Diana Alex Kajumulo t/a M/S D.K. Agencies Co. vs Exim Bank (Tanzania) Limited (Civil Appeal No. 223 of 2023) [2025] TZCA 987 (23 September 2025)

IN THE COURT OF APPEAL OF TANZANIA AT DODOMA ( CORAM; SEHEL. 3.A.. KHAMIS. J.A.. And FELESHI. JJU CIVIL APPEAL NO. 223 OF 2023 DIANA ALEX KAJUMULO t/a M/S D.K. AGENCIES CO ....................APPELLANT VERSUS EXIM BAK (TANZANIA) LIMITED............................................ RESPONDENT (Appeal from the decision of the High Court of Tanzania, Commercial Division, at Dar es Salaam) (Phillip, Jt) dated the 3r d day of June, 2019 in Commercial Case No. 17 of 2018 JUDGMENT OF THE COURT 26th May, & 23rd September, 2025 SEHEL. J.A.: Exim Bank (Tanzania) Limited, the respondent, instituted a suit against Diana Alex Kajumulo t/a M/S D.K. Agencies Company, the appellant, before the High Court of Tanzania, Commercial Division at Dar es Salaam (the High Court) claiming, inter alia, for a declaratory order that the appellant was indebted to the respondent in the sum of Tanzania Shillings Three Hundred Forty-Six Million Four Hundred Thirty-Six Thousand Three Hundred Seven and Forty Cents only (TZS. 346,436,307.40) being an l

outstanding loaned amount plus accrued interests and other charges thereon as at 31s t March, 2010 and costs of the suit. A brief factual background underlying the present appeal is to the effect that, on 8th May, 2007, the respondent granted the appellant an overdraft facility to the tune of TZS. 50,000,000.00 payable in twelve (12) months period from the date of disbursement which was the 15th May, 2007, exhibit PI. On 7th May, 2008, by mutual agreement between the appellant and the respondent, the overdraft facility was renewed and extended to the tune of TZS. 70,000,000.00, exhibit P2. The said overdraft facility was secured by a mortgage of a right of occupancy, exhibit P3, over a property situated on Plot Nos. 254 and 256 Block "B", registered under a Certificate of Title No. 186306/69, Mikocheni Area, Dar es Salaam, exhibit P4. In 2010, the appellant successfully requested for rescheduling of the overdraft facility, exhibit P5. Therefore, on 2n d November, 2010, the parties signed a fresh letter of offer with Ref. No. OL/WEF/23/2020, exhibit P6. Amongst the terms, the mortgaged house was part of the loan agreement and the overdraft facility was turned into a twenty-four (24) months' term loan payable by 2n d November, 2012. 2

It was alleged by the respondent that the appellant did not honour the terms and conditions of the loan agreement despite her willingness to accommodate the appellant's requests for rescheduling the overdraft facility. That, as up to 23r d July, 2010, the unpaid amount stood at TZS. 124,021,962.75, comprising of the principal amount, interests and other charges. That, she served the appellant with three demand notices but failed to honour the requests. Therefore, the respondent sued the appellant as aforesaid. On the other hand, in her written statement of defence, the appellant did not dispute that she obtained the overdraft facility and the termed loan from the respondent. However, she averred that failure to repay the loan was caused by the world economic crisis as most of her customers were foreigners. She further averred that she notified the respondent on the hardships she encountered and committed herself to remit TZS, 1,000,000.00 per month until her business would stabilize, exhibit Dl, but the respondent did not respond to her request. Nonetheless, she proceeded to remit TZS. 1,000,000.00 per month for six months. It was countered further that the demand notices were served to her with the ill motive of illegally selling her property. 3

After completion for the filing of the pleadings, the case was unsuccessfully mediated. Therefore, the case went for trial. During trial, five issues were framed for the determination by the trial court. One, whether the appellant breached any term of the loan agreement. Two, if the answer to issue number one was in the affirmative, whether the respondent was entitled to enforce the terms of the mortgage between the parties. Three, whether the demand notices issued by the respondent were premature and therefore illegal. Four, whether the appellant was indebted to the respondent and if so, to what extent, and five, what reliefs were the parties entitled to. For the first issue, the High Court observed that, according to the pleadings and evidence adduced by both parties, it was not disputed that the respondent secured an overdraft facility and the term loan. That, although clause 2 (b) (i) of annexure 2 to the letter of offer (exhibit P6) required the appellant to notify the respondent on any likely event that would substantially affect her business, the same did not discharge the appellant from her obligation of paying the outstanding amount. In that respect, it found the appellant was in breach of the term loan. The High Court answered the second issue in favour of the respondent that the mortgage deed was duly signed by the appellant, thus, 4

entitling the bank to enforce her legal rights under the mortgaged deed in order to recover the outstanding loaned amount. In regard to the third issue, the High Court observed that the respondent served the appellant with two demand notices on 27th August, 2010 and on 26th July, 2012 (exhibits P9 & P10 respectively) but the first demand notice was overtaken by events after the parties had signed the letter of offer dated 2n d November, 2010 (exhibit P6) whereby they agreed to reschedule the outstanding amount and the repayment period. Nonetheless, it held that the demand notice of 26th July, 2012 was duly and lawfully served on the appellant upon her failure to repay the agreed monthly instalments. On the fourth issue, the High Court was satisfied with the respondent's bank statement (exhibit P10) that it accurately showed, as of 31s t March, 2015, the outstanding amount was TZS. 346,436,307.00 as pleaded in the plaint and as of 1s t June, 2018, the outstanding amount was TZS. 809,984,043.08. The amounts included the principal, accrued interests and other charges. In the end, the High Court decreed in favour of the respondent that the appellant to pay the respondent TZS. 346,436,307.40 being outstanding loan amount inclusive of interest as at 31s t March, 2015, to pay interest on the decretal sum at a rate of 27% per

annum from 1s t April, 2015 to the date of judgment, to pay court's interest at the rate of 7% per annum from the date of judgment to date of full payment and costs of the suit. In the alternative, the High Court declared that the respondent had a legal right to sale the mortgaged property in case the appellant fails to repay the decreed amount. Aggrieved with the High Court's decision, the appellant lodged the present appeal assailing it on the following five grounds of appeal: " 1) That the trial court erred in iaw and fact by its failure to take into account the appellants testimony to the effects that by remitting the lesser amount to the respondent's bank after requesting for reduction o f monthly remittance was not a breach o f the terms and conditions o f the contract. 2) That the trial court erred in iaw and fact by holding that remedial steps proposed by the appellant to the respondent amounted to the breach o f the contract, 3) That the trial court erred in iaw and fact by its failure to take into account the appellant's evidence to the effect that the respondent's intention was to dispose o f the mortgaged property rather than recovery o f its loan amount 6

4. That the trial court erred in law and fact to award interest to the respondent who was the cause o f ai! the misdeeds.
5. That the trial court erred in iaw and fact to hold as it held." When the appeal was placed before us for hearing, the appellant was represented by Mr. Philemon Mutakyamirwa, learned advocate, whereas, the respondent was represented by Messrs. Elisa Abel Msuya and Sinare Zahran, learned advocates. Both parties filed their written submissions in terms of rule 106 (1) and (7) of the Tanzania Court of Appeal Rules (the Rules), in support of their respective positions. Upon taking the floor to argue the appeal, Mr. Mutakyamirwa adopted the written submissions to form part of his oral submission and collectively highlighted the first, second and third grounds of appeal; the fourth and the additional grounds while the fifth ground was abandoned. On the first, second and third grounds of appeal, Mr. Mutakyamirwa submitted that, as per the principle of the sanctity of the contract which is provided in section 37 (1) of the Law of Contract, the appellant and the respondents were required to perform their respective promises as contained in the loan agreement. He pointed out that, according to clause 7

2 (b) of exhibit P2 which is found at page 232 of the record of appeal, after the appellant had notified the respondent on the problems she was facing, the respondent was required to restructure the loan but instead she wanted to sell the appellant's mortgaged property. Referring us to regulation 7 of the Bank and Financial Institutions (Management of Risks Assets) Regulations 2014, Government Notice No. 287 of 2014 (henceforth "the G.N. No. 287 of 2014"), he contended that the law obliges bankers to address the circumstances faced by the appellant and to restructure the loan facility. He argued that the respondent ignored the appellant's request to remit a monthly amount of TZS. 1,000,000.00 without any justifiable reason and wanted to auction the mortgaged property while there was no breach of contract. He added that the appellant adhered to her contractual obligation because after she had notified the respondent through exhibit Dl, she continued to remit TZS. 1,000,000.00 per month and paid for six months as evidenced by exhibit D2. In the end, he asserted that there was no breach of the terms of contract, and that, the respondent's act was malicious as she wanted to sell the mortgaged property without issuance of the notice of default. 8

Submitting on the fourth and additional grounds of appeal that the awarded interest had no justification, he argued that the accrued interest, if any, was caused by the respondent's failure to honour the appellant's request, and that, it was not clear which interest rate was applied by the High Court in reaching to its decision. Elaborating, he submitted that, according to the terms and conditions of exhibits PI, P2 and P6, the interest of 27% would be chargeable per annum upon default but the High Court did not clarify which interest was applied. Further, he vehemently submitted that the claimed interest rate was contrary to regulation 11 of the G.N, No. 287 of 2014. He stressed that the regulation prohibits charging interest on non-performing loans after the expiry of ninety (90) days. He referred us to exhibit P6 and contended that the loan agreement expired on 2n d November, 2012 and became a non performing loan in February, 2013. He also referred us to exhibit P10, the bank statement tendered by the respondent and argued that the respondent continued to charge interest up to 31s t March, 2015 contrary to the law. In that regard, he submitted that the High Court erred in law in awarding interest on a non-performing loan. On the other hand, the respondent replied to the submission in the same manner as argued by the learned counsel for the appellant. 9

Mr. Zahran responded to the first, second and third grounds of appeal. He submitted that the appellant admitted to the respondent's claim. First, in her written statement of defence, secondly, during cross examination and lastly in the final submission that she concluded two facilities and a term loan agreement with the respondent, as per exhibits PI, P2 & P6. That, the initial overdraft facility agreement, exhibit PI, was renewed and extended for another period of twelve (12) months. The extended period is reflected in the exhibit P2 which also extended the overdraft from TZS. 50,000,000.00 to TZS. 70,000,000.00. Despite the extension, the appellant defaulted to honour her obligation. She thus requested for restructuring of the overdraft facility which request was accepted. Therefore, the overdraft facility was restructured to a term loan to be repaid within twenty- four (24) months, exhibit P6. Yet again, the appellant defaulted while associating the default with a world economic crisis. He asserted that, following the appellant's default, the respondent legally wanted to enforce her contractual rights by selling the mortgaged property in order to recover the loaned amount. Given the scenario, he argued that the High Court was justified in holding that the appellant breached the terms of the loan agreement. 10

Further, Mr. Zahran pointed out that, according to paragraph 3 of the plaint, the respondent claimed for payment of the outstanding amount inclusive of penal interests which, as of 31s t March, 2015, was TZS. 346,436,307.40 as reflected in the bank statement of the appellant's account, exhibit P10. In that respect, he argued that the amount claimed by the respondent arose from the loaned amount and accrued interests as such the High Court did not err in entering judgment against the appellant who had admitted to the claims. Concerning regulations 7 and 11 of the G.N. No. 287 of 2014, M r. Zahran argued that the issue was neither raised nor dealt with by the High Court. In any event, he argued that regulation 11 of G.N. No. 287 of 2014 deals with classification of debts and it does not prohibit banks to charge interests on loans. He further argued that there is no law which bars the bank to charge interest on the outstanding loan. M r. Msuya responded to the fourth and additional grounds of appeal that faulted the High Court in awarding interest of 27%. He submitted that the awarded interest was contractual as it is stipulated in all the agreements, exhibits PI, P2 and P6 that in case of default, the respondent would charge a penalty interest of 27% per annum per instalments and/ or interest. He asserted that the appellant was bound to pay the penal

interest which she freely entered. Therefore, she was bound by the agreement and the High Court was right in awarding the respondent the contractual interest. In rejoinder, Mr. Mutakyamirwa conceded that the appellant admitted to the respondents' claims but he added that the admission was unqualified as the appellant requested for rescheduling of the loan payment and had been paying TZS. 1,000,000.00 per month. Regarding interests, he reiterated his earlier submission that the loan became non-performing which was not supposed to be charged interest as per regulations 7 and 11 of the G.N. No. 287 of 2014. Having heard the competing arguments from the counsel for the parties, we wish to put it clear that we shall determine the grounds of appeal in the same manner argued by the counsel for the parties. The issues which arose from the parties' submissions in regard to the first, second and third grounds of appeal, are in twofold. One, whether the High Court erred in finding the appellant in breach of the term loan agreement, and two, whether the loan was non-performing loan. This last issue will be discussed after the fourth and additional grounds of appeal as it also touches on them. 12

The first issue is purely factual and invites us to revisit the evidence presented before the High Court by the parties. This being a first appeal which is in the form of rehearing, in terms of rule 36 (1) (a) of the Rules, we are entitled to subject the evidence on record to an exhaustive scrutiny and draw our own conclusion on the appeal while in mind that the trial court had an advantage of seeing, observing and assessing the demeanour of the witnesses - see: the cases of, Peters v. Sunday Post [1958] E.A 424 and Jamal A. Tamim v. Felix Francis Mkosamali & Another (Civil Appeal No. 110 of 2012) [2013] TZCA 342. As stated earlier on, the respondent alleged in her plaint that the appellant took an overdraft facility of TZS. 50,000,000.00 which was later renewed and extended to TZS. 70,000,000.00. However, she defaulted to service it. Therefore, she requested for its restructuring. Her request was accepted resulting into restructuring of the overdraft facility to a term loan and extended the repayment period from twelve (12) months to twenty- four (24) months. On the other hand, the appellant did not dispute the respondent's claim. In her written statement of defence, she admitted that she failed to service the loan but associated her failure with the world economic crisis, 13

This is reflected at paragraph 5 of her written statement of defence which reads: "5. However, the setback o f the repayment o f the loan facility was caused by the world economic misery, o f which most o f the defendants customers are foreigners and the plaintiff was accordingly informed o f such setback and the defendant committed herseif to the plaintiff to start remitting the sum o f Tanzanian Shillings One Million per month until the stability o f the world economy under which she did...." Further, the appellant who testified as DWI admitted in her witness statement that she was indebted to the respondent but requested the High Court to allow her to repay the loaned amount into three instalments. Specifically, she testified in paragraph 7 of her witness statement that: "... I pray for the indulgence o f this court that the interests be reduced and let me be allowed to repay the principal loan monies on three instalments commencing from September 2018 and thereafter let the accrued and agreeable interest be rescheduled into loan monies under which I would be allowed to remit the monthly payment" 14

Yet again, when she was cross examined by the counsel for the respondent, she agreed to be in default. She responded as follows: "It is true, I failed to pay the ban as per scheduled plan. As per the agreement, I agree that I breached the contract agreement." From the above pieces of evidence, the appellant did not deny the claim but requested the High Court to reschedule the loan agreement that was freely concluded by her and the respondent. The High Court declined the invitation as it found the appellant was still indebted to the respondent. As such, it ordered her to pay the principal sum plus all penalties and interests accrued from the loaned amount. Among the cherished fundamental principles of law of contract, which is constantly being emphasized by this Court, is that, neither a third party nor any courts of law can interpolate or temper with the terms and conditions of the legally sound contractual agreement which the competent parties, for a lawful consideration with a lawful object, have freely entered into. Such an agreement becomes sacrosanct to the parties- see the cases of Unilever Tanzania Ltd v. Benedict Mkasa t/a Bema Enterprises (Civil Appeal No. 41 of 2009) [2009] TZCA 24, Miriam E. Maro vs. Bank of Tanzania (Civil appeal No. 22 of 2017) [2020] TZCA 1789 and Philipo 15

Joseph Lukonde v. Faraji Ally Saidi (Civil Appeal No. 74 of 2019) [2020] TZCA 1779. For instance, in the case of Unilever Tanzania v. Benedict Mkasa t/a Bema Enterprises (supra), the Court underscored that: "Strictly speakingunder our laws, once parties have freely agreed on their contractual clauses• , it would not be open for the courts to change those clauses which parties have agreed between themselves. It was up to the parties concerned to renegotiate and to freely rectify clauses which parties find to be onerous. It is not the role of the courts to re-draft clauses In agreements but to enforce those clauses where parties are in dispute. "[Emphasis added] In the same vein, given the appellant's admission, we are satisfied that the High Court correctly found the appellant was indebted to the respondent and had to enforce the terms and conditions contained in exhibit P6. It could not have gone outside the parties' contractual agreement. Accordingly, we find the first, second, and third grounds of appeal lack merit. We now turn to the fourth and additional grounds of appeal that the award of 27% interest on special damages was wrongly awarded. The law 16

is settled that the trial court has discretion to award interest for the period prior to the suit only if it is provided under an agreement, that is, contractually provided for payment of rate of interest, or where there is no stipulation, the interest rate is allowable by mercantile usage (this must be pleaded and proved) or it is a statutory right, or payment of it can be implied from the course of dealing between parties - see the cases of Highway Furniture Mart Limited v. The Permanent Secretary & Another [2006] 2 E.A. 94 and National Insurance Corporation (T) Limited v. China Civil Engineering Construction Corporation (Civil Appeal No. 119 of 2004) [2010] TZCA 4. In the latter case, this Court stated that: "... as a matter o f substantive iaw, interest for the period prior to the date of the suit may be awarded if there is agreement, express or implied for payment o f such interest, or it is payable by the usage o f trade (see for example, Hariiai & Co. and Another v. The Standard Bank Ltd. [1967] EA. 512, 516-517) or provided for under a statutory provision o f the law entitling the plaintiff to recover interest, or arises out o f a rule o f equity..." In the appeal before us, the interest of 27% per annum was clearly provided for in exhibit P6 and the respondent claimed and prayed for its 17

payment. Further, the appellant did not dispute the fact that interest of 27% was provided for in the loan agreement. She only sought for adjustment of its payment. In that respect, we find that the High Court correctly awarded the contractual interest of 27% per annum. The fourth and additional grounds of appeal are also without merit We dismiss them. Lastly, we briefly wish to address the issue whether the loan was non-performing and whether the respondent was not entitled to claim for interest. On this issue, Mr. Mutakyamirwa referred us to regulations 7 and 11 of the G.N. No. 287 of 2014 to assert that the loan was non-performing, thus, the High Court erred in awarding interest. We have revisited the law and observed that the regulations were promulgated specifically to empower the Bank of Tanzania to regulate and supervise banks and financial institutions, with the objective of maintaining the stability, safety, and soundness of the financial system, and thereby mitigating the risk of loss to depositors. This is clearly provided for in regulation 2 of the G.N. No. 287 of 2014. We are therefore satisfied regulations 7 and 11 of G.N. No. 287 of 2014 were not intended to govern the relationship between bankers and their customers. In that respect, we find that the submission made to us by Mr. Mutakyamirwa was misplaced and we proceed to dismiss it. 18

In the result and for all the above reasons, we find the appeal is without merit and it is hereby dismissed with costs. DATED at DODOMA this 23r d day of September, 2025. B. M. A. SEHEL JUSTICE OF APPEAL A. S. KHAMIS JUSTICE OF APPEAL E. M. FELESHI JUSTICE OF APPEAL The Judgment delivered this 23th day of September, 2025 in the presence of Mr. Philemon Mutakyamirwa for the Appellant and Mr. Sinare Zahran for the Respondent, both through virtual Court and Jasmin Kazi, Court Clerk; is hereby certified as a true copy of the original. 19