IN THE HIGH COURT OF THE UNITED REPUBLIC OF TANZANIA

(IN THE DISTRICT REGISTRY OF KIGOMA)

AT KIGOMA

APPELLATE JURISDICTION

LAND APPEAL NO. 22 OF 2020

(Arising from District Land and Housing Tribunal Kigoma, Land Application No. 38 of
2016 Before M. Nyaruka, Chairman)

MUUNGANO SACCOS LTD 1st APPELLANT

JESCA SIMON DEHEYE 2nd APPELLANT
YUSUPH REHAN HASSAN 3rd APPELLANT
VERSUS

LAMECK DAUD LIBELI RESPONDENT

JUDGMENT
8th & 15th March, 2021

A. MATUMA, J.

The parties herein executed a loan agreement of Tshs. 30,000,000/= on

the 11th February 2015 whereas the 1st appellant was a borrower, the

Respondent a lender, the 2nd and 3rd appellants were guarantors to the

loan in which they mortgaged their landed properties namely Plot No.

1045 H.D. Block Q Majengo and Plot No. 1150 H.D. Block Q Majengo.

The loan period was only three months and had to expire on the

11/05/2015. The borrower defaulted the agreement which erupted sour

i
relationship between them. The respondent at last decided to commence

a suit in the District Land and Housing Tribunal which ended in his favour.

It is apparent on record from both the documents filed by the parties

during trial, their evidence and their respective submissions before me

that a loan of Tshs 30,000,000/= was indeed advanced and obtained

respectively as per facts herein serve for whether such amount included

a hidden interest or not. The dispute between the parties were thus;-

Z While the appellants a vers that they were advanced as a loan

by the respondent to the tune of only Tshs 20,000,000/=
with an agreement of interest of Tshs 10,000,000/= but
agreed to camouflage the interest and therefore their loan
contract was written the borrowed amount to be Tshs
30,000,000/=, the respondent on his party averred that the
Tshs 30,000,000/= was borrowed in cash with no any
interest.

ii. While the Appellants avers to have already paid the loan in
part by instalments of Tshs. 4,000,000/=, Tshs. 4,000,000/=
and Tshs 3,000,000/= in cash and Tshs 12,000,000/= by
check, thereby making a total repayment of the loan to the
tune of Tshs. 23,000,000/=, the respondent on his party
acknowledge to have received only Tshs. 7,000,000/= as a
consideration for him to extend, the period of the loan and
not as party of the principal loan.
The trial tribunal having heard the parties on the issue decreed to the

respondent against the appellants;

i. Tshs. 30, OOO, OOO/= as the principal loan advanced to the

appellants by the respondent.

ii. Tshs 12,000,000/= as an interest agreed by the parties for

the extension of time by the respondent at three different
times.

Hi. Tshs 15,000,000/= as general damages for the appellants'

long stay with the principal amount without repaying it
back to the respondent.

iv. Cost of the suit

v. An order for attachment and sale of the mortgaged houses

in case the appellants defaults to execute payment of the
decreed sum in 45 days from the date of judgment i.e
03/07/2020.

The appellant became aggrieved with the herein decree hence this appeal

with a total of four (4) grounds of appeal whose essential complaints are:-

i. That the general damages of fifteen million was granted

without any proof.

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 ii. That the Tshs 12,000,000/= was granted to the
respondent while he is not a financial institution registered
under the Banking and Financial Institutions Act, 2006.

Hi. That the trial tribunal disregarded the appellants'evidence

to the effect that they have already paid Tshs.
23,000,000/= and the outstanding debt is only Tshs
7,000,000/=.
iv. That their e vidence and exhibits were completely ignored.

At the hearing of this appeal Mr. Eliuta Kivyiro learned Advocate

represented the appellant while Mr. Silvester Damas Sogomba learned

Advocate represented the respondent.

Mr. Kivyiro learned advocate arguing on the 1st ground of appeal

submitted that the Respondent was awarded Tshs 15,000,000/= against

the appellants as general damages on allegations that he was a

businessman and the money he advanced to the appellants came from

his businesses while there was no evidence to that effect.

Responding on the first ground, Mr. Sogomba learned advocate was of

the argument that the general damages awarded was justified because

the respondent is a petty trader who expected his advanced money to be

returned back to him in three months'time.

Having heard the arguments of the parties on the first ground, I am of

the firm view that I should agree with Mr. Kivyiro learned advocate on

this complaint. This is because apart from allegations that the respondent

was a businessman, the trial tribunal considered the fact that the 1st

appellant stayed with the borrowed money for five years. I am of the

firm view that it was wrong for the trial tribunal to consider a period of

five years in awarding the general damages because from the moment

the suit was instituted in court the appellants could in no way pay the

respondent his money as the matter was already in court and constituted

some claims which were in dispute.

In this matter, the suit was instituted in court on the 19th April, 2016. The

loan was to be repaid by May, 2015 but according to the respondent

himself he extended the period to June, then to July, then to August and

lastly, he extended three months, which no doubt was at the end of

November, 2015. According to the respondent he extended the period

for the repayment of the loan as they paid him some considerations for

the said extension and the last three months he extended were yet to be

paid which formed the claim of Tshs 12,000,000/=. The appellants did

not dispute to have been extended time for the repayment of the loan

but they denied to have agreed any consideration for the extension.

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Be it that the extension was for any consideration or not as shall be

discussed in the other ground, for the purposes of determining this first

ground of appeal my concern is that the respondent extended the period

for the repayment of his money. In that respect, a breach cannot be

alleged to include the period so extended. The respondent is estopped

under section 123 of the Evidence Act, Cap. 6 R.E. 2019 to deny the fact

that the period he extended does not fall within the alleged breach as he

condoned it by his own extension of the loan period. In the circumstances

the breach if any was from December, 2015 to 19th April, 2016 when the

respondent finally instituted the suit. That is hardly a period of four

months and 19 days. The institution of the suit automatically stayed the

obligations between the parties pending its determination by the court.

The trial tribunal did not adjudicate the matter within a reasonable time

as from April, 2016 to 3/7/2020 when it finally decided it. That is almost

a period of four years and three months. It was quite unfair for the trial

tribunal to stay with the matter unadjudicated for four years and use the

same period to punish the appellants. Had the matter been adjudicated

within a reasonable time in just months (Speed track one), or a year

(Speed track two), or a period not exceeding 14 months (Speed track

three), or even the maximum period of 24 months (Speed track four),

the trial court would have not awarded the said amount as general

damage for the period of five years which the appellants had no control

as the matter was pending in the tribunal. General damages if any ought

to have considered only the period between the alleged breach and that

of the institution of the suit.

The period which the matter had been pending in court can only be

considered if the judgment debtor had at all times denied the debt but

finally the same is proved and only if the court adjudicated the matter

within a reasonable time frame set by law. Although the Land Disputes

Courts Act does not specify the maximum period for determination of

disputes, the Civil Procedure Code which is applicable to the trial tribunal

sets the maximum period to be speed track four which is hardly 24

months.

In this case, the matter was unnecessarily stayed in court because the

appellants did not deny the principal date of Tshs. 30,000,000/= even if

they alleged to have included a camouflaged interest. Therefore, the

mischief by the trial court was wrongly shouldered to the appellants.

On the allegations that such money came from the business of the

respondent and was as well taken from the bank as a loan, the trial court

found that the fact required proof which wasffiissing. I also find as such.

7
The respondent apart from averring that he was a businessman he did

not positively establish that such money came from his business. But

again, the loan contract is very clear that the loan was advanced without

any interest. With that fact and the fact that the respondent extended

time at different occasions, the said money cannot be argued to have

been affecting the respondent's businesses.

In that respect I do away with the general damages and quash the decree

of Tshs 15,000,000/= passed by the trial tribunal. I will later consider

whether the respondent was entitled to general damages within the real

period of the breach if any, when dealing with the other ground.

On the 2nd ground of appeal the learned advocate argued that the trial

court erred to allow interest to the respondent to the tune of Tshs.

12,000,000/= as he was not a financial institution to be entitled to

interests on the loan he advanced to the appellants.

He further argued that even through the check of Tshs 12,000,000/=

which the appellants issued to the respondent was part payment of the

principal loan and not interest. He thus argued that the trial court ought

to have considered that amount as part payment of the outstanding loan.

Mr. Sogomba learned Advocate for the respondent responding to the 2nd

ground of appeal submitted that in the first instance, the Tshs

12,000,000/= was not an interest in its real sense but was an amount

accrued from the loan just as consideration for the extension of the period

of its repayment. That the check was issued to the respondent just for

him to buy time. He added that even the receipts to that effect were

titled' faida'which did not mean that they were forming part payment of

the principal loan.

He thus argued that the Banking and Financial Institutions Act is

inapplicable in the circumstances of this case.

On being probed by the court, the learned advocate for the respondent

admitted that going by the principle that a document must speak by

itself, a check of Tshs. 12,000,000/= dated 02/11/2015 does not reflect

the allegations of the respondent that it was issued for the respondent to

be patient for the delay of the appellants to pay him his money. Rather

it indicates to have been payment by the 1st appellant to the Respondent

and may justifiably be argued to have been part payment of the principal

loan.

Alternatively, the learned advocate argued that even if the Tshs

12,000,000/= and other payments as per receipts would have to be

considered as interests on the principal loan, there is currently in place a

decided case by the Court of Appeal of Tanzania; Simoni Kichele

Chacha versus Aveline M. KiIa we, Civil Appeal No. 160 of 2018

(CAT)at Mwanza, which has allowed a loan contract on interest basis by

individuals other than Banks and financial institutions to be executed as

agreed by the parties in their respective contract.

Mr. Kivyiro in rejoinder thereto argued that Simoni Kichele Chacha's Case

is distinguishable as the same was talking on the interest as a clause on

the loan contract in the case of default.

I would start by agreeing with Mr. Kivyiro that Simoni Kichele Chacha's

case has been misconstrued. The same did not condone unlicensed

people to advance loans on interest basis. In it the Court of Appeal

considered the principle of sanctity to contracts as it was well decided in

AbuatyAHbhaiAzizi v. Bhatia Brothers Ltd[2000] TLR 2S£that;

'The principle of sanctity of contract is consistently reluctant

to admit excuses for non-performance where there is no
incapacity, nor fraud (actual or constructive) or
misrepresentation, and no principle of public policy
prohibiting enforcement.'

From such holding it is very clear that the highest court of the land was

of a decision that an agreement prohibited by principles of Public Policy

are not enforceable.

in
Now do we have in place principles of Public Policy prohibiting

enforcement of loan contracts on interest basis by unlicensed individuals?

The answer is yes. In terms of section 23 (1) (a) (b) and (2) of the Law

of Contract Act, Cap. 345 R.E. 2019 any agreement forbidden by law or

an agreement which is of a nature that if permitted would defeat the

provisions of the law is unlawful and not enforceable. That carries us to

the provisions of section 3 (1) (a) of the Business Licencing Act, Cap. 208

R.E. 2002 which prohibits any person to carry on business without having

a valid business license. The same provides;

3(1) No person shall carry on in Tanzania, whether as a

principal or agent, any business unless

(a) he is the holder of a valid business license issued to

him in relation to such business'.

In that respect, lending money on interest basis is nothing but a business

transaction which is forbidden unless the lender is licensed as such.

Lending money on interest basis without a valid business license is

actually a violation of the provisions of the Banking and Financial

Institutions Act, Cap. 242 R.E. 2002 in which only Banks and Financial

Institutions can run business in the nature of financial transactions like

lending money on interest basis. That law under section 4 (1) and (2)

restricts business in the nature of financial transactions to Banks and

Financial Institutions subject to application and grant of license to that

effect.

With the herein provisions of the laws it is quite clear that we have in

place the laws and general principles of Public Policy forbidding

transactions of a business nature without a valid license. I am far away

to purchase the arguments of the learned advocate for the respondent

that the Court of Appeal in Simoni Kichele Chacha's case meant to do

away with these provisions.

In fact, in Simoni Kichele Chacha's case, the contract in issue was not for

the loan on interest basis. But rather the parties to the contract thereon

agreed some penal measures in the case of default in the performance of

the terms therein. One of the penal measures agreed was that in case

the borrower defaults to repay the loan within the agreed period, he will

suffer interest of 30% of the principle loan on each month.

Therefore, the contention in the matter and which was decided by the

Court of Appeal was not whether loans on interest basis by unlicensed

individuals are enforceable or not, but on whether penal measures agreed

by the parties on default of their agreements are enforceable or not. It

decided that the same are enforceable provided that it is not forbidden by

law or general principle of Public Policy. To cut a story short, Simoni

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Kichele Chacha's case did not condone unlicensed individuals to carry on

business transactions because;

Z The contract under scrutiny in that case was not relating to

a loan on interest basis but rather it was dear that it was a
loan free of any chargeable interest. The court could thus
not discuss what was not before it.

ii. The chargeable interest of 30% in the contract which was

under determination by the court was not an interest to the
principal loan but an agreed sanctions or penalty in the case
of default by the borrower to repay the principal loan within
time. Therefore, it was not an amount to be executed if the
loan was to be repaid in time.

Hi. Penal sanctions of 30% agreed by the parties to the contract

was enforceable provided that they were not prohibited by
law or any general principle of Public Policy as they acted as
a mere forcing agent that the borrowed money be repaid in
time.

iv. The Court ofAppeal in Simoni Kichele Chacha's case, did not
talk anything in relation to the provisions of the Business
Licensing Act, or those of the Banking and Financial
Institutions Act in relation to loan on interest basis by
unlicensed individuals.

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Now back to the issue at hand, the parties on the stated amount of Tshs.

12,000,000/= and other payments of Tshs 4,000,000/=, Tshs.

4,000,000/= and Tshs. 3,000,000/= did not agree as to what exactly they

were for, part payment of the principal loan or considerations for

extension of time for the repayment of loan.

While the appellants contended that the amounts were part payment of

the principal loan, the respondent argued that they were amounts agreed

out of the contract itself for cooling him for the delay of the appellants to

repay back the loan and extension of time for the loan period. The issue

therefore isn't whether the money was interests on the principal loan but

whether they formed part of the repayment of the principal loan or were

merely considerations for the extension of the contract period.

My finding on the issue is that the same formed part of the repayment of

the loan by the appellants to the respondent and not as a coolant to the

respondent for him to extend the contract period.

I am of this finding because as rightly observed by the respondent's

advocate himself, going by the doctrine of a document must speak by

itself; the check of Tshs. 12,000,000/= by the appellants to the

respondent does not indicate or disclose the respondent's version. It is

merely indicated that the appellants were paying the respondent Tshs.
12,000,000/=. As there is no any transaction between the parties but the

loan in question, the check meant nothing but repayment of the loan in

part.

Also, payments which were in cash as per receipts cannot be argued to

be a mere consideration for the extension of a loan period. This is

because they do not speak as such. They are titled 'faida'. As they were

cash payments for unwritten agreement, there was no necessity to issue

the receipts. Receipts meant records of payment. The appellants aver

that they were written 'faidabecause despite the principal loan to indicate

that it was Tshs 30,000,000/= the real loan was only Tshs. 20,000,000/=

and an interest of Tshs 10,000,000/=. Therefore, they decided to start

repaying the interest {faida) and the receipts were to reflect as such for

their official records and or use.

I agree with the appellants to the extent that the cash paid to the

respondent by them was part of the repayment of the principal loan

because its does not click in any mind of a reasonable man that a person

indebted Tshs. 30,000,000/= can pay or initiate payments of a total of

Tshs. 23,000,000/= just as coolant to seek extension of time to repay the

principal sum and remain indebted with the whole advanced amount.

Only clazy people can do that. Nothing on record suggests that the 1st

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Appellant's officers were crazy to such extent, and thus I am entitled to

believe them that they could not execute such unjust agreement

shouldering their office. Otherwise the agreement would be held illegal

for being unfair to one party.

Not only that but also the respondent's averment is not authenticated

anyhow. The contract between them which is subject to this suit do not

bear any clause for its extension and the manner in which extension could

have been sought and granted if need arises. Instead it provides that in

case of any default the lender would be entitled to take legal actions

including selling the mortgaged properties;

'4 Kwamba, endapo mkopaji atashindwa kurejesha mkopo

katika tarehe i/iyokubaliwa katika mkataba huu (i.e. tarehe
11/05/2015) mkopeshaji atakuwa na haki ya kuchukua hatua
za kisheria zaidi ikiwa ni pamoja na kuuza nyumba za
dhamana Hi aweze kukomboa pesa yake pamoja na gharama
zingine zitakazojitokeza'

The extension clause was not there and if in any case the parties thought

it was important to execute onother agreement altering the contract

period, they were obliged to do so in winding as per Edwin Simoni

Mamuya v. Adam Jonas Mbaia (1983) TLR 410 which was also

quoted by the trial tribunal that;

1A
 'Where the contract is in writing its terms can only be varied
in writing'

I therefore find that the Tshs 12,000,000/= was intended to be part

payment of the principal loan and not interest nor a consideration for the

alleged extended period. But since it is in evidence that the check of that

amount was dishonored by the Bank, the amount remained unpaid to the

respondent. I quash therefore the decision of the trial tribunal which

decreed that amount as interest agreed by the parties for extension of

the loan period.

The 3rd and 4th grounds of appeal are all intending to challenge the

decision of the trial tribunal to the effect that it did not consider the

appellants' evidence that they had already paid a total of Tshs

23,000,000/= to the respondent and the only outstanding debt is Tshs

7,000,000/=.

On this the respondent admitted to have been paid only Tshs

7,000,000/=. He stated that a check of Tshs 4,000,000/= and that of

Tshs 12,000,000/= which would make a total payment of Tshs.

23,000,000/= were dishonored. He even though contended that all such

amount was merely consideration for the extension of time as I have

already reflected herein. But I have as were herein above ruled out that

17
the same formed part payment of the principal loan. The question now

is was all these payments effected accordingly?

As earlier on said and according to the evidence on record there is no

doubt that the Tshs. 12,000,000/= were not effected or dully paid. That

Check was not paid. According to the respondent it was due to

insufficient fund in the 1st appellant's account but the check itself does

not bear any endorsement by the bank to that effect. It is like it was

never presented to the bank for payment. The same has even expired

and ca no longer be executed.

About other payments of Tshs. 11,000,000/= (cash payments), the

respondent admitted only Tshs 7,000,000/= stating that the other Tshs.

4,000,000/= was attempted to be paid to him by check which again was

dishonored by the bank.

On my perusal of court records, I have come across with exhibit 'PM'

which are three receipts which were tendered by the respondent himself

to establish that he was paid Tshs. 4,000,000/= Tshs. 4,000,000/= and

Tshs 3,000,000/= whose total is Tshs 11,000,000/=. In his sworn

evidence at the trial at page 10 of the proceedings, the respondent clearly

testified that;

18
 'Your honour there is receipts of respondents (now
appellants) which were being issued to me once they were
paying me so as to continue to extend that time of paying
the loan. I pray to tender it'.

The receipts were then tendered without any objection. Therefore, the

receipts tendered by the respondent were prima-facie evidence that he

received such amount. I thus find that the respondent was paid a total

of Tshs. 11,000,000/= by the appellants as evidenced by his own receipts

and not Tshs. 7,000,000/= as he alleges.

That having so found, it is thus clear that the respondent has already been

paid a total of Tshs 11,000,000/= out of Tshs 30,000,000/= the principal

loan. The outstanding balance of the loan is therefore Tshs 19,000,000/=

only.

The appellants contended that the principal loan camouflaged an interest

of Tshs 10,000,000/=. That might be true as it has on occasions before

this court transpired that parties to loan agreements had camouflaged

interests for the purposes of circumventing the provisions of the Business

Licensing Act and the Banking and Financial Institutions Act supra. This

was clearly seen in the case of Gasto Sabas Nyongo versus Bombo

Johnstone Nyamweru, (PC) Civil Appeal No. 13 of 2020 (HC-

Kigoma) \n which the parties executed a loan'deed of Tshs. 4,530,000/=

19
before Mr. Silvester Damas Sogomba learned advocate with a clause

purporting that;

'Mkopo umeto/ewa Kindungu na hakuna riba itakayotozwa'

On appeal to this court and after I probed the parties revealed the

reality of their loan contract. The respondent (lender) conceded

that the real amount of the loan was only Tshs 1,500,000/= but

they decided to falsify the contract to include interests.

Therefore, the possibilities that the loan in the instant matter was

only Tshs 20,000,000/= but the loan agreement executed at a tune

of Tshs 30,000,000/= to include an agreed interest of Tshs

10,000,000/= in a camouflaged manner cannot be ignored

completely.

But in this suit where the parties are at issue as to whether the loan

included a camouflaged interest and none of them is willing to

disclose the truth and true status of the contract, the court cannot

rely on speculations to decide the matter. The doctrine of a

document must speak by itself would come into play to rescue the

dispute. The contract at hand as herein above quoted is very clear

that it was a loan of Tshs 30,000,000/= free of any interest. I will

stick there as by doing otherwise would amount to nothing other

than speculations which is bad in law as it has been decided in a

number of cases including that of Materu Leison and J. Foya

versus R. Sospeter (1998) TLR102 (HC).

I had also time to rule out in the case of Denis Eiias Nduhiye

versus Lemina Wiibad, Juveviie Civil Appeai No. 1 of 2019

(HC)& Kigoma that;

'Speculative views have no room in Civil trials'

In the final analysis I am of a firm decision that the outstanding

debt is Tshs 19,000,000/= which the appellants should pay to the

respondent within a period of one month from the date of this

judgment.

In the circumstances of this matter as herein above stated the

respondent is also entitled to general damages of Tshs 1,000,000/=

for the breach of contract from the maturity date of the debt on

11/05/2015 to 19/04/2016 when the respondent finally filed the

suit.

That after the expiration of one-month period as herein above

stated, if the appellants won't have paid the outstanding debt

herein above decreed together with the general damages as herein

above decreed, the respondent shall be at liberty to execute the

decree by attachment and sale of the mortgaged properties. Taking

into consideration the circumstances of this case whereas each

party is not real open to what exactly happened between them

necessitating this court to scrutiny the evidence on record party for

and partly against each party, I award no costs to either party.

This appeal is therefore partly allowed to the extent herein above

explained without any costs. Right of further appeal to the Court

of Appeal of Tanzania subject to the requirements of relevant laws

Court: Judgment delivered in chambers in the absence of the appellants

and in the presence of the Respondent and his Advocate Mr. Damas

Sogomba.

Sgd: A. Matuma

Judge

15/03/2021