The High Court has restrained the Ecobank Tanzania Limited from placing into receivership a firm believed to be the main agent of majority of East Africa manufacturing industries, Shana General Store Limited, over a dispute involving 1.5bn/- overdraft.
Judge John Utamwa
In his order dated May 8, 2013, Judge John Utamwa said, “The respondent (Ecobank) and his agents are hereby restrained from further taking receivership or managing or interfering with that applicant (Shana)’s business in any way.”
The judge further directed that the company should be restored into its business ( that is the warehouses, stores and shops located on Plot No. 26 Block G, Market Street in Moshi and on Plot No. 23, Somali Street in the City of Arusha) immediately.
In an advertisement published on May 3, this year, the Bank appointed advocates, Joseph Nuwamanya and Albert Msando of Mawala Advocates, as joint receiver managers of the Company under the term of agreement on a debt dated June 28 and July 18, 2011 and November 16, 2012.
Court documents show that in 2011, the Company secured an overdraft facility with limit of 1.5bn/-. The Company was operating it very well, but could not deposit sales to service the overdraft because the banker had no branches in Arusha where the company’s offices are located.
It is alleged that Shana General Store Limited was directed by the Bank to make the deposits at National Micro-Finance Bank (NMB) at Arusha branches, but the Ecobank received such deposits not on the same day, but after three to five days, thus leading to the interests to accrue.
The Bank had allegedly promised to the Company that it would open branches in Arusha for easy servicing of the facility, but it never lived up to the promise. This forced the Company to instruct Kings Law Chambers to open a suit against the Bank for breach of contract.
“Servicing the facility through NMB caused undue disturbances, difficulties and delays on the plaintiff’s part in honouring this contractual obligation,” reads part of the plaint of the suit.
In good faith in 2012, the Company requested the Bank to change the facility from over draft into loan to be covered in ten years since all the undertakings between the parties were dully secured. To the dismay of the Company, the Bank agreed to the changes but the loan was to be covered for three years only.
“The defendant (Bank)’s conduct has significantly disturbed the plaintiff (Company)’s business and is causing loss,” the plaint of the suit reads. The Company, therefore, demands compensation of 500m/- and for orders that the Bank should change the overdraft facility to loan to be repaid for ten years.
In its defence, apart from raising an objection to the hearing of the suit on grounds that the plaint does not disclose a cause of action against Ecobank Tanzania Limited and the case being reinstated by unauthorised advocate, the Bank disputed the claims of having breached any contract as alleged.
“It is disputed that the defendant at any material time covenanted to open a branch of its bank in Arusha and the plaintiff shall be put to strict proof thereof.
It is disputed that the servicing of the facility through NMB Bank caused any undue difficulty,” states part of the Bank’s written statement of defence.
