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Appeals court rejects ruling in $16 million loan dispute

Dar es Salaam. Tanzania’s Court of Appeal has stayed proceedings in a $16.275 million loan dispute between Equity Bank and three companies (Nas Hauliers, Everest Freight and Tanga Petroleum) due to a discrepancy in the number of claimants listed in the documents of the case.

The discrepancy refers to the difference between the number of plaintiffs in the ruling and those mentioned in the appeal document.

The court raised this issue while hearing an appeal filed by Equity Bank (T) Limited and Equity Bank (K) of Kenya against Nas Hauliers Limited, Everest Freight Limited and Tanga Petroleum.

On appeal, the banks challenged the decision of the Commercial Division of the High Court of Tanzania, which awarded the companies a victory in a dispute over a $16.275 million loan that the banks had allegedly lent but refused to be refunded.

The appeal was scheduled to be heard on Tuesday, April 30, 2024 by a three-judge panel of the Court of Appeal, namely Rehema Mkuye (panel leader), Abraham Mwampashi and Zainabu Muruke.

However, before the appeal hearing began, the Court noted a difference in the number of claimants listed in the appealed judgment and those listed in the appeal brief and grounds of appeal.

This issue was first raised by Justice Muruke in the impugned judgment, which listed a total of five claimants, namely three claimants (the companies) and two respondents, Equity Tanzania and Equity Kenya.

However, it appears from the notice of appeal and the grounds of appeal that there are thirteen plaintiffs, namely two appellants (the capital banks), and eleven defendants, that is, the three companies plus eight other persons (directors of said banks). societies).

These directors are Ally Hemed Said, Ahmed Hemed Said, Bahman Salim Hemed, Idrissa Said Abraham, Issa Mohamed Said, Suleiman Nassoro Mohamed, Samiha Ally Hemed Said and Alexandria Estate Limited, who provided personal guarantees for the disputed loan.

They arose from a counterclaim filed by the banks. In that suit, both were plaintiffs and the companies and their directors were defendants. However, in the judgment, the directors are not mentioned in any of the parties (plaintiffs or defendants), except that within the judgment they are only mentioned as defendants in the counterclaim.

Thus, the judges separately questioned whether these two documents (the notice of appeal and the grounds of appeal) are properly before the court, including persons who are not mentioned in the appealed ruling. “We are at a crossroads as to whether the notice of appeal and the grounds of appeal were presented to the court as they should have been. Therefore, we must deliberate on them,” Justice Mkuye said. Counsel for both parties, Mpaya Kamara and Timon Vitalis representing the appellants (equity banks) and Frank Mwalongo representing the respondents (the borrowing companies and their directors), admitted the discrepancy.

They maintained that this discrepancy may seem minor and has no adverse effects since it does not affect the rights of either party.

“However, if we look at pages 45 and 59 of the judgment, it is clearly indicated that the counterclaims were filed against three defendants (the Nas companies and others) and eight more (the directors),” explained lawyer Kamara.

He stated that there is no defect in the notice of appeal and the grounds of appeal that list the 11 defendants, including the directors of these companies, and if there is an error, it is in the judgment that does not mention the directors in its own handwriting. . “In our opinion, this is a minor error that does not get to the root of the case,” argued lawyer Kamara. He asked the court to apply the principle of not taking into account errors that do not go to the root of the case.

Lawyer Mwalongo argued that as far as the plaintiffs (the directors) are concerned, there is no problem.

“For me I don’t see any problem; It is enough that the sentence mentions them within it,” argued lawyer Mwalongo. He stressed that neither party complains of being affected by this discrepancy as it does not touch on the root of the case. Therefore, he also asked the court to use the same principle to rule out an error that does not go to the root of the matter.

The court is expected to issue a decision on this issue at a date that will be communicated to the plaintiffs once it is ready.

The case in question dates back to 2018, when State Oil obtained a loan of $18.64 million from a foreign lender, Lamar Commodity Trading DMMC of Dubai, guaranteed by Equity Bank Kenya.

According to the ruling, the companies agreed with Equity Bank (K) Limited (EBK) on a standby letter of credit (SBLC/LC). In those agreements dated May 22, 2019, EBK issued the LC to secure loans from a foreign company, Lamar Commodity Trading DMCC in Dubai/Numora Trading PTE Limited. The companies took the loan to repay other debts owed to banks in the country, including Equity Bank (T) Limited (EBT), Amana Bank and UBL Bank Limited, and to raise their capital. The Numora funds, provided by Lamar, were sent to EBK, which in turn sent them to EBT, which was appointed as its agent to hold the securities of these companies.

EBT paid all of the companies’ debts and held their securities, and the remaining funds were disbursed to the companies.

However, the companies later filed a lawsuit against the banks (EBT and EBK), asking, among other things, the court to order EBT to return the movable and immovable securities that EBK had as collateral through the LC to get the loan.

The companies, among other things, claimed that the $16.27 million loan from Lamar/Numora was not guaranteed by EBK, arguing that the letter of credit issued by EBK was defective and that the loan was not registered with the Bank of Tanzania (BoT).

The banks, EBT and EBK also filed counterclaims against the companies and their directors, claiming more than $19 million in loan debt paid by EBK to Lamar/Numora as its guarantor after the companies defaulted on the loan, along with interests.

The banks called six witnesses, including a representative of the BoT, who testified that the loan, repayable in one year, did not need to be registered and that only loans repayable after two years needed registration.

They also called the director of Lamar and the shareholder of Numora (the lender), who testified that they gave the loan to the companies with the guarantee of EBK, and when the companies did not repay the loan, EBK, as guarantor, had to pay.

In a judgment delivered by Justice Deo Nangela on April 19, 2023, among other things, after analysis, he dismissed the banks’ counterclaims, stating that they had not proven their claims.

Instead, he awarded victory to the companies, stating that they had proven their claims.

He declared that the companies had already repaid the loan and that the banks had no claims against them, and ordered the companies to return all securities that EBT held as collateral for the loan, a decision that the banks have appealed.

This is the second appeal by the banks after another by State Oil, which also claimed that the banks guaranteed a loan of $18.6 million, which she repaid, but the banks refused to pay it, and she went to court and He got the victory he had paid for. the loan.