IN THE HIGH COURT OF THE UNITED REPUBLIC OF TANZANIA

(IN THE DISTRICT REGISTRY OF DAR ES SALAAM)

AT PAR ES SALAAM

MISCELLANEOUS CIVIL APPLICATION NO. 09 OF 2022

IN THE MATTER OF THE COMPANIES ACT, NO. 12 OF 2002 (Cap.

212 R.E. 2019)

AND

IN THE MATTER OF TANZANIA CHAMBER OF COMMERCE,

INDUSTRY AND AGRICULTURE (TCCIA)

AND

IN THE MATTER OF APPLICATION BY;

ERNEST NDUTTA NYORORO.....................................PETITIONER

VERSUS

PAUL FARAJ K O Y I....................................... ........ 1st RESPONDENT

TANZANIA CHAMBER OF COMMERCE,

INDUSTRY AND AGRICULTURE (TCCIA)............ 2nd RESPONDENT

NEBART MWAPWELE ... 3rd RESPONDENT [As a Necessary Party]

RULING

13th & 17th January, 2022

ISMAIL, J.
 This petition has been taken at the instance of the Ernest Ndutta

Nyororo, who has introduced himself as a member of the 2nd respondent,

with a membership number 006499. He has instituted this petition seeking

several orders against the respondents as follows:

(a) A declaration that the affairs of the 2nd respondent are run in a
manner that is prejudicial to the interest of the members and
the company (2nd respondent) itself;

(b) A declaration that 3rd respondent's appointment as the 2nd

respondent's Executive Director is invalid, illegal, null and void
ab initio ;

(c) Issuance of a temporary injunctive order, restraining the 1st

and 3rd respondent from running the company's affairs and
allow Ms. Judith Jeremiah Karangi to perform her duties;

(d) Issuance of permanent injunction against the 3rd respondent

from running the 2nd respondent's affairs;

(e) Costs;

(f) Any other order or relief that the Court may deem fit, just and
equitable for enabling smooth and proper running the 2nd
respondent's affairs and protection of interests of the 2nd
respondent, the shareholders and the petitioner.
 The allegation by the petitioner is that the 1st respondent is involved

in malafide acts which are prejudicial to the interests of the 2nd respondent.

The acts, are considered to be a breach of the provisions of Clauses 35 (a)

(v) and 39 (a) of the Memorandum and Articles of Association (Memarts),

and they include:

(i) Termination of the appointment of a Ms. Judith Jeremiah

Karangi, hitherto the 2nd respondent's Executive Director,
while powers for such termination are allegedly vested in the
National Executive Council;

(ii) Appointment of the 3rd respondent as the 2nd respondent's

Executive Director. The petitioner's contention is that the
appointment was un-procedural and illegal;

(iii) Removal of Dr. Kingu Mtemi as a member of the 2nd

respondent's National Executive Council and the Board of
Directors;

(iv) Removal of Ms. Judith Karangi from the list of signatories of

the 2nd respondent's bank accounts and replace her with two
other signatories.

The petition has been valiantly opposed by the respondents. Through

their joint replies to the petition and the supplementary petition, the

allegations by the petitioner have been slammed. The respondents'

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averments are that the 3rd respondent's appointment was on an acting

capacity, subject to approval by the 2nd respondent's National Executive

Council, whose meeting was slated for 15th January, 2022. The

respondents further contended that Ms. Karangi was serving on a

probation, pending a confirmation by the 2nd respondent's National

Executive Council, on a recommendation by the Board of Directors.

With respect to 3rd respondent, the respondents' averment is that he

took up the position in an acting capacity at Ms. Karangi's instance,

following her travel to Nairobi.

Hearing of the petition, which was done orally, saw Mr. Kennedy

Mgongolwa, learned counsel, representing the petitioner, as Mr. Malima

David, learned counsel, had his services enlisted by the respondents.

Getting us under way was Mr. Mgonngolwa, who stated that the

petition had been preferred under section 233 (1), (2) and (3) of the

Companies Act, Cap. 212 R.E. 2019, together with Articles 41 and 42 of

Table C of the Schedule to Cap. 212. He submitted that the petition stems

from what he alleges to be acts of mismanagement done by the 1st

respondent, by making several decisions which are prejudicial to the 2nd

respondent's affairs. The incidents complained about are those that are

averred in paragraph 9 of the petition and proved by Exhibit TC 4 attached

to the petition. Mr. Mgongolwa argued that the Memarts (Exhibit TC 3),

under Article 39 (a), has vest powers in the National Executive Council

(NEC) to appoint the 2nd respondent's Executive Director. That

notwithstanding, Mr. Mgongolwa contended, the 1st respondent terminated

Ms. Karangi and Dr. Kingu as Executive Director and Board members,

respectively, in blatant violation of the cited provision on the Memarts. He

roundly condemned the action, terming it illegal and un-procedural.

Learned counsel further argued that the 1st and 3rd respondents went

far overboard by presenting documents to the 2nd respondent's banker

(Exhibit TC 2), communicating the change of signatories. The change,

learned counsel contended, saw Ms. Karangi removed while Anna Wille and

Justin Marwa were brought in her stead. He argued that appointment of

signatories to the bank accounts is done by the board of directors and not

the president Mr. Mgongolwa argued that no board convened to deliberate

on the issue of signatories. He argued that not even an acting role would

be sanctioned by the 1st respondent.

Taking a swipe at the replies to the petition and supplementary

petition, the petitioner's advocate took the view that putting an alleger to

strict proof was an affront to the law as we know it, and as accentuated in

EA C ables L im ite d v. Spencon S e rv ice s Ltd, HC-Misc. Commercial

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Application No. 61 of 2016; and G ilb e rt Zebedayo M rea v. M oham ed

Jssa M akongoro, CAT-Civil Application No. 369/17 of 2019 (both

unreported). He argued that the consequence of all is that such denial is

considered to be an admission of the allegation.

The petitioner's counsel urged the Court to grant orders sought in the

petition.

In his swift rebuttal, Mr. David found nothing blemished in the 1st

respondent's conduct. Learned counsel began with contending that the

name of the 3rd respondent appearing in the petition was dissimilar to the

3rd respondent's actual name. While his real name is Nebart, the petition

has Nerbert as the name of the 3rd respondent. He called upon the Court to

consider amending the petition or guide as appropriate.

With respect to the petitioner's involvement in the petition, Mr. David

contended that the petitioner is not a subscriber of the 2nd respondent.

This is because he is not in the Companiers Register as required under

section 24 (1) and (2) of Cap. 216.

Regarding the alleged illegality in the appointment of the 3rd

respondent, learned counsel saw no legal flaws in the appointment. He

argued that, given the falling out witnessed within the membership of the

board of directors of the 2nd respondent, decisions had to be made to allow

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a smooth conduct of the 2nd respondent's affairs. Being the president, chair

of the NEC, Board and Annual General Meeting he was empowered, under

Clause 18 (b) of the Memarts to act and address the stalemate. Part of the

efforts, argued Mr. David, involved writing a letter (Attachment 2) to

inform regional chairmen of the goings in the Chamber.

On the appointment of the 3rd respondent, Mr. David argued that his

was merely an act of addressing the gap and that his action was subject to

approval by the NEC. He argued that Ms. Karangi who was working on

probation had not been confirmed to the position. He argued that the 3rd

respondent's position would be resolved on 15th January, 2022 when

members of the NEC were set to convene and deliberate on the matter.

With regards to removal of Dr. Kingu, the argument put forward is

that he was given time to evaluate his suitability to continue serving as a

board member, taking into account the fact that he was a civil servant

whose involvement is prohibited by Article 24 (iii) of the Memarts. Mr.

David contended that Dr. Kingu is a medical doctor employed and working

at Lugalo Military Hospital.

On the legitimacy of the 3rd respondent to sign documents, Mr. David

held the view that the 3rd respondent's involvement came as a result of the

Ms. Karangi's absence from office and asked the 3rd respondent to deputize

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for her. This is when the latter signed the documents disputed by the

petitioner. Mr. David challenged the circular resolution (Exhibit TC 4)

because it had failed to conform to the requirements of Article 36 of the

Memarts which provides for the quorum requisite for transacting business.

In this case, the number is four members, three of whom are officers of

the Chamber. In this case, the resolution shows that there are four

members, including Dr. Kingu. He argued that Articles 18 and 19 (a) and

(b) define who the officers are. On a reflection, however, Mr. David agreed

that Dr. Kingu was an eligible member.

With regards to Ms. Karangi's removal from the list of signatories, Mr.

David contended that this decision was unanimously reached by members

through a resolution for a meeting which was held in Dodoma. It was not

the 1st respondent's own affair.

He urged the petitioner to let the NEC discuss, deliberate and resolve

the matter amicably.

Rejoining to the rebuttal submission, Mr. Mgongolwa began by

conceding to the contention that name of the 3rd respondent was wrong.

He argued that this was a mere slip that can be cured by applying the

principle of overriding objective, as spelt out in Sanyou S e rv ice S ta tio n

8
L td v. B P (T) L im ite d & 2 O thers, HC-Civil Case No. 329 of 2002

(unreported).

On the powers of appointment, learned counsel maintained that the

1st respondent is not vested with such powers; while with respect to Ms.

Karangi's misconduct, Mr. Mgongolwa's take is that such allegations are not

part of what is alleged in the pleadings. He urged the Court to consider it

as a mere submission made from the bar, and that the same should be

disregarded.

Mr. Mgongolwa contended that no evidence had been adduced to

prove that Dr. Kingu was a civil servant, adding that matters pertaining to

his eligibility ought to have been determined at the meeting of the

members.

Defending the resolution tabled by the petitioner, Mr. Mgongolwa

argued that Article 37 of the Memarts states that a circular resolution is

only issued on an emergency basis. In the instant case, learned counsel

contended, the resolution came after the Dodoma meeting.

He urged the Court to intervene and make a finding that will forestall

any possible exclusion of the said members from the meeting of the

National Executive Council.

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 I have scrupulously reviewed the pleadings filed by the parties, the

accompanying documents, and counsel's oral submissions. I am now ready

to address issues raised by the parties. What is clear is that removal of Ms.

Karangi, Dr. Kingu, and appointment of the 3rd respondent is what

constitutes the heart of the parties' consternation. The central question is

whether such actions were regular and consistent with the instruments that

govern the conduct of proceedings in the 2nd respondent.

I will begin the disposal journey by addressing an issue which was

raised by the respondents' counsel. This is with respect to the legitimacy of

the petitioner to found these proceedings. The relevant provision in this

respect is section 233 (1) of Cap. 212 which provides as hereunder:

"Any member o f a company may make an application to

the court by petition fo r an order on the ground that the
company's affairs are being or have been conducted in a
manner which is unfairly prejudicial to the interests o f its
members generally or o f some part o f its members
(including at least him self) or that any actual proposed act
or om ission o f the company (including an act or om ission
on its behalf) is or would be so prejudicial. I f the court is
satisfied that the petition is w ell founded, it may make
such interim or fin al order as it sees fit for giving re lie f in
respect o f the m atter com plained o f."

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 Section 24 of Cap. 212 talks about membership of a company, and it

provides that subscribers of the company shall become members whose

rights to commence proceedings against possible unfair prejudice to

company affairs are provided for under section 233 (1) cited above. In the

instant case, the petitioner's membership has been ascertained through

attachment of a membership certificate and a payment receipt against

payment of membership subscription fees (Exhibit TC 1). In my view, this

is sufficient evidence that proves the petitioner's membership to the 2nd

respondent. One would not require production of a company register to

prove that he is a constituent member of the company as the respondents'

counsel argues. It is simply not a requirement of the law. I take the view

that the petitioner's membership status is ascertained and it qualifies him

as a member that can found an action under section 233 (1) of Cap. 212.

There is also a nagging issue on the impropriety of the 3rd

respondent's name that the petitioner's advocate has conceded to. While

the actual name is Nerbat, the petition has picked Nerbert as the 3rd

respondent's name. As both counsel agree, this is a trifling error which has

less or no effect to the legitimacy of the proceedings. It is a misstep that

can be cured through an amendment and without any prejudice on the

ii
respondents' part. Consequently, I consider this to be a tolerable error and

I choose to give it less weight.

As stated earlier on, the critical point of contention relates to removal

of Ms. Karangi and Dr. Kingu, and the installation of the 3rd respondent as

Ms. Karangi's successor. Related to that, is the deletion of Ms. Karangi's

name as a signatory of the 2nd respondent's bank accounts. It should be

appreciated that the latter action is resultant of what happened in the

former. If, for any reason, Ms. Karangi's tenure as Executive Director came

to an end, such cessation would definitely affect her status as the signatory

of the accounts for, such responsibility was bestowed on her by virtue of

her role as the company's executive Director. It follows, therefore, that the

decision on the regularity or otherwise of her termination is what will

determine if she should continue to serve as a signatory to the bank

accounts.

As stated by Mr. Mgongolwa and duly acknowledged by Mr. David,

running of the affairs of the 2nd respondent is governed, primarily, by the

provisions of the Memarts. These are the constitution of the company in

which organs of the company and the role that they play are spelt out.

These include the Executive Council, the Board of Directors and officers of

the Chamber, in the descending order. Each of these organs has specific

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functions. With respect to appointment of staff, such powers are vested in

the NEC. This is in terms of Article 39 (a) of the Memarts which provides as

hereunder:

"The National Executive Council shall appoint an Executive

D irector for the Chamber follow ing interview s and
recommendations by the Board o f Directors. A t the
follow ing Annual Genera! Meeting or Extraordinary General
Meeting, the delegates shall be inform ed o f the
appointment.

The Executive Director shall be responsible to the Board o f

Directors o f the Chamber and he sh all be the spokesperson
o f the Chamber on operational m atters."

What we gather from the quoted excerpt is that there is no shared

responsibility between the NEC and any other company organ with respect

to appointment of the 2nd respondent's Executive Director. This is

exclusively the domain of the NEC, on the recommendation of the Board of

Directors. It is also a known fact that the organ that is vested with powers

of appointment also enjoys the powers of termination of employment.

Thus, the powers of appointment enjoyed by the NEC include the exclusive

powers to sever links with the employee that it hired or employed. It goes

without saying, therefore, that it is the NEC that enjoys the exclusive

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powers of termination, as far as the position of the Executive Director is

concerned.

Mr. David has not seriously disputed the fact that Ms. Karangi's

services were dispensed with by the 1st respondent. His only contention is

that circumstances of this case were such that intervention of the 1st

respondent, the president, was necessary, in order to save the 2nd

respondent from hitting the bottom of the trough. He argues that the 1st

respondent's intervention was intended to salvage the affairs of the 2nd

respondent, and that, being the Chair of the Board, NEC and Annual

General Meeting, the 1st respondent was justified in his intervention.

Learned counsel has also argued that Ms. Karangi was not terminated.

Rather, she was on probation and left her position because she was not

confirmed.

In my considered view, these arguments are hollow and failing to

resonate. While the 1st respondent's efforts to address the uncertainty that

marred the 2nd respondent's operations are lauded and were well

intentioned, the undeniable fact is that such acts were ultra vires the

constitution of the company. My conviction is that the 1st respondent, has

no business meddling in the issues relating to engagement or termination

of the Executive Director. His being a chair of the meetings of the organs

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does not, in any way, place him on par with the NEC or even the Board of

Directors that recommends appointments to the NEC. Simply stated, the 1st

respondent is not the Executive Director's employer. It follows that the 1st

respondent's unilateral decision to terminate the then Executive Director

was nothing short of a wanton infraction of the provisions of the Memarts,

and an abhorrent infringement of the powers vested in the NEC. It would

matter less, if the intention of such usurpation was to save the 2nd

respondents from the imminent blushes that were caused by endless

bickering among different players in the company.

The net effect of the 1st respondent's ultra wres acts is in the mould

of what the House of Lords decided in the case of A sh b u ry R a ilw a y

C arriag e a n d Iro n Co. L td v. R ich e (1875) LR 7 HL 653, wherein ultra

vires actions of the directors that defied the objects of the Memorandum

and Articles of Association of the company were held to be void ab Initio

and invalid, unable to be ratified at a later stage.

The respondent's learned counsel has introduced yet another

argument. It is to the effect that Mr. Karangi was serving on probation

basis. As I struggle to make sense of what he intended to achieve in using

a probationary status of an employee, it behooves me to state, albeit en

passante, that even in cases that involve laying off employees who serve

15
on probationary basis, there is an elaborate procedure whose application is

a matter of imperative requirement. This is in terms of the provisions of the

Employment and Labour Relations Act; Cap. 366 R.E. 2019; and the

Employment and Labour Relations (Code of Good Practice) Rules, G.N. No.

42 of 2007. These pieces of legislation provide a detailed process that the

employer must follow if termination is to be considered fair. The process

implicitly requires that termination of one's services must be done by a

body that enjoys the powers of termination. In our case, such body is the

NEC and not the 1st respondent.

In view of the foregoing and, borrowing a leaf from the principle

enunciated in the cited English decision, I take the view that the conduct

exhibited by the 1st respondent deserves nothing but a comprehensive

censure. I hold that Ms. Karangi's ouster from her position in 2nd

respondent company was marred by irregularities that are too profound to

see the light of the day. I agree with the petitioner that such infraction was

prejudicial to the company's interests, and it was within the respondent's

right to enlist this Court's assistance and get the flawed decision out of the

way. Most importantly, such flaws confirm the petitioner's contention that

running of the 2nd respondent's affairs smacks of serious prejudice to the

interests of the members and the 2nd respondent.

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 Equally horrendous, is the subsequent decision by the 1st respondent,

to crown the 3rd respondent as Ms. Karangi's successor. Once again, this

was an appointment, done by a person who overstepped his mandate,

rendering it an intolerable travesty of justice. Appointment of staff is the

power bestowed upon the NEC, as it is to fire employees, and it would not

operate differently in the case of the 3rd respondent's appointment as Ms.

Karangi's successor. It follows that his appointment to the position of

Executive Director, whether on permanent or acting position, is shrouded

in flagrant violation of the provisions of the Memarts. It bred a disturbing

and intolerable consequence that justifies the prayers sought by the

petitioner.

Finally, there is a question of whether Dr. Kingu was removed from

his position, and whether the alleged removal was justified. This question

is not hard to resolve, essentially because the letter that the petitioner

relies on is quite clear. It merely required him to weigh his position and

make his own conclusion regarding his suitability to sit on the two forums

amidst the allegation that he was a civil servant, contrary to Article 24 (iii)

of the Memarts. Exhibit TC 4 clearly states in part as follows:

"On behalf o f National Executive Council and in considering

your employment status in public service and the
provisions o f the above articles o f TCCIA MEMARTS, you
17
 are advised to evaluate WHETHER or NOT your position as
NEC and Board Membership is tenable. "

Exhibit TC 4 was purportedly communicating the position made by

the NEC, a body that is vested with powers to inquire into such matters.

But even assuming that the 1st respondent sent the said correspondence

without any instructions from the NEC, the fact remains that no decision

had been made to terminate Dr. Kingu's membership in the Board of

Directors, or at all, as contended by the petitioner. I am not persuaded,

one bit, that Dr. Kingu's tenure as a board member was truncated pursuant

to the communication that the petitioner relied on. In my considered view,

up until now, no position has been taken with respect to Dr. Kingu's board

membership. It is on the basis thereof that I find nothing plausible in the

petitioner's contention in that respect, and I reject it out of hand.

Overall, save for the contention with respect to Dr. Kingu's tenure in

respect of which I find nothing convincing, I hold that Ms. Karangi's

termination and appointment of the 3rd respondent to succeed Ms. Karangi

was irregular and violative of the Memarts. Consequently, I declare them

invalid and void ab initio . Accordingly, the same are quashed and the

application is granted with costs. As I do that, I grant the petitioner's item

(a) of the reliefs sought.

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Order accordingly.

DATED at DAR ES SALAAM this 17th day of January, 2022.

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