 and 29/05/2012 were tendered and

admitted as exhibits P9 and P10 respectively.

PW2 went ahead and testified that, there was a debenture which was

issued by the 1st defendant to the plaintiff pledging all properties of the

Company as security. The same was registered by the Registrar of

Companies and was tendered and admitted in Court as exhibit Pll. PW2

went as far as testifying that, there were two variations in respect of the

debenture, the first one is dated 25/01/2011 and the second one is dated

07/05/2012. They were both tendered and admitted as exhibits P12 and P13

respectively. PW2 went ahead telling the court that, up to the time when this

Page 10 of 41
matter was filed in court the 1st defendant was indebted more than Tshs.

12,700,000,000/= which she defaulted to pay back to the plaintiff.

Following that default, the latter issued statutory notices to that effect

as. required by the laws. The 1st Statutory Notice was signed by NMB Bank

on 13/04/2018, issued to and received by the 1st defendant's son on

14/06/2018 in respect of Plot No. 110C located at Chang'ombe area in Dar

es Salaam. The same was tendered and admitted as exhibit P14. The 2nd

Statutory Notice was in respect of Plot No. 3 LO. No. 44035, of Certificate of

Title No. 4662 located at Themi Industrial Area in Arusha which was tendered

and admitted as exhibit P15.

PW2 concluded his testimony that, the 1st defendant was given two

types of loan; an overdraft of Tshs. 8,000,000,000/= and a term loan of

Tghs. 2,000,000,000/= as evidenced by exhibit Pl. That, the 1st defendant

had never withdrawn his security because whenever there was a signing of

the new loan facility, she furnished the plaintiff with Board Resolution

directing that, the previously issued debentures and security should still

secure the new or updated facility. He prayed for this court to grant all

prayers prayed in the counterclaim which prayers marked the end of the

plaintiff's case.
Page 11 of 41
 The defence side had one witness; Kamaljeet Aggarwal, who testified

as DW1, he introduced himself as the Director of the NSK Oil and Gas

Company Limited, the defendant in the counterclaim. In his affirmed

testimony, he told the court that, his duties involved running the day-to-day

operations of the company and they have been using NMB Bank as their

Bank for business transactions. He further averred that, they have had good

relations with NMB Bank and when the latter approached them with a new

product of overdraft facility, they were interested as they realized it would

help them in the business. According to him, in an overdraft facility, the Bank

set the limit of the overdraft value and one may withdraw the money to the

maximum limit of money set.

DW1 went on to tell the court that, since the year 2009 when they

started business, they were availed the overdraft limit of Tshs.

7,000,000,000/= and when the Bank realized its capacity to service the loan,

enhanced the overdraft facility to Tshs. 10,000,000,000/=. Also, they were

given a term loan facility of Tshs. 5,000,000,000/= which they used to

purchase a property at Chang'ombe, Dar es Salaam and which they

completed repayment on 31/12/2015. Thus, by 01/01/2016 the status of the

loan was already settled and there was no difference in respect of the term

Page 12 of 41
loan agreement. Therefore they were surprised by the alleged opening

balance of more than Tshs. 10,800,000,000/= instead of Tshs.

2,200,000,000/=.

DW1 further asserted that, between the years 2009 to 2015 they

deposited to the bank Tshs. 329,600,000,000/= and withdrew Tshs.

331,000,000,000/= through various transactions hence the two billion

difference. He tendered the NSK Oil Company Ltd Ledger Book which shows

the calculations and transactions in their account. The same was admitted

as exhibit DE 1. DW1 also told the court that, due to their good relations

with the plaintiff, they have been making cash deposits, cheque deposits,

bank transfers, issuing cheques to withdraw, UTT transfers, interests, bank

charges and even making deposits through bank deposit slips. He tendered
'7

the deposit slips which were collectively admitted as exhibit D2. He ardently

maintained that, the amount of Tshs. 12,000,000,000/= claimed by the

plaintiff is not correct because according to the ledger, the variation between

the amounts deposited and the amount withdrawn is only 1,375,000,000/=

which is the correct amount to which they are indebted.

Besides that, he told the court that, he was shocked and surprised

when he was informed that, the plaintiff wants to put them under
Page 13 of 41
 receivership on the amount of debt that was incorrect. He prayed that, this

court allow them to pay the owed debt of Tshs. 1,375,000,000/= and

thereafter all their collaterals including securities, guarantors as well as

debentures be released by the plaintiff. That marked the end of the defence

case as well.

After the hearing and presentation of evidence, which was done in

both oral and documentary forms, counsel for the parties opted for the final

submissions. With the order of the court, the parties filed their respective

submissions as ordered. For brevity, I will not reproduce them in verbatim

but I will surely refer and consider them in the analysis of this judgment.

When I was composing the judgment, I found some issues which were

not well addressed by the evidence by the parties. Some of those issues left

"me in a quagmire which necessitated the calling of the parties to clarify them

hence additional evidence. Such a requirement was from both parties and

the aim was to assist the court to understand the dispute to do justice to the

parties.

Following that quagmire on 30/03/2023, the court recalled both

parties to come and clarify the following areas. One, that, on the claimed

Page 14 of 41
amount of Tshs. 12,704,963,897.39, what was the overdraft facility and

what was the term loan? Two, how the interest was calculated. Three,

when was the repayment ending? Fourth, while being aware of the

definition of the overdraft, then whether the whole advanced overdraft was

wholly withdrawn and spent by the defendant. Fifth, what were the terms

and conditions of both loans and where are they found? Sixth and last,

whether the loan advanced to the 1st defendant was repaid by the

defendants either as a whole or in part, then if there was repayment what

was paid and what was not paid? The parties appeared to clarify the said

areas on the evidence they gave earlier.

In response to the directives of the court, the plaintiff called PW2

Joseph Manoni. In response to the first issue, PW2 informed the court that,

the balance of unpaid overdraft is Tshs. 10,852,489,497.63/=, as reflected

on the Bank Statement, exhibit Pl on the item dated 22/05/2020. While the

term loan has two sides, one is the principal amount which is Tshs.

1,508,355,261.84 while the second part is an interest of Tshs.

344,119,137.76/= and if these two amounts are totaled it creates a balance

Of Tshs. 1,852,474,300.60/=

Page 15 of 41
 Regarding how the interest was calculated he said in both loans the

interest was calculated daily, as was accruing daily but charged at the end

of the month based on the daily calculation, and the interest was debited on

each month's debt side of the loan Account statement.

Regarding the issue of the end of repaying period, he said the debt

was supposed to have been paid up to 2017, but they issued the bank

statement of up to 2021. While the overdraft facility was serviced for the last

time in the year 2017, the term loan was for the last time paid in 2018 as

the loan was payable by only depositing the money in the Bank Account and

the repayment must be reflected in the customer account statement exhibit

Pl.

Regarding the question of whether the whole advanced amount of

overdraft was wholly utilized by the 1st defendant or not, he said looking at

the statement on the item of 24/03/2016 the overdraft had already been

spent to the tune of negative Tshs. 10,494,922,577.95/=he said what was

done is to look at how will he repay as in banking procedure overdraft facility

must be repaid within 12 months. At that time the client's loan account

statement should read either zero or positive. Since he had failed to service

the loan that is why the bank through its offer letter dated 24/03/2016
Page 16 of 41
exhibit P3 was given a new agreement and it was a restructuring was done

and reduce the overdraft for Tshs. 2,000,000,000 and make that amount the

term loan payable every month and the implementation of that agreement

can be seen in the customer account statement dated 20/05/2016.

Regarding the terms and conditions of the term loan and overdraft and

where are they found, he said they are found in exhibit P3 in clause 2, 2.1

talking of the reduced overdraft to a Tshs. 8,000,000,000/= and a term loan

of Tshs. 2,000,000,000/= that there were no new terms and conditions as

that was not a new loan. It was a result of restructuring. Therefore, the

terms and conditions applied to the overdraft facility also apply to the term

loan. Further that clauses 11 and 12 of exhibit P3 stipulated the conditions

which were to be complied with by the defendant before the restructuring

was done which they complied with.

Regarding the issue as to whether the term loan and overdraft were

paid in part or not and if some amount was repaid, what was the repaid

amount and what was not? He said looking at the Customer Account

Statement the starting balance of the term loan was Tshs. 2,000,000,000/=

as reflected on the item of 20/05/2016 and at each end of the month the

interest was calculated and added to the debt. He said on the side of credit
Page 17 of 41
in the statement it shows how the 1st defendant was paying, and if you

calculate you find that, the repaid amount was Tshs. 815,000,000/=plus

other money. According to him, out of that, Tshs. 401,000,000/= paid the

principal while the rest went to pay the interest, therefore the principal

remained Tshs. 1,508,355,261.84 while the interest remained Tshs.

344,119,137.76/= thus totaling a balance of Tshs. 1,852,474,300.60/= as

an unpaid debt of the term loan.

Regarding the amount paid as an overdraft, PW2 said he cannot say

directly because there was a time the 1st defendant withdrew and after doing

business she deposited the money. Also, the tendency of withdrawing and

deposit was frequent throughout the loan period. Therefore, to know the

principal which was paid in respect of an overdraft facility a look should be

made at the actual debt when it started on 20/05/2016, the debt was Tshs.

8,464,767,300.26/= after the restructuring of overdraft and came with the

reduction of 2,000,000,000/= which was restructured to be a term loan. He

gave the example of the debt on 22/05/2016 that the debt had already

increased up to Tshs. 10,852,489, 497.63/=. Out of that, about

2/890,000,000/= was the interest, therefore, the only remaining amount

which went to pay for the interest was about 500,000,000/= which is what

Page 18 of 41
made the debt increase from the original Tshs. 8,464,767,300.26/= that is

why on 20/05/2016 and up to 22/05/2016 it had already raised to Tshs.

10,852,489,497.63/=

On cross-examination, he said that the term loan was not new money,

it was part of an overdraft that was turned into a term loan which was to be

payable for three years ending 20/05/2019 though the term loan offer letter

had no time limit for payment of the loan. And that since there was no new

money, the security which secured the overdraft continued to secure the

term loan therefore the plaintiff was justified to proceed against the security

pledged for a loan.

The defendant called DW1, who on the issues of concern raised by the

court for clarification, he said he would talk about why the ledger book had
♦.
the transactions ending in the year 2017 because they saw it prudent to

show from when their relationship started and when the transaction ended

particularly when they did not withdraw or make a deposit. He said since the

defendant is still indebted to the plaintiff, the two are still in a relationship,

which will end if he would finish paying the plaintiff money.

Page 19 of 41
 From what has been narrated in the evidence, the following facts are

■ not disputed. There had been a good business relationship between the

plaintiff, NMB Bank, and the 1st defendant, NSK Oil & Gas Co. Ltd which goes

way back to the year 2009. It is also undisputed that since when they started

to engage they have been in a harmonious relationship. During their time of

engagement (before the current dispute had arisen) there have been

various loan facility disbursements by the plaintiff to the 1st defendant on

several occasions, which were being repaid according to the terms and

conditions of their respective agreements.

It is also not in dispute, that a year or a little more before 20th May

2Q.16 the 1st defendant sought and obtained an overdraft facility of Tshs.

10,000,000,000/= from the plaintiff. That as a matter of principle was

supposed to have been repaid before 20th May 2016. However, according

to the plaintiff, the present dispute is in respect of the overdraft facility of

Tshs. 8,000,000,000/= and term loan of Tshs. 2,000,000,000/= which was

restructured from the overdraft facility of Tshs. 10,000,000,000/=. From the

defence, the defendants dispute to have the term loan disbursed to the 1st

defendant from the plaintiff. Now this brings this court to the 1st issue as to

whether there was a term loan extended by the plaintiff to the 1st defendant.

Page 20 of 41
 To resolve this issue, according to the counterclaim, the 1st defendant

was disbursed by the plaintiff a term loan of Tshs. 2,000,000,000/= (two

billion) and an overdraft of Tshs. 8,000,000,000/= (eight billion) making it

Tshs. 10,000,000,000/= (ten billion) in total. The 1st defendant defaulted

repayment of the loan with the interest, the loan has now escalated to a

total debt of Tshs. 12,740,963,897.39/= which comprises both, the principal

amount and the interest.

The 1st defendant does not deny the overdraft of Tshs.

10,000,000,000/= however denies the term loan of Tshs. 2,000,000,000/=.

Although the 1st defendant has denied either having negotiations or entered

into a contract for a term loan of Tshs. 2,000,000,000/=, exhibit Pl shows

that, on 20/05/2016, the 1st defendant was disbursed such amount in his

account
■ 'X .• on Ref No. 408ZTRF16141008S which had the transaction

description of "Loan Disbursement". The same is also reflected in exhibit DI,

the 1st defendant's ledger book on the entry of 20/05/2016 which reads; "To

Loan-Dar Depot NMB" transacted through voucher number 74. In the

circumstances, the 1st defendant cannot deny the fact that there was a

restructuring of the overdraft loan facility and in her loan details statement

that amount was posted. She can therefore not claim to have not been aware

Page 21 of 41
of the said fund in her account. On that basis, it is instructive to conclude

that, a term loan of Tshs. 2,000,000,000/= which is the result of the

restructuring of an overdraft facility of Tshs. 10,000,000,000/= to remain

with an overdraft of Tshs. 8,000,000,000/= was extended to the 1st

defendant. The 1st issue is therefore answered in the affirmative to the

extent explained above.

This conclusion brings me to the second issue which is what were the

terms and conditions of the said Tshs. 2,000,000,000/= disbursed term loan,

to; the 1st defendant. Giving evidence in answering this issue, the plaintiff

through PW1 and PW2 relied on exhibit P3 to substantiate the fact that, the

1st defendant consented and was well aware of the loan, and the 2nd

defendant pledged for the collaterals of the said loan. I took the liberty of

going through the exhibit P3 titled BANKING OFFER dated 24/03/2016. In

paragraph 2 the letter reads;

"2. The Facilities:

2.1. Overdraft Limit Amount:

An Overdraft of TZS 8,000,000,000/- (Tanzania Shillings Eight

Billion Only).

Page 22 of 41
 Note: Being a restructuring of the earlier existing

Overdraft of TZS10 billion into a term loan of TZS 2

billion and a reduced overdraft limit of TZS 8 billion."

Apart from that, paragraph 5 of the same document regarding interest reads;

"5. Interest Rate: "

5.1. Interest rate for the TZS Overdraft facility shall be pegged
at the last auction 182 days plus 200 basis points subject to
the floor rate of 12% p.a. to be reviewed quarterly basis ias
auction 182 days T-biiis movement. Interest shall be calculated
on daily overdrawn balances. (Currently
17.79°/o+2%o=19.79°/o p.a.)

5.1.1. Interest will be charged on the outstanding amount of

the Facility. The interest rate is, unless otherwise specifically
agreed by the Bank in writing, a floating rate and in principal
subject to change at the beginning ofeach new Interest Period
(interest Review Date). The applicable Interest Period is 12
months. Interest rate adjustments will be as determined by the
Bank from time to time and notified to the Borrower."

These two paragraphs, raises two questions, first, what was the offer

letter for, was it for an overdraft restructuring, an offer for a term loan, or

bpth? Second, if it was for both, according to paragraph 5 above, is the

Page 23 of 41
interest mentioned for an overdraft facility only or for both the overdraft and

the term loan facility?

These questions can be resolved by looking at the evidence of the

parties. Looking at the evidence of PW2 initially given and which was given

when he was recalled it is very clear that, exhibit P3 was for restructuring of

the first overdraft facility of Tshs. 10,000,000,000/= to come up with a

restructured overdraft facility of Tshs. 8,000,000,000/= and the term loan

of-. 2,000,000,000/=. In paragraph 2.1 the said exhibit, it mentions the

original overdraft, the aspect of restructuring of the original overdraft to get

Tshs. 8,000,000,000/= as reduced overdraft and Tshs. 2,000,000,000/= as

the term loan. That means the letter is for both the restructured overdraft
<

facility and the term loan.

A

Regarding the terms and conditions of the term loan, as we have

already concluded, the term loan is not new money, it is a result of the

restructured overdraft of Tshs. 10,000,000,000/= which resulted in a term

loan of Tshs. 2,000,000,000/= and the remaining amount of Tshs.

8,000,000,000/= remained as the overdraft. That means the terms and

conditions of the original overdraft facility were also applied to the term loan.

The second issue, therefore, has been resolved in the affirmative.

Page 24 of 41
 Coming to the third issue is whether there was an overdraft facility

extended to the first defendant in the counterclaim. In the evidence, the 1st

defendant has not denied the overdraft facility extended to her by the

plaintiff. According to exhibit P2, a Banking Letter Offer was initially issued

on 07th January 2015 extending an overdraft of Tshs. 10,000,000,000/= but

later on as per exhibit P3, the amount was reduced to Tshs. 8,000,000,000/=

That all these documents prove the existence of the overdraft extended to

the 1st defendant by the plaintiff. This is also proved by the evidence by DW1

who throughout his defence has never disputed to have been indebted by

the plaintiff, what he was disputing is the amount which the plaintiff claims

to be the unpaid debt. This issue is therefore answered in the affirmative.

V'1

The only concern on this, however, is how much has been paid so far

arid how much is still indebted. According to the plaintiff, the overdraft was

Tshs. 8,000,000,000/= and to this day the amount is at a standstill only the

interest has accrued.

In their evidence, PW1 and PW2 informed the court that, the balance

of/the unpaid overdraft is Tshs. 10,852,489,497.63/= as reflected on the

Bank Statement, exhibit Pl, on the item dated 22/05/2020. According to the

two witnesses, when restructuring was done the side of the overdraft was,
Page 25 of 41
when coupled with the interest which had already accrued was Tshs.

8,464,767,300.26/=. Therefore the opening balance after the restructuring

of the overdraft was Tshs. 8,464,767,300.26/=. From the original that is why

from 20/05/2016 and up to 22/05/2020 it had already raised to Tshs.

10,852,489,497.63/=

As it has been testified, the overdraft is the maximum limit of loan

facility extended to a borrower for him to withdraw the money from his

account, after the limit had been set, the person so entitled may withdraw

or utilize the money or not. That being the case, another question arises as

to whether the whole advanced amount of overdraft was wholly utilized by

the 1st defendant or not. This question is important before resolving the issue

of how much is the claimed amount. On this, PW2 said that, according to

the bank statement on the item dated 24/03/2016, the overdraft had already

been spent to the tune of negative Tshs. -10,494,922,577.95/=. And by

then, 12 months within which to pay the said facility had already lapsed.

According to PW2, for the overdraft to be seen to have been repaid,

,tehe client's loan account statement should read either zero or positive.

Since the 1st defendant had failed to repay, that is why the bank through its

offer letter dated 24/03/2016 exhibit P3 gave the 1st defendant the new
Page 26 of 41
agreement and it was a restructuring that was done to reduce the overdraft

for Tshs. 2,000,000,000 and make that amount a term loan payment every

month for three years up to 2019. The implementation of that agreement is

seen in the customer account statement dated 20/05/2016.

According to PW1 and PW2, the term loan has two sides, one is the

principal amount which is Tshs. 1,508,355,261.84 while the second part is

an interest of Tshs. 344,119,137.76/= and if these two amounts are totaled

it creates a balance of Tshs. 1,852,474,300.60/=. However, going through

exhibit Pl, there are days in which the 1st defendant made deposits.

On the other hand, the 1st defendant claims that the only amount owed

by the plaintiff is a total of Tshs. 1,378,343,268.75/= only. On that, the

defendant through DW1 said up to 31/12/2015 he had already completed

repaying the debt, therefore he was surprised by the opening balance in the

year 2016. Up to the end of 2015, he had deposited Tshs.

329,000,000,000/= and had withdrawn 331 billion-plus. Therefore, the

difference between what was deposited and what was withdrawn makes the

balance of about Tshs. 2.2 billion which is an unpaid debt, and not 10.8

billion as alleged. He said that can be proved by his ledger, exhibit DI, and

558 Bank deposit slips which DW1 tendered collectively as exhibit D2.

Page 27 of 41
 In his further evidence, DW1 came with a second version of what was

deposited and withdrawn, he said he deposited Tshs. 352.7 billion and

withdrew Tshs. 354 Plus Billions, therefore the difference between these two

amounts is the unpaid debt.

He said after receiving the information of intention to be put under

receivership and notice and seeing the amount which is alleged to be claimed

by the plaintiff, the 1st defendant called a special accountant for evaluation

and after that evaluation, they found the amount claimed to be Tshs. 1,

370,000,000/=. He in the end asked the court to allow the defendant to pay

that amount and make an order to release the security.

On cross-examination, he said he had been paying both the overdraft

and the term loan through the same account. He also said he has no

clearance letter to clear him after he allegedly completed the repayment of

the debt up to 31/12/2015. He said although the deposit slips he tendered

have no signatures of the bank tellers who allegedly received the money and
•z ) '•

the stamp of the bank, still they are the valid deposit slips. He also admitted

that some of the deposit slips were not of the transaction with the plaintiff,

they were of the transaction with other banks. One of the deposit slips for

Page 28 of 41
instance was used to pay in account No. 014103016725 which was the

account of NBC Bank, therefore it was not paying the debt.

He also said that all the money he deposited was not going to settle

the loan with the plaintiff, some were also paying other people. He said

haying computed the difference between the deposited and withdrawn

amount, he found the total amount to which the plaintiff is entitled from him

tQ be Tsh. 1,378,343,268.75/=

In law, as the famous legal adage goes, "he who alleges must prove,"

the plaintiff had an obligation under section 110 of the Law of Evidence

Act, [Cap 6, R.E. 2022], (the Evidence Act), to prove, not only the existence

of the overdraft but to what extent the 1st defendant defaulted paying the

same. In establishing the burden of proof in civil cases, the Court of Appeal

in Barelia Karangirangi vs Asteria Nyalwamba, Civil Appeal No. 237 of

2017, CAT at Mwanza had this to say;

"We think it is pertinent to state the principle governing proof

of cases in civil suits. The general rule is that he who alleges
must prove... it is similar that in civil proceedings, the party
with legal burden also bears the evidential burden, and the
standard in each case is on the balance ofprobability."

Page 29 of 41
 Further to that, while section 110 of the Evidence Act, provides for

>the burden of proof generally, section 112 of the same law provides for yet

another principle of burden of proof of the particular facts. For purposes of

easy reference, the same is hereby reproduced

112. " The burden of proof as to any particular fact lies on

that person who wishes the court to believe in its

existence unless it is provided by law that the proof of that fact

shall He on any other person." [emphasis added]

Guided by the above positions, then, generally the plaintiff has to prove

the claim. However, there are some particular facts which the defendants

want the court to believe in their existence, section 112 of the Evidence Act,

imposes the duty to the defendant to prove them. In this aspect, the

defendant wants the court to believe that he paid what was claimed and that

tjpe only amount that is still unpaid is Tsh. 1,378,343,268.75/=

• •>

Regarding what is claimed on the part of an overdraft, the plaintiff

relied on the evidence of PW1 and PW2. He also relied on exhibit Pl, the

Bank statement of the loan account of the 1st defendant which shows the

status of repayment of both the term loan and the overdraft facility.

Page 30 of 41
 I have gone through the evidence of PW1 and PW2 as well as exhibit

Pl, at the items dated 22/05/2020. I find the amount due on 22/05/2020 is

Tshs. 10,852,489,497.63/=, I believe this amount ought to have been

obtained by taking the total credited amount which according to exhibit Pl

is Tshs. 33,998,562,567.88/= minus a total debit amount which is Tshs.

23,174,447,830.89/= which when computed, amounts to Tshs.

10,824,114,736.99/=.

In my view, if we are to believe the customer account statement to be

a credible document retrieved from the accurate system, then we should

base our computation on the last figure which creates a summary of what

has been credited and what has been debited, to ascertain the liability of the

14 defendant. That said, I find the unpaid amount of the overdraft to be

Tshs. 10,824,114,736.99/=.

As earlier pointed out, the defendant vehemently disputed being

indebted to such an amount. She said through the evidence of DW1 that the

amount to which he admits to being indebted is Tsh. 1,378,343,268.75/=.

Hp tendered the exhibit DI and D2 the ledger book and a total 558 of deposit

slips. As it has been proved, he took a loan of Tshs. 8,000,000,000/= as an

overdraft and Tshs. 2,000,000,000/= a term loan which both were supposed
Page 31 of 41
to be repaid, the defendant was under section 112 of the Evidence Act,

supposed to prove that he repaid the amount and that the only unpaid

amount is Tsh. 1,378,343,268.75/=.

In the case of Hemedi Said vs Mohamed Mbilu (1986) TZHC 15

the guiding principle of weighing the evidence of two contending parties in

the same case is that ''according to law, the person whose evidence is

heavier than that of the other is the one who must win."

In law, the weight of evidence is determined by some factors, some of

which are, the credibility of both, the person giving the evidence and of the

evidence itself. The credibility of the witnesses is based on the coherence of

the evidence he is giving, and the demeanor of the witness himself during

his testimony. While the credibility of the evidence other than the oral

testimony can be assessed based on the credibility of the source from where

the evidence has been taken or extracted. In the case at hand, while PW1

has tendered exhibit Pl the bank statement of the account which was

controlled by the 1st defendant, DW1 relied on the ledger which he said when

he was cross-examined by the counsel for the plaintiff that, the ledger was

got used in respect of the transaction of the plaintiff alone. Furthermore, he

said the ledger was created sometimes by the entries from the 558 deposit
Page 32 of 41
slips, exhibit DI collectively, which the 1st defendant used to deposit the
*
money in the account. However, through cross-examination, DW1 confessed

that, among the tendered deposit slips, some had no signature and stamp

q| the officers of the bank before whom the money was deposited, while

others were depositing the money in NBC bank. That in my view, lowers the

credibility of the evidence of the defence.

That being the case, weighing the two sets of evidence on the scale,

the evidence of the plaintiff is much heavier than that of the defence. That

said, I find it instructive to conclude that, the total amount to which the

plaintiff is entitled from the defendants in the counterclaim in respect of the

overdraft facility is Tshs. 10,824,114,736.99/= which is the difference

between the total amount deposited and that of the amount withdrawn.

Regarding what was paid in respect of the term loan, the plaintiff

through the evidence of PW2, said the 1st defendant paid the total of Tshs.

815,000,000/= plus other money. According to him, out of that, Tshs.

401,000,000/= repaid the principal sum while the rest paid the interest,

therefore, the principal amount that remained unpaid was Tshs.

1,508,355,261.84/= while the interest which remained unpaid was Tshs.

Page 33 of 41
344,119,137.76/= thus totaling a balance of unpaid term loan to be Tshs.

1,852,474,300.60/= as an unpaid debt of the term loan.

The defendant did not segment these two loans, therefore he did not

say what she repaid as the term loan. He combined both loans and relied on

exhibit DI, the ledger book, and exhibit D2 the deposit slips, he said the

defendants are indebted only to Tshs. 1,378,343,268.75/=.

More so, his calculations are based on the defendants' ledger book

with the transaction ending on 31/12/2017, while the plaintiff's calculation is

up to the year 2021 as the interest continued to accrue. This was one of the

reasons why I called additional evidence, where PW2 said that, since the

debt was unpaid, the interest continued to accrue which is why he brought

the statement up to 2021. On his part, DW1 said they brought the ledger

with the details of up to 31/12/2017 because that was the end of the

transactions as the payment and withdrawal ended there. In the

circumstances this issue should not detain me, from the evidence of DW1,

he had no sound reasons as to why he brought the ledger up to 31/12/2017,

and that date on the ledger has no effect in marking the date when should

the charging end.

Page 34 of 41
 Now, on what is claimed from the term loan facility, just like in the

overdraft facility the answer should be in the loan details statement. In the

statement, and according to the evidence of PW2, up to when the

restructuring was done, the principal term loan was Tshs.

1,508,355,261.84/= while the interest which remained unpaid was Tshs.

344,119,137.76/= thus totaling a balance of unpaid term loan to be Tshs.

1,852,474,300.60/=. That is reflected in a summary of the loan details

statement at the start of the statement. However, the statement does not

show the balance of unpaid at the end of the term within which the

repayment was to be done, unlike the Customer Account Statement which

shows the balance of unpaid debt which is computed from the difference

between the money deposited and that of the withdrawn. In this, the

statement does not give such details.

However through the evidence of PW2, he gave a detailed account of

What was paid and what was not. That account was not in any way

contradicted by the defendants, but section 110 of the Evidence Act, requires

a person who alleges to prove his allegations. In the case at hand, taking

into account the fact that the term loan was not new money, the plaintiff

was duty bound to detailedly prove the unpaid term loan money, and since

Page 35 of 41
it has already been proved that, all payments were made through the

account, then the loan details statement was supposed to be clear bearing

in mind the fact that, section 62 of the Evidence Act, (supra) exempt the

.content of the document to be proved by oral evidence.

Although the defendant was duty bound under section 112 of the

Evidence Act, to prove that he repaid the term loan, that duty comes in after

the plaintiff had discharged his primary duty to prove that she claims from

the defendants the alleged amount through the Lon details statement, the

duty which in my opinion has not been accomplished. That being the case,

I find the claim in the term loan unproven at the required standard.

On the issue of whether there is a valid statutory notice of default

issued to the defendants in the counterclaim by the plaintiff? It should be

noted that the 2nd defendant guaranteed the 1st defendant's loan and an

overdraft. According to section 8 of the Law of Contract Act, Cap 345, R.E.

2019. the liability of guarantors co-exist with that of the borrower, thus,

When the borrower defaults, the guarantor has to be notified. This brings

me to the fourth issue as to whether the Notice of Default issued on

18/04/2018 was valid.

Page 36 of 41
 According to the Notices of Default (exhibit PE 14 and PE 15), the

defendants defaulted in payment of the credit facilities granted to them.

Section 127 (3) of the Land Act [Cap 113 R.E 2019] requires that a Notice

of default be issued as a result of default in the payment of any interest

secured by any mortgage to be in the form and content prescribed by the

Minister in the Regulations. It also provides that, a Notice which is not in the

prescribed form is void. Subsection (2) of section 127 of the Land Act,

(supra), makes it a requirement for the Notice of Default to inform the

recipient adequately about:- The nature and extent of the default; that the

mortgagee may proceed to exercise his remedies against the mortgaged

land; actions that must be taken by the debtor to cure the default; and that,

after the expiry of sixty days following receipt of the notice by the mortgagor,

the entire amount of the claim will become due and payable and the

mortgagee may exercise the right to sell the mortgaged land.

In the present case, PW2 testified that, they served both defendants a

Notice of Default and it was DWl's son who received them and signed them.

This narration is denied in totality by DW1, he testified that, none of the

directors were served with the said notices, and they never signed. Having

examined the Notices of Default issued by the plaintiff on 18/04/2018, the

Page 37 of 41
Court is satisfied that the Notice is issued in Land Form No. 54A which is the

form prescribed under the schedule to the Land (Mortgage Financing)

Regulations, 2009.

Further to this, the contents of the Notice reflect the requirements of

the law under section 127(2) of the Land Act, on the nature and extent of

the default. They all indicate that the defendants have defaulted to honour

their obligations by failing to pay the amount in excess, arrears and the

interest thereon tuning TZS 12,587,806,681/= as of 11/04/2018. It also

provides that, in the event the plaintiff does not rectify the default within 60

days the plaintiff may exercise her right to sell the mortgaged properties,

appoint a receiver, lease the property or enter possession and sell them to

recover the defaulted amount.

The only mishap which I find pertinent as rightly indicated by DW1 is

who received the same. The Notices do not show if the same were received

by the defendants; as of the 1st defendant, it is not certain whether it was

the company secretary who received the same or not. There is neither name

npr the receiver's stamp seal indicating receiving the same. The same goes

for the 2nd defendant and taking into account the amount of debt in question,

a dispatch would have sufficed in proving that, the defendants were legally

Page 38 of 41
notified. Although the notice requirement under section 127 of the Land Act
X

may not be relevant to the borrower where the guarantee is in the form of

a third-party mortgage like this one at hand, it is a common banking practice

that, in an overdraft, a demand note is a minimum requirement to establish

default.

The rationale behind this is to allow the mortgagor to settle the claimed

ajmount and in case of further failure, it implies that the mortgagor denied

Mis opportunity to fulfill his obligation. In the circumstance, in the absence

of further proof of service, this Court finds that, although the Default Notice

is. valid according to the law, the same was not properly served to the

defendants. The fourth issue is also answered negatively.

In light of the above, while answering the fifth issue, I thus proceed to

enter judgment in favor of the plaintiff and dismiss the defendants' claims

oh the counter-claim to the extent explained hereinabove and order that:

(i) The 1st defendant to settle her liability in respect of the overdraft

facility of Tshs. 10,824,114,736.99/= which is the difference between

the total amount deposited and that of the amount withdrawn or else

the plaintiff may proceed against the collated/ security to settle the

loan debt.
Page 39 of 41
(ii) The defendant is to pay interest on the sum stated in (i) above at the

rate of 19.79% per annum as indicated in paragraph 5.1 of the Banking

Offer Letter, exhibit P3 from June 2018 to the 04th October 2021 when

the current counterclaim was filed.

fiii) The defendant is to pay interest on the sum stated in (i) above

at the rate of 19.79% per annum as indicated in paragraph 5.1 of the

Banking Offer Letter, exhibit P3 from the 04th October 2021 the date

of filing this suit/counterclaim to the date of judgment.

(iv) The defendant is to pay interest on the decretal amount at the

Courts rate of 7/% per annum from the date of judgment up to the

date of satisfaction of the decree.

(v) Award of general damages to the tune of Tshs. 250,000,000/= for

disturbance and loss of income caused, and

(vi) Costs of this suit.

(vii) As it has been established that, the notice was not validly served

to the defendants, then the satisfaction of the decree be within 60

days, failure of which the normal procedure of executing the court

decree be invoked.

Page 40 of 41
It is so ordered.

DATED and delivered at ARUSHA this 29th day of May 2023.

Page 41 of 41