Fahari Bottlers Limited vs Registrar of Companies and NBC (1997)Limited and Other Objectors (Misc. Civil Cause 155 of 1998) [1999] TZHC 24 (20 September 1999)

i n m i . m e n con n o f T a n z a n i a (DAR ES SALAAM DISTRICT REGISTRY) A ! P A R ES SALAAM MISCELLANEOUS CIVIL CAUSE NO. 155 OF 1998 (CONSOLIDATED WITH MISC. CIVIL CAUSES NOS. 146, 147,148, 149, 150, 151, 152, 153, AND 154 BY O R D ER OF H I E C O U RT DATED 16TII JULY, 1999| IN THE M ATTER OF THE COM PANIES ORDINANCE AND IN THE M ATTER OF FAHARI BOTTLERS LIMITED BETWEEN FAHARI BOTTLERS LIMITED ....... APPLICANT/PETITIONER AND THE REGISTRAR OF C O M P A N IE S ....................RESPONDENT AND NBC (1997) LIMITED AND O T H E R S ................OBJECTORS. R U L I N G A group o f 10 associated Companies has presented itself before this court segmented into ten (10) simultaneous winding up petitions. These sister Companies are Ziggi Bottlers Ltd, Kiiima Bottlers Ltd, M wanza Bottling Company Ltd, Ruaha Bottling Co. Ltd, Shinyanga Bottlers Ltd, Serengeti Beverages Ltd, West Lake Bottlers Ltd, Fahari Fruit Products Ltd, Southern Higland Bottlers Ltd and Fahari Bottlers Ltd. The petitions were assigned Nos. 146/98, 147/98, 148/98, 149/98, 150/98, 151/98, 152/98, 153/98, 154/98, and 155/98 respectively. Prayers sought in all the petitions are similar in terms. Simultaneous with the winding up petitions the petitioners, by way o f chamber summons supported by affidavits o f their respective Directors, have applied for appointment o f Provisional Liquidators. As is the case with the Petitions for winding up, the prayers in this aspect are the same and on similar terms. In order to appreciate their import 1 herebelow reproduce them as they appear in one o f the petitions:- “1. That the court exercise its discretion under S. 183(1) o f the Companies Ordinance, Cap 212 ( “Cap 2 1 2 ” or “the Ordinance) and

Rule 31(1) o f the W inding Up Rules, (1929) (Imperial) ('‘Winding Up R u les”) an d appoints: a) M ark Danlti liontani o f Iiom ani & Co., Peugeot House, 39 Upanga Road, P.O .Box 740, 1)AR E SSA L A A M ; b) P aul H ow ard Finn, FCA o f Finn Associates, tem ple Chambers, Temple Avenue, London E C 4Y ODT., and Peugeot House, 39 Upanga Road, c/o P.O .B ox 740, D A R E S SALAAM ; c) Kevin A nthony Murphy, CA o f Finn Associates Temple chambers, Temple Avenue, London E C 4Y ()I)T., and Peugeot House, 39 Upanga Road, c/o P.O. Box 740, 1)AR ES SALAAM. as Provisional Liquidators o f the company with further Order that:

• they shall take possession of all the fixed and current assets of the company, whether of a tangible or intangible nature;
• they shall act with the powers conferred by S.190(l)(a) - (f) and 190(2)(a)- (h) of the said Ordinance;
• within four weeks (or such other period as the Court may direct) they prepare a Scheme of Arrangement and make application to the court u n d e rs.l5 4 (l) of the said Ordinance for the purpose of convening a meeting of the company's Creditors to consider and vote upon the Scheme;
• for the purpose of S.187(4) of the said Ordinance they shall act jointly and severally in all matters;
• their remuneration be determined by reference to S. 187(2) of the said Ordinance n( the rale of 12.5% o f gross rcalisntions(or at any other rate ns the Court shall deem fit) to be divided by agreement between them;
• the costs of appointing an advocate under the provisions of S. 190( 1)(c) or agents under the provisions of S .190(1) (g) of the said Ordinance be defrayed from the assets within the hands of the Provisional Liquidators;
• the cost o f providing any security as may be determined by the Court

under (lie provisions of S. 184(e) of (lie said Ordinance he defrayed from Ilie assets within the hands of the Provisional Liquidators;

• That, pursuant to s.171 of the Ordinance, the proceedings in any suit, application, case, petition, or matter pending in this court or in any oilier subordinate court or tribunal be stayed pending the Order for winding up the company or further Order;
• That, pursuant to S.170(l), the hearing of the petition be adjourned to a date to be fixed following the meeting of the company’s creditors to vote upon the proposed scheme of arrangement.

2. That the costs o f this application he defrayed from the assets o j the Company.
3. That such other Order he m ade in the prem ises as the court shall deem to he ju s t and thinks fit. “ As the petitions and chamber summons are hinged on similar and same terms, for convenience and avoidance o f duplication, with consent o f the Court, the Counsel struck a compromise to the effect that the various petitions should be consolidated and argued together in Misc. Civil Cause No. 155 o f 1998 hence the presence o f proceedings leading to this ruling in the said record. Arguments w ere made by way o f written submissions. All the petitioners were advocated by Uric N g’amaryo while the Respondents/objectors had services o f various respective Counsel as follows - Capt. Kameja for NBC (1997) Ltd, Dr. Sinare for TRUST BANK, M wandambo for TIB, Rwebangira (Ms) for KIOO Ltd, Dr. Tenga for CO NTING EN T CREDITORS (Girish T. Chande, Ashok T. Chande, Ravi T. Chande, J.V. Textiles & Garments Ltd and M /S Juthalal Vesji Ltd), M biro for GROW N CORK COM PANY (EA ST AFRICA) LIM ITED , Mujulizi for STANBIC BANK (T) LTD and M &M COM M UNICATIONS LTD One last objector, ABD1LLAII M IKIDADI appeared on his own.

In their counter affidavits the objectors except KIOO LTD which also has a preliminary objection specifically directed to Fahari Bottlers Ltd and insists on winding up, do not object to the appointment o f Provisional Liquidators. Again, except KIOO Ltd which supports one KEVIN M URPHY all objectors object to the trio proposed by petitioners for appointment as Provisional Liquidators because o f conflict o f interests - FINN and M U R PllY because they allegedly participated in the proposed restructuring scheme while BOMANI has been acting for the ‘Fahari gro u p ’ including provision of services by his chambers to the petitioners. Not only that but also they all object to the proposed powers and duties o f the Provisional Liquidators. All except NBC (1997) Ltd are opposed to the proposed scheme o f arrangement - restructuring. T hey insist that the Provisional Liquidators to be appointed should be for the purposes o f maintaining the status quo, fully investigating the affairs o f the relevant Companies, compilation o f list o f creditors, collection, prossession, and preservation o f the properties till the winding up order. NBC (1997) Ltd on the other hand agrees on the making o f a scheme o f Arrangement; agrees on the appointment o f the Provisional Liquidators but differs with Petitioners on the proposed trio and the powers to be conferred on w hoever is appointed. While insisting on winding up, STANBIC and M & M feel that “reconstruction” or “re organisation” could be one o f the options to be adopted by liquidators with approval o f creditors and the C ourt but that not on term s as proposed. Objectors also, object to the proposed 12 1/2 % o f gross realisation as remuneration to Provisional Liquidators suggesting less instead and fair amount ranging from unspecificity to 5%; propose Joseph W arioba as Provisional Liquidator, and call for rejection o f the original Provisional Liquidator’s Report. Just to clarify on the last issue o f the “original Provisional Liquidator’s R eport”, I should point out at this point that this was the report compiled by Provisional Liquidators so appointed by this C ourt when the present Petitions were filed. Following wanting and conflicting orders and decisions by different judges in these petitions and in Civil Case No. 9 o f 1998 the Court o f Appeal, suo motu, opened revision proceedings vide Civil

Revision No. 1 o f 1999 in which, among others, it was ordered “the proceedings for appointment o f Provisional Liquidators be and are quashed” . By then however the Provisional Liquidators appointed and charged with the duty o f restructuring had already commenced their work and the report which had already been compiled is the one being referred to. With that let us now turn to the submissions. Mr. N g’amaryo for Petitioners, painstakingly and in a length submission argued on what can be summarised as follows (for ease o f reference I will adopt the paragraphs and entitling he designed): (A) that PROVISIONAL LIQUIDA TION PRO CED URE IS ESSENTIAL TO FACILITATE THE RESTRU CTU RING PRO CESS O F THE 10 PETITIO N IN G COM PANIES

• that the “winding up order’’ was not the intention nor the contem plation o f the petitioners at this stage hut were fo rc e d to seek protection o f this process because, legally, Provisional Liquidators cannot he appointed under S. 183 o f the Companies Ordinance unless a winding Petition is filed.
• the three proposed liquidators sh ould be accepted because, (a) Only seven out o f the 10 petitioning Companies have persons objecting (b) Only 32% (8 persons) out o f 26 who f ile d Notices to appear p u t up an objection (c) Creditors who never objected or file d notices to appear are in excess o f 100, the vast majority, hence the m inority which objects is ju s t less than 10% o f the creditors

there is “overwhelm ing need to proceed with the restructuring process in order to m axim ise the realization for the benefit o f all the creditors o f the ten Companies an d therefore facilitating the recapitalisation process o f the Pepsi Cola Business in Tanzania, with the consequential benefits also to the workers and the nation ”

• D etailing why he is urging f o r restructuring, Mr. N g ’am aryo insists that : reasonably, every creditor is concerned with recovery o f its debt. : only restructuring can provide short term and opportunity to creditor to collect all or p a rt o f its debt fro m an insolvent Company : Pursuing a winding order and f u ll liquidation which results into no realization whatsoever is unreasonable : M acro-econom ic benefits w ould include “ (i) The p roject revenue generation f o r the period 1999 to 2003 is Sits. 35 Billion. (ii) M ajor Tanzania suppliers o f goods and services will get business worth over Sits. 2fi Billion between 1999 - 2003. (The will pay taxes including VAT). (iii) 25,000 retailers w ill m ake a gross profit o f Shs.33 Billion during the p erio d 1999 - 2003 front sale o f Pepsi-Cola products. (They will pay taxes including VAT to the Government). (iv) The overall benefit to the econom y fro m the above 3 sources is Shs. 96 Billion over the next 5 years. (v) Direct and indirect em ploym ent w ill be created fo r 9000 workers.

(vi) Competition - resulting in lower prices, better quality and m ore advertising an d prom otion - including sponsorships o f sports, leisure and cultural activities in Tanzania. (vii) The consum ers and custom ers will benefit by com petition between two w orld class brands. The court m ay be aware fro m the press o f the historically unprecedented drop o f the Pepsi Cola prices by 25% fo llo w ed by other too. (viii) Inw ard Investm ent o f over 20 million US Dollars. (be) Im proved prospects o f realisation and dividends by unsecured creditors”.

• that under the restructuring process the Provisional Liquidators will within fo u r weeks o f their appointm ent prepare a schem e o f Arrangem ent, m ake an application to the Court under s. 154 o f cap 212 f o r the purposes o f convening a m eeting o f the P etition er’s / creditors to consider an d vote on that schem e as well as any other m atter brought up and\or arising as a result o f the enquiries conducted by the Provisional Liquidators, that i f approved the schem e would be presen ted to the Court f o r approval or variation after which, the role o f “the Provisional Liquidators as ‘M idw ives’ o f the restructing and recapitalization lapses ”, that i f this fa ils the petitions f o r winding up will be activated. Mr. N g ’am aryo vehem ently m aintains that under this process “there is no p o ssib ility .. o f any law ful rights o f the creditors as a body, an d individually (including the objectors) being tram pled upon in an yw ay”, an d that it is the creditors collectively who know and should fin a lly decide exactly what is best f o r them an d what is a m ere sham.

He concluded by stating that the application and proposition is fa ir, ju s t and equitable to all the creditors as a body". (li) RESTRUCTURING IS ESSENTIAL AN D IND ISPEN SABLE CONDITION PRECE D EN T TO TIIE RECAPITALIZA TION OE THE PEPSI COLA BU SIN ESS IN TANZANIA

• that the restructuring process leading to recapitalization is to enable a prospective investor “led by a South African based Company called International Pepsi-Cola Bottlers Investment L im ited (IPCBIL) with the support o f Pepsi-Cola International, who are shareholders in IPC HU. and are also Franchisers o f all the Pepsi-Cola Carbonated soft drinks bottled in Tanzania, to recapitalize the Pepsi-Cola business presently run by their Franchisee, nam ely Fahari Beverages L td ”

• that the Court should note F in n ’s report which shows that the M axim um realization to N B C (1997) L td is only 2 .3 7 M illion U.S dollars at 30th April, 1998.

• that that fig u re should now be less due to escalating an d continuing costs, losses, claim s m ade (i.e. Civil Case No. 98/98 and 42/99) and poten tial claim s including, another fa c to r that is, paym ents due to preferential creditors i.e. Tanzania Revenue Authority and term inal benefits o f the Employees,

• that “. ......... in liquidation and auctioning the rem aining assets, there w ill be no realisation whatsoever f o r any unsecured creditors and som e objectors w ill also fa c e the prospects o f claims and suits sim ilar” to those fa cin g N B C (1997) L td (C) THE QUESTION OF THE APPO IN TM E N T OF PA UL HOW ARD F IN N AN D KEV IN A N TH O N Y M U R P H I A S PRO VISION A L LIQUIDA TORS is RES JUDICA TA

• that the Court o f A ppeal decided that the appointm ent o j the two Provisional Liquidators was proper as there ^vas no conjlict o f interests an d that the “M atter therefore ought to and m ust rest. N o one can or should bring it up again unless, and i f so, only through fu rth er revisional proceedings in the Court o f A p p ea l”. (D) THE PRO PO SED A PP O IN TM E N T OF MR. RO M AN I A S PROVISIONAL LIQ UID ATOR CAN NO T BE FAULTED

• that Bom ani is em inently qualified and a man whose standing, calibre cannot com prom ise his integrity and that consenting to the use o f his cham bers by creditors an d interested persons when contacting P etitioners’ advocates do n ot m ake him partisan or agent o f addressees in the sam eway the Court whose registries are used to clear various correspondences between opposite parties do not carry that negativity. (E) THERE IS N O APPLICA TION BEFO RE THE CO U RT FOR THE A P P O IN T M E N T O F MR. JO SEPH SIN D E WARIOBA A S PROVISIONAL LIQUID A TOR OR EVIDENCE A S TO HIS QUALIFICATION S A N D PRO FESSIO N AL EXPERTISE

• that Warioba cannot be appointed a Provisional Liquidator as there is no cham ber application supported by an affidavit to that effect in terms o f Rule 8 (2) o f THE WINDING UP RULES, (1929) (IMPERIAL) (W INDING UP RULES) and as elucidated by the Court o f A ppeal in Civil Revision No. 1/99; that in any case objectors have not provided his qualifications an d expertise let alone a defect apparent in the purported consent which reveals jttt irrelevant com pany “J V Group o f Companies L td ”

(F) THE REM U N ERATIO N O F THE PRO POSED PROVISIONAL LIQ U ID ATO RS IS FAIR AN D REASO NABLE

• that the 12 1/2% o f the gross realization in reference to s. 187 (2) o f C AP 212 is neither unreasonable nor unfair considering, the “enorm ity and com plexity o f the task o f the provision al liquidators as exem plified by the volum e o f the interim report subm itted by the previously appointed liquidators, and activities to he covered which are far-flu n g and over the whole country and specifically considering “the added difficulty in transport and electronic com m unication between the Com panies , the rudim entary and m anual record keeping and the relatively short tim e required to com plete their ...task ” I (G) THE C O U R T SH O U LD SE E ULTERIOR M O T IV E IN THE E F F O R T B Y A H AN D FUL O F CRED ITO RS TO O PPO SE AN D FRUSTRA TE THE RESTRU CTU RIN G PRO CESS AN D REC A PITA LIZA TIO N O F THE PEPSI-COLA BU SIN ESS IN TANZANIA. THE SAID H AN DFUL O F CREDITORS SE E M TO BE A L L M A K IN G A JO IN T EFFOR T TO DO SO.

• that the various affidavits o f creditors and guarantors seem to com plim ent each other, that som e creditors appear prepared to write o ff their debt albeit jeopardizin g other creditors’ changes o f recovery as well as kill the Pepsi-C ola business in Tanzania

• that the self-injurious a n d unreasonable efforts by the objectors in blocking gen u in e an d fru itfu l efforts by Petitioners seeking Courts assistance in restructuring should be seen as aim ing at boosting Coca- \ Cola Business in Tanzania (H) FOR C R E D lT m S TO A D D R E SS THIS C O U R T IN O PPO SITIO N O F TJIIS A PPL1CA TION, PR O O F O F DEB T M U S T HA VE B E E N S U B M IT T E D •

• that the 9 Creditors should have proved their debts; “They m ust have p roved th a t ..... Applicants/Petitioners owe them the sum s they have indicated in the Counter affidavits. The onus and responsibility fa lls on them to do so, som eone cannot sim ply appear an d say I am a creditor, produce no evidence and expect to be heard by the Court. ”

• Regarding the contingent “creditors they should have adduced evidence o f the existence o f the loans and guarantees.

• that none o f these has a locus standi I. THE R E P O R T O F TIIE INITIAL PRO VISIO NAL LIQUIDA TORS A N D THEIR WORK SO FAR D ON E SH O U LD N O T B E WASTED

• that the interim report relates to a task alm ost h a lf way through and the sam e should be adopted in order to allow com pletion o f the task within the contem plated tim e fra m e and save effort and expenses so f a r injected therein.

• that this w ill have sense i f Finn and M urphy in conjunction with B om ani w ill be allow ed to com plete the task fro m where they left o f f because otherwise it w ill be to “reinvent the w h eel” i f new Provisional Liquidators are appointed'. J. P O W E R S O F THE PROVISIO NAL IJQ U ID A TORS SH O U LD N O T B E LIM ITED (this was not so fra m e d by Mr. N g ’antaryo as he p u t it under item (a) above, but considering its im portance in the dispute I have deem ed it p roper to give it a separate title)

• that though pow ers o f Provisional Liquidators are not specifically spelt out under the cap 212 the said CA P ju xtaposes provisions relating to Liquidators with those relating to Provisional Liquidators in several sections including ss. 176, 180 (1), 184 , 186 (5) proviso, 186 (6), 188 thus leading one to reasonably conclude that the sam e pow ers required

by a L iquidator are needed by a Provisional Liquidator albeit f o r a specific period

• that less pow ers than those ashed f o r will delay the process as the Provisional Liquidators w ill have to constantly seek specific Court orders to enable them carry out their duties and obligations responsibly
• that as much as the Court m ay lim it and restruct the Provisional L iquidator’s pow ers under s. 182 (2) CAP 212 or Liquidators powers under s. 190 so also it is a natural inference that the Court has pow er to give other or additional specific pow ers to Provisional Liquidators as circum stances o f the case m ay require.
• that it is unim aginable that Provisional Liquidators cannot have pow ers to “spearhead” restructuring process but at the sam etim e have pow ers to investigate, collect, p resen ’e assets, prepare statem ent o f affairs an d related
• that “pow ers and order less than those prayed for, particularly pow ers as m eagre as those proposed by objectors will delay the efforts, the process, ham string the Provisional Liquidators and frustrate the restructuring process ”. The above is a summary o f a very lengthy submission by Mr. N g ’amaryo. This attracted a formidable joint counter by the objectors. As they are all launched on the same vein, and being almost similar in substance, I will summarise them jointly and together save for limited areas where they part, in which case, I will deal with those elements separately. I will start with M s Rw ebangira’s submission on preliminary objection. Ms Rwebangira has raised a preliminary objection to the effect that the Petition in respect o f Fahari Bottlers Ltd was presented in bad faith and should be stayed pending hearing and determination o f legal issues as follows -

(i) “ Whether a com pany which is under com pulsory winding up proceedings by a Creditor, enters into a settlem ent agreem ent under which it prom ises to p a y a com prom ise am ount an d thereby persuades the Creditor an d the Court to mark the m atter as settled and, as a result o f which issue a decree but soon thereafter and, without paying the said com prom ise am ount thereto, fraudulently, and/or in an attem pt to avoid liability under the decree is entitled to proceed, to a “voluntary ” Winding Up on grounds o f alleged insolvency or restructuring or lias to show “d e a n h a n d s” before it can be heard. (it) In what circum stances would a Petitioner be allow ed to defeat the rights o f a decree holder, when such ju d g em en t h ad been entered with the consent o f the Petitioner, fu lly aware o f its alleged insolvency but not disclosed to the decree holder? (Hi) W hether a com pany which goes into liquidation im m ediately after it has agreed to settle pa rt o f a debt in a com prom ise and has not p a id that com prom ise am ount did so fraudu len tly or n o t . (iv) W hether a com pany which transfers its assets (and business) to another com pany without transferring its liabilities with the said assets an d im m ediately petitions f o r Voluntary Winding Up, that com pany to which the assets were transferred should not be wound up or at least the assets so transferred be brought into the liquidation process. Facts leading to this objection include the following - In Misc. Civil Cause No. 133/98 filed on 5/8/98 Kioo Ltd petitioned for the winding up o f Fahari Bottlers Ltd. Before the petition could be heard, precisely on 15/8/98, parties entered into an agreement which was recorded by the C ourt on 19/8/98. The terms were as follows.

1. Fahari Bottlers Ltd to pay a sum of Tsh.225/- Million to Kioo Ltd towards settlement of its claim within 55 days from the date of this agreement provided the investment was in place by then.
2. If as a result of investment into Fahari or reconstruction it was able to pay Kioo 1,1(1 > i further sum towards full settlement of the claim, it would do so. If not the sum p a i d ........... shall be the full agreed settlement.
3. Kioo agreed to withdraw the petition (also consent to lifting of the injuction) and defer further steps in the action for a period of 60 days from the date hereof. If during this period, as a result of investment into Fahari or reconstruction, Fahari took any steps such as transfer of assets or formed a joint venture, Fahari undertook not to prejudice Kioo’s rights under their claim. Fahari further undertook to inform Kioo in writing within one week o f any such step which may have been taken which could prejudice Kioo’s rights. This persuaded Kioo Ltd to apply to the C ourt to mark the m atter as settled which prayer was granted accordingly. According to Mrs Rwebangira, the Fahari Bottlers Ltd had a hidden agenda, for, “ Surprisingly on the same day of 19th August, 1998 the Petitioner entered its own resolution for Voluntary Winding up and filed petition for Voluntary Winding up on the next day”, and the assets were “hived-down” to a newly formed Company - Fahari Beverages Ltd. Mrs. Rwebangira argues, “ the Petitioner deliberately misled the creditor and the court into settlement simply to get the Creditor’s petition off the court record so that it could present its own and seek winding up or its so called “reconstruction”/

“restructuring” under its own terms. We submit that this was fraud. I he Petitioner concealed the fact that its current investment and assets could not meet the initial sum of Shs.225,000,000. It also concealed the fact that it was about to make it impossible for Kioo Ltd as decree holder to execute the decree” or “take further steps” to recover the decretal amount by reason of its new Petition. This concealment of material facts directly relevant to the agreement, settlement and consent to the lifting of the injuction amounted to fraud and we pray that its petition should not be allowed to stand”. In response to this, Mr. N g’amaryo, citing Mukisa Biscuit manufacturing Co. Ltd v West End Distributors Ltd (1969) EA 696 argued that the above cannot be a preliminary objection known in law as it contains facts which have to be proved (and not points o f law); that even if it is one it has been raised prematurely as what is before the Court now is an application to appoint Provisional Liquidators and not the hearing o f the Petition. With respect to M rs.Rwebangira 1 am on all fours with Mr. N g’amaryo that this is not a preliminary objection known in law. Authorities on what is a preliminary objection abound and the authority cited above summarises what the legal stand is. As was observed by, Law, J.A, at page 700 o f the cited Report, “ ..... So far as I am aware a preliminary objection consists of a point of law which has been pleaded, or which arises by clear implication out of the pleadings, and which if argued as a preliminary point may dispose of the suit. Examples are an objection to the jurisdiction of the court, or a plea of limitation, or a submission that the parties are bound by the contract giving rise to the suit to refer the dispute to arbitration....” While I dont agree will Mr. N g’amaryo in his arguments that the debt o f Shs.225,000,000 due to Fahari Bottlers was not proved and that the “settlement agreement alleged must be

proved”, for, the decree on record speaks for itself and he would surprise the world if he pretends ignorance o f the same when he was a participant thereto, 1 cannot associate myself with an argument by M rs Rwebangira that the existence o f that liability is a point o f law which should bar the filing o f a Petition for winding up as was the case here. I am pursuaded, without prejudice to subsequent decisions on the matter, that on the facts at hand, Fahari Bottlers L td’s acts are very very suspicious - offering debt settlement terms today only to file a Petition for winding up tom orrow, and even then without notifying the party you struck the agreement with, when the terms o f the said agreement so provide, and not only that but also going further to transfer the assets excluding liabilities to another newly formed Company cannot be compatible with honesty, genuiness or faithfulness. There is something very wanting if not fishy. But that is the maximum we can comment at this point. M rs Rw ebangira’s arguments are relevant when it comes to the hearing o f the Petition. Those are strong and relevant points that can be fronted to convince the C ourt that the petition for winding up should not be granted. Even then they cannot even be raised as preliminary objection for they don’t legally qualify. There is no unlawfulness or illegality in the filing o f the Petition. Mrs Rwebangira cannot be heard to say “this petition was unlawfully filed” or “this petition is illegally before the C ourt.” W hat she can be rightly heard to front is, “though filed, this Court should not grant this petition as petitioners are before this Court shrouded with dirt” . This is defferent from fronting a preliminary objection. In the premises the preliminary objection is over-ruled. Going back to the main substance I should outrightly state that the objectors ably submitted, and at length for that matter. For consistency I will summarise the objectors’ response along the paragraphs and titles as numbered in respect o f Mr. N g ’am aryo’s submissions.

All objectors cancede that in law provisional liquidators can be appointed but insist (save NBC (1997) Ltd) that these would be for the purpose o f maintaining the status quo, in that they would only collect, preserve and protcct the Petitioners property, hxcept NBC (1997) Ltd, they d on’t agree that their duties should cross over to restructuring or working on a scheme o f Arrangement. Stanbic Bank and M & M concede to some extent that that could possibly be one o f the duties o f the Provisional Liquidators Regarding the indispensability o f restructuring as a condition precedent to recapitalization objectors who are against it insist that the restructuring is for the benefit ol the Petitioners and more so because they entered in a scheme o f Arrangement without involving interested parties, i.e. Creditors; that they “hived-down” their assets into a new Company “without carrying the liabilities as well and leaving themselves being empty shells and without Considering C reditor’s interests.” The gist o f the charges is well reflected in one o f the objectors submissions as follows - “ ...... the Petitioners directors ....grossly mismanaged the debtor companies, have dispated their properties and assets including illegal transferring thereof to a third party, namely Fahari Beverages Ltd whose directorship com poses o f the Petitioners’ advocate” . They strongly oppose the proposed trio as Provisional Liquidators - Finn, Murphy and Bomani as they are interested parties. They insist that the latter was not only used in clearance o f Petitioner’s correspondences but was actively involved in various negotiations while the former were involved in the restructuring scheme and advises to petitioners - hence none can service and command the confidence o f objectors. They stand surprised over the alleged res judicata regarding the appointment o f Finn and Murphy as it is not supported by the C ourt o f Appeal decision in Misc. Civil Revision No. 9/99. They all (except the contigent objectors who have no particular preference) urge for the appoint o f Joseph Sinde Warioba as a Provisional Liquidator for they have trust and confidence in him. They argue that once there is a chamber application for

appointment o f a Provisional Liquidator, proposals that follow don’t require a chamber application; that the consent made by W arioba is proper and the w rong name o f the Company (JV Group) was by slip o f the pen which can be rectified if need be. On the remuneration, while they all objcct to the 12 1 / 2 % o f the gross realization they stand divided on what should be given. The majority propose 5% while NBC (1997) Ltd maintains that the person appointed should make a proposal for determination by the Court. They dispute existence o f any ulterior motive in their objections arguing that rather it is the Petitioners who harbour the same by engaging in actions which touch their interests but w ithout involving them. Regarding their locus standi objectors are surprised by this argument because Petitioners conceded o f being insolvent, that they (objectors) have clearly stated the extent o f indebtness in affidavits; and that in any case this is not the occassion to prove debts. Lastly, they argue that the initial Report by the Provisional Liquidators should be disregarded as it was Com posed by people w hose appointment was declared null and void, and that powers o f the Provisional liquidators to be appointed should be limited to protect objectors’ rights. Mr. N g ’amaryo did not have much in rejoinder. He reiterated what he stated in the main submission. He insisted that the proposal o f Mr. W arioba is against Rule 31(1) o f the rules; that decision o f majority creditors is o f pursuasive force (cited Amiral Meghji

• the D ebtor (1970) HCD 230) and Indian Building Constrators Ltd. v R B Purohit (1965) E.A 342, In Re st. Thom as’Dock Company (1876) 2 CLD 116, In re Uruguay Central and Hygueritas Railway Company o f M onte Video (1879) 11 CLD 372, Re Home Remedies, Ltd (1942) 2 ALLIIR 552), and that Chandes (Contigent creditors) by the end o f June, 1998, were totally controlling and managing the affairs o f the Petitioner

Companies, thus “they and their associated companies a r e ....... accountable for the affairs and financial position o f the companies” and that their acts would be scrutinised and decided upon by creditors’ meeting if prayers are granted. He insisted, “ Faliari Beverages Ltd is a Company floated by the Chandes for the purpose of restructuring and hive down. This is mentioned in the letters .........signed by Chandes”. I have detailed the submissions and arguments purposely. Although the application seems to be a simple one a decision thereon afl'ects a substantial group o f companies let alone other interested parties including objectors. Arguments and submissions regarding their fate therefore should clearly be put to the fore. I should start by stating that I stand indebted to the Counsel’s (o f both sides) able submissions. Not only that but also for availing me copies o f authorities cited - I think, in a responsible recognition o f the wanting nature o f our Library facilities. For an organised flow o f findings I will not follow the sequence o f titles and paragraphs as designed by Mr. N g’amaryo and paraphrased at the beginning o f this ruling. Where necessary I will interchange them or argue them together. I will start with the question o f the objectors' Locus stanili As rightly submitted by the objectors I have been at pains to understand what Mr. N g’amaryo meant by insisting that in order for the objectors to have a locus standi they should have proved the existence o f debts! The objectors duly filed notices upon the Petitioners’ advertisements regarding their petitions for winding up. They duly appeared before the Court represented by Counsel. Their respective Directors swore affidavits showing the extent o f indebtness by Petitioners - Crown cork, U$ 186,288; Kioo Ltd, Tshs. 1,139,814,293 F out which Tshs.225,000,000/= form a Court decree; Stanbic Bank, U$. 1,193,199.99, M/S M & M Communications Ltd, Tshs.68,333,909/20 and U$.773.39, subject o f (HC) Civil Case No. 268/98; Abdillah Mikidadi, 10 Million Tshs for wrongful termination, subject o f Civil Case

No. 283/96 at Kinondoni District Court; NBC (1997) Ltd, a total o f Tshs.7,300,378,428 [broken up as follows:- Rualia Bottlers - Tshs.2 9 8 ,5 4 1,705, Southern Highlands Bottling Coy - Tshs. 137,679,230/=, Fahari Fruits Products Ltd - Tshs. 184,409,767/=; West Lake Bottlers Ltd - Tshs. 130,787,172/=; Fahari Bottlers Ltd - Tshs.6,399,463,939/=], Shinyanga Bottling Company Ltd - Shs. 149,496,61 5/=; Trust Bank (Tz) Ltd, Tshs.688,000,000/=; TIB, Tshs.269,036,877/92. The Directors o f the contingent Creditors (Girish T. Chande, Ashock T. Chande, Ravi T. Chande, J.V. Textiles & Garments Ltd, M/S Juthalai Verji Limited) swore affidavits to show that they guaranteed various loans extended to Petitioners. What else does Mr N g’amaryo wish to be proved in order for these parties, who stand to lose in case the Petitioners die miserably insolvent, to be able to stand in C ourt to defend their interests? The objectors’ notices to appear in the Petitions and their affidavits stand as sufficient evidence conferring unto them the locus standi required in the respective Petitions. As rightly submitted by them, in any case, this is not the right moment for proving the exact debts/liabilities. Coupled with this, the petitioners who self-confessed o f being deeply indebted to various parties did not challenge the objectors’ affidavits regarding the debts nor regarding the contingent Creditors that they guaranteed various /ly ^ s. Mr. N g’amaryo who knows it well, being a seasoned lawyer, is aware that an affidavit is evidence and cannot be assailed by mere submissions as he is trying to do. Suffice to conclude that the objectors are properly and legally before this Court. N ext to consider is whether it is proper to appoint a Provisional Liquidator. This should not detain us at all. All Counsel concede that this is purely legal and the law so provides. S. 183 (1) o f Cap 212 (COM PANIES ORDINANCE) provides, “Subject to the provisions o f this section the Court m ay appoint a liquidator or provisionally at any tim e after the presentation o f a winding up petition and before the m aking o f a winding - up order, an d either the official receiver or any other f i t person m ay be appointed”.

Rule 3 1 o f the Companies (Winding up rules, 1929) provide further, “A fter the presentation o f a petition, upon the application o f a creditor, or o f a contributory, or o f the Company, and upon p roof by affidavit of sufficient gro u n d f o r the appointm ent o f a Provisional Liquidator, the Court, i f it thinks Jit and upon such terms as in the opinion o f the Court shall be ju s t and necessary, m ay m ake the appointm ent”. l)o fa c ts and circum stances o f the controversy before this Court warrant appointm ent o f Provisional L iquidators? On this point the Counsel have made reference to various pursuasive foreign decisions on what the Court should consider in exercising its discretion tow ards that end - (Re Dry D ocks Corporation o f London (1888) 29 Ch. D 112, Re Hammersmith Town Hall Company (1877) 6 Ch. D 112, Re High-field Commodities Ltd (1984) 3 All. ER. 884). The enunciated principles boil to what is contained in the headnote to the report o f the judgem ent in Re High-field’s case “ The Court would not usually exercise its powers ..... to appoint a Provisional Liquidator unless there was at least a good prima facie case for a winding up order. However, the Courts’ Power to appoint a provisional liquidator (is) general in scope and (is) not restricted to cases where the Company was obviously insolvent or where it was otherwise clear that it was bound to be wound up, or where the Com pany’s assets were in jeopardy. Furthermore, the power (is) discretionary, and in addition to be being required to be exercised judicially the need for the exercise of the discreation should outweigh the consequences to the Company ...... In particular where the grounds for winding up Petition....was expedient in the public interest, the public interest should be given full, though not conclusive, weight”. The above quoted being a common law stand and not in derogation o f the law as already quoted has full blessing o f this Court, for, it portlays what the law is in this country as well.

The Petitioners have self-confessed o f being in deep insolvency. I hey have filed petitions for voluntary winding up. Prima facie therefore a winding up order is likely to issue. The Petitioners have categorically stated “ all the ten Companies are interlinked in their businesses, finances, directors and shareholders”, and have confessed o f having “hived-down” their assets to another newly formed Company. Naturally, this state o f affairs sets in uncertainly regarding the stability and safety o f the assets let alone the dealings, and loudly threatens the interests o f the Creditors and Shareholders. In the circumstances, a Provisional Liquidator is required, among others to investigate these dealings, collect and protect the assets. For that reason I answer the question I had posed at the beginning, positively. Following on heels to the above is - what pow ers should this Provisional L iquidator have. The objectors save NBC (1997) Ltd urge for very limited powers and not as insisted upon by Petitioners. They insist instead that the Provisional Liquidators are only appointed for preservation o f the petitioner’s assets - maintain status quo, and that legally a Provisional Liquidator cannot engage in restructuring or composition o f any Scheme o f Arrangement (cited the R e Dry Docks and Hammersmith cases whose citation has already been provided above). On whether restructuring is essential and indispensable to recapitalisation o f Pepsi-Cola business in Tanzania they argue that Petitioners being insolvent and out o f business no meaningful restructuring can be made, that it is superflous to the petitions and that Creditors should not be compelled on a course whose extent o f the alleged benefit has not been disclosed and more so in relation to creditors.

I should start by stating the obvious that neither the Companies Ordinance nor the “Rules” made thereunder specifically provide powers which have to be conferred upon Provisional Liquidators. S. 183(2) o f the Ordinance and Rule 3 1 of the Winding up Rules, refer to powers o f a Provisional Liquidator in an assumptive manner. I hey provide, “ 183(2) W here a Liquidator is provisionally appointed by the Court, the Court may limit and restrict his powers by the order appointing him” . Under Rule 31 the Court, (regarding a Provisional Liquidator), “ (i) . . . if it thinks fit and upon such terms as in the opinion o f the Court shall be just and necessary, may make the appointment (ii) The order appointing the Provisional L iq u id ato r ......... shall state the duties to be performed by the Provisional Liquidator” On the basis o f the quoted law it is clear that the Court is vested with unlimited discretion regarding what powers should be bestowed on Provisional Liquidators, f o r that m atter I am in full agreement with Mr. N g ’amaryo that the Court is empowered to give powers including those provided to the Liquidator under s. 190 through 193 o f the Ordinance. What powers should be given are left to the wisdom o f the Court. I cannot therefore buy the objectors’ contention that Provisional Liquidator’s powers is limited to only investigating the affairs o f the Petitoners, collection and preservation o f the Petitioner’s assets. Depending on the facts o f a particular case Provisional Liquidator’s powers can loom into restructuring action and making o f a scheme o f arrangement or any other activity deem ed proper by the Court to be in the interests o f the creditors/ shareholders. The counsel for both camps cited authorities in support o f their respective stands- some o f the objectors cited Re Dry D ockm Re Hammersmith and Highfield’s cases while N g ’amaryo for Petitioners cited, among others, Re Amirali Meghji (1970) HCD 230; Indian Building contractors Ltd v R.B. Purohit (1965) EA 342. The latter cases show that a Provisional Liquidator has pow ers even to make restructuring or arranging a Scheme o f

Agreement, which stand, I fully support in view o f the blank cheque given by the law (above quoted) to the Court. There is yet another support from a recent commonwealth decision, decided just last year (1998) (Mujulizi, learned Counsel, stands commended for unearthing it) which shows that Provisional Liquidators not only can they be given powers to preserve but also to dispose o ff the Petitioner’s property (In the M atter o f Peregrine Investment Holdings Ltd AND In the M atter o f the Companies Ordinance Cap. 32, decided by the High Court o f Hongkong Special Administrative Region, Companies Winding Up No. 20 o f 1998). An excerpt from the judgement runs as under - “ Provisional Liquidators were appointed The order appointing the Provisional Liquidators provided that the Liquidators could sell or dispose of any assets by way of private treaty tender or auction upon such terms as the provisional Liquidators may deein appropriate subject only in the case of sales of subsidiaries or entire business divisions to the Liquidators obtaining leave to do so from the Court”. I am satisfied that as the law stands now Provisional Liquidators can be bestowed with any powers ranging from investigating Petitioners affairs, collection o f assets to selling or disposing o f the same or some other duties including designing a Scheme o f Arrangement that would be beneficial to all the parties involved and which the latter should agree to before presentation to the Court for approval or otherwise. N ow, back to the specific question, on the facts o f this particular case what specific pow ers should be conferred on the Provisional Liquidator? My first reaction is that they should not be limited as proposed by the majority objectors but rather should be wide enough to cover a formulation o f a scheme o f Arrangement. I have reached this conclusion because o f the following, first, it would

seem that there is a confusion regarding the centre o f controversy. The arguments presented by the objectors seem to suggest that there is already in place a scheme o f arrangement which they are being called upon to agree to. One o f the objectors charges thus: “ It is therefore manifestly clear that there has already been a transfer or attempt to transfer the assets. What then are the Provisional Liquidators to take charge of? A ren’t they being appointed simply to inherit and adopt the already prepared scheme, and thrust it at the creditors, call for a vote from a number of already approving creditors who are in the majority any way? Isn’t the Court being called on to rubber-stamp an already made scheme, with the secured creditors being sidelined as mere by-standers?” And yet another lauched a similar serious attack in the following words, “ It is ridiculous therefore niy Lord for a debtor to compel a creditor to agree to a course o f action of whatever description which docs not appear to be bencficial to hint considering the fact that there is no real guarantee that the recapitalisation process will deliver any positive results. My Lord, it is our further submission and we pray that this honourable court of law should not be used as conduit pipe for debtors finding their lee way of technically avoiding debts on sheer mechanism such as restructuring and recapitalisation which were at their disposal long way ago to the detriment of the creditors”. To clear the air, I should say that I am surprised by these submissions. 1 know from the record that Finn and M urphy had already embarked on a formulation o f a scheme o f Arrangement. I also get a feeling that w hatever was proposed arose serious misgivings among the objectors. Well, that m ay be correct but f o r the purposes o f this application there is n o schem e whatsover in existence. The Petitioners and objectors alike may feel that in case Provisional Liquidators are empowered to formulate a scheme

o f Arrangement the already compiled proposal may find its way into the new scheme That should not be our concern now. A decision to utilise which material and from which source will lie with the person appointed - thats why a neutral, unbiased person is required At the sametime, it is not correct to say that a scheme o f Arrangement would be brought to the Court for simply rubber stamping. The scheme will have secured the blessings o f the creditors/shareholders. The C o u rt’s duty is not to rubber-stamp but rather to scutinise the scheme o f Arrangement formulated, satisfy itself on the response o f creditors/shareholders and whether the scheme itself is fair and equitable and for the benefit o f all parties concerned. Only after being satisfied with the above perfection would the C ourt approve the scheme. It is not mandatory that the Court should approve such scheme. It may reject the same or order for amendments. While still on that it should be noted that it is not mandatory that such a Provisional Liquidator must formulate a scheme o f Arrangement. He would be empowered to formulate one but during his investigations he may get convinced that a scheme o f Arrangement is unworkable in the circumstances or not beneficial to the creditors. In such situation he is not bound to formulate any. He would then inform the Court accordingly for winding up process to proceed. What is the gauge o f his duties? W hatever he does should be in the best interest o f the creditors/shareholders. Thats why I have not and will not bother to make a finding on the weight to be attached to percentages o f creditors as regards their support on the scheme orchestrated by Mr. N g’amaryo and elaboratively responded to by the objectors’ Counsel. It is premature to argue on the percentage o f creditors that support a scheme or not, for, at this point there is none. Insisting on merely winding-up without giving a lee-way to the Provisional Liquidator to survey for another beneficial option may not lie in the interests o f creditors. 10 Companies are invlolved. They have effected a hive-down on the assets to a newly created Company. They are miserably indebted to both secured and unsecured creditors

(just one creditor claims over Tshs 7 billion). Even if a winding-up order is made there may not be enough money to pay creditors. Let a Provisional Liquidator investigate, scan and come out with what is good for the parties. Arguments have been presented that only limited powers should be given and that the Provisional Liquidator would be at liberty to apply to Court for specific additional powers to embark on restructuring or a scheme o f Arrangement if he soon discovers its necessity. Well, this is one mode o f approach but compared to what I am suggesting the latter saves time, expedites matters and removes unnecessary delays. Let him leave the Court clothed with all the authority and powers. Let him join the battle armed with all armaments available. It defeats common sense for a fighter to join the battle with a scheme that he has to check on the strength o f the enemy first then rush back to the armoury to equip himself well! That said, what should these wide powers encompass? We have two versions. The Petitioners’ as they appear at the begining o f this ruling, and NBC (1997) L td’s. Having carefully considered the arguments, the law, the slate in which the 10 Petitioners are, the way the “hive-down” has been effected, I settle, with minor variations on NBC (1997) L td ’s proposals regarding powers which should be exercised by a Provisional Liquidator as follows:-

1. To carry out fu ll investigation into the affairs o f the Petitioners in order to identify their (Petitioners) assests and property including the hive-down exercise carried out by the Petitioners
2. To take possession o f all the property and assets o f the Petitioners wherever they are and by whomever held and preserve them fo r the benefit o f the creditors until a suitable scheme o f Arrangement is proposed and agreed upon, or

i f no such Arrangement is reached, pending a Winding Up Order and the appointment o f a Liquidator. 3. To prepare a list o f all creditors which should he submitted to the Court within 3 weeks. 4. To prepare a statement o f the Petitioners ’affairs within 5 weeks 5. To prepare a proposal fo r a Scheme o f Arrangement, i f fo u n d feasible, within 6 weeks and apply to the Court fo r an order to convene a creditors' meeting to consider and vote upon the scheme. 6. To appoint such persons as he may deem f i t to assist him discharge his duties. The schedule within which to take the steps, for one reason or another, may prove insufficient. In that case, he will be allowed to apply for extension o f time. The question o f restructuring and its indispensability being a condition precedent to the recapitalization should not take much o f our breath. We have provided wide powers to the Provisional Liquidator. Armed with that he will investigate full activities o f the Petitioners and will come up with whether restructuring is necessary and in what form and thats why he is em powered to formulate a Scheme o f Arrangement, which has to be accepted by the creditors and approved by the Court. The benefits enumerated by the Petitioners should not carry the show o f the day for the Provisional Liquidator has to go into them thoroughly and satisfy himself that they are real and workable and a not a “sham” (to borrow the language o f one o f objectors’ Counsel). While still on this I should touch the argument that the initial Report o f Provisional Liquidators and their work so far done should not be wasted. I am afraid this Court cannot issue an order for its utility. The Provisional Liquidator should be left free to

decidc on how to collect the required information. However, common sense would dictate that the Provisional Liquidator will go for all relevant materials and contacts, and that report is one o f them. It is not o f insignificance that the initial Provisional Liquidators will be paid for whatever they did before being barred. In effect therefore the initial report is the property o f the Petitioners. That said, who should he appointed a Provisional Liquidator? I should in very certain terms declare that neither Finn, Murphy nor Bomani is fit to be appointed as Provisional Liquidator - they are disqualified because o f their association with the Petitioners. Conflict o f interest is very glaring. I was surprised if not sturned to hear a seasoned lawyer o f N g ’am aryo’s calibre gathering guts and audacity to say that the Court o f Appeal in Civil Revision No, 1/99 dicided on the appointment o f Finn and Murphy. Fie asserts that the m atter is res judicata. He declared, “ the matter therefore ought to and must rest. No one can or should bring it up again unless, and if so, only though further revisional proceedings in the Court of Appeal”. With respect, I am sure that Mr. N g ’amaryo is aware that that submission is fallacious. The Court o f Appeal observed, “ There is not much to say about the appointment of the two other provisional liquidators (i.e. Messrs Finn and Murphy). At first we had the impression that both resided outside the jurisdiction of the High Court, that is, in London, but on closer examination of the record, it appears that they have an address within the jurisdiction of the court and is [sic] qualified for appointment as a liquidator”.

The Court o f Appeal did not appoint (and could not in the circumstances) Provisional Liquidators. Jf so, as rightly fronted by the objectors, why bring the same m atter before this Court which is subordinate to the Court o f Appeal? Although Mr. N g’amaryo capitalises on those observations he forgets or deliberately, fails to make reference to the final order o f the Court, which among others states, ‘T h e proceedings for appointment o f Provisional Liquidators be and are quashed”. Clearly, and as rightly submitted by the objectors, the observation o f the Court relied upon was obita dicta. In any case, having quashed the proceedings which appointed them, on which ground then can the purported appointment stand? The suitability or otherwise o f M urph, Finn as is the case with liom an i is now what is before this Court for determination. And I have already indicated that the trio do not qualify because o f conflict o f interests. As was stated in Peregrine case already referred to above, “ It is the task of the Provisional Liquidators to get in the assets on behalf o f the creditors and shareholders. They stand in the position of trustees ......... Trustees are never permitted to be or remain in a situation where they have a conflict o f interest. That rule is crucial to the proper administration of the relevant trust. The dual role of the Liquidator’s firm should have been disclosed to the Court at the earliest opportunity”. In that case the Provisional Liquidators had been performing auditing duties to the party and this was concluded upon to be client relationship hence existence o f a position o f having conflict o f interests.

Again, in Re: Charterland Goldfields 26 T.L.R 132 a liquidator was disqualified for similar reasons-it was stressed, ‘the liquidator of the company must be a person who will act independently, aspecially of those against whom there may be pending claims, and will discharge his duties without favour to either side. Where it appeared that the liquidator in the voluntary Winding Up of a company had an intimate business connexion with several of the directors of company, who were also directors of other companies between which and the company in question there had dealings requiring investigation, the court being of the opinion that he was not in a position to take independent course in making the necessary investigations, made an order removing him from the office of liquidator, and appointed another liquidator in his place”. The objectors in here have sufficiently proved that there is client relationship between Finn, M urphy and Petitioners. The tw o personalities have been engaged in the negotiations with some o f the creditors on behalf o f Petitioner, let alone formulation on the restructuring proposal long before the petitions were filed. They have been negotiating with NBC on behalf o f Petitioners regarding their indebtness proposing in the process debt - compression. The objectors’ fears that they may put into effect whatever plans and recom mendations they have had in their capacity as Professional advisors to the Fahari G roup are not far fetched. On the other hand it has amply been proved that Mr. B om ani’s Chambers w ere being used by the Petitioners for clearance o f their Correspondences. Mr. N g ’am aryo’s urge that the relationship ended at that has been contradicted by evidence that fees w ere paid for services. Also it has not been explained why, if the services ended at Mail delivery arrangement, didn’t they use Eric N. Mahayo Partnership Chambers just within reach. In any case, there are very telling correspondences whose copies were sent to Mr. Bomani and which clearly show that he was engaged in some negotiations between the

newly formed Company, Fahari Beverages Co Ltd and NBC. The former is the Company to which the Petitioners transfered their assets. Even an angel would not trust that Mr. Bomani would not take sides in a conflict, as the one in existence, between objectors and Petitioners. As Provisional Liquidators are expected to protect the interests o f the creditors any person who has any connection in terms o f business dealing between him and Petitioners is outrightly disqualified from appointment to that position, for, conflict o f interest is the very obvious. Here it is not a question o f qualification and experience. The trio no doubt excel in this. And it is not a question o f acting in the interest o f the creditors. It must actually be seen that it is done. Provisional Liquidators must not have tainted let alone suspicious trust in the eyes o f the creditors. The trio is obviously netted in the latter and is accordingly disqualified. Who should be appointed? The objectors propose Mr. Joseph Warioba. The Petitioners object to the proposal arguing that there is no application as such as Rule 8( 1) o f the “Rules” has not been complied with, that he has not given his consent as the one he submitted is in respect o f a different company and that his qualifications and expertise have not been proved. Indeed, for an application for a Provisional Liquidator to be properly before the Court there must be a chamber summons supported by an affidavit - the Court o f Appeal in Civil Revision No. 1 o f 1999 is clear on this as is Rule 8 (1) o f the “Rules” . However, with respect to Mr. N g’amaryo, what the objectors are proposing is not an application for appointment o f a Provisional Liquidator as much but who should fill in that position once an application to appoint is allowed. The Petitioners were the ones who applied for appointment o f Provisional Liquidator and that is the application which is before us. Proposing a name is just ancillary to the main application. The Petitioner could even have simply filed the application without naming a person leaving it to the Court to

scan around and pick a fit person. The objectors are simply proposing whom they think, once the application is granted, can fill up the position. I cannot imagine the legislature passing such unreasonable a law which sets up a procedure as proposed by Mr. N g’amaryo. I am o f the settled view that in proposing a name o f a person fit to be appointed a Provisional Liquidator by objectors after the Petitioner or any person has filed an application for his appointment does not require the filing o f a chamber application supported by affidavit. That requirement stands only for the initial application, in this case, the one filed by Mr. N g’amaryo for the Petitioners. Concerning the argument that W arioba did not give consent, while conceding that he made an error when he consented to be being appointed a Provisional Liquidator to “JV Group o f Companies” because there is no Petitioner going by that title, I am inclined to agree with the objectors that that was a slip o f a pen. In any case, the law does not state that such consent should be secured before appointment. It may be desirable in order to avoid inconvinience because a person may refuse to take up the task if arbitrarily picked but the law as it stands puts up no such condition to the Court before so appointing. The same is the case with qualifications and expertise. The Court simply picks on a “fit” person. In doing that the C ourt will rely on various factors including judicial notice o f the standing o f particular person or upon receipt o f proposals. The objectors have come up with a proposal. As was observed by the Court o f Appeal Civil Revision No. 1 o f 1999, “........After all the provisional Liquidators were expected to protect the interest ot the creditors, and it is only fair that such creditors be given opportunity to play a part in the proceedings.fbr appointment o f Liquidators....” The objectors, all o f whom except one are represented by advocates, and able o n ^ jfaf that matter, have proposed Mr. Warioba. Is it possible that this formidable group c qjj eom e up with a personality who is incapable o f protecting its interests? I am not pursuaded by Mr. N g ’amaryo in this respect. I thus hold that Mr. Joseph W arioba is ^ jjf person to be appointed a Provisional Liquidator o f the Petitioners. In any case, he is just a

Provisional Liquidator. The task will surely involve engaging various professionals and thats why it has specifically been provided that he can appoint any fit person to assist him For that matter, he is not precluded from seeking assistance from Finn, Murphy or Bomani. What is important is not who does what but who controls what is being done, who dccidcs on direction to be taken, who makes a decision before matters are presented to creditors and to Court. We come to the remuneration to which the Provisional Liquidator is entitled Here we have three scenarios proposed 12 1 / 2 % by Petitioners, 5% by the rest o f the objectors except NBC which proposes that the Liquidator be called upon to chart his duties and activities and quote his charges. The contingent creditors leave it to the wisdom o f the Court. It is unfortunate that neither the Ordinance nor the Rules provide a definite answer. The counsel are agreed on this. Those who propose 5% argue that this is the commonly applied practice in Tanzania in respect o f receivership and Liquidation and this is in consonance with the requirements o f English Property Conveyancing Act, 1881 as applied to tanzania by Cap. 114 o f the laws. While I have not been able to understand the basis o f N g’am aryo’s urge to have his clients pay a higher charge o f 1 2 1 / 2 % (he argues that the enormity and complexity o f the task call for that percentage) I have been pursuaded by the Counsel for NBC that using a “percentage” criteria on the gross realisation in awarding the Provisional Liquidator’s remuneration is wanting. W hat is that “gross realisation”? This would have no problems in winding up proceedings for there would be sales and disposals. Now, in our case, regard being had to the pow ers and duties we have placed on the Provisional Liquidator which realisations will ,^ k e ? If he manages to formulate an acceptable Scheme o f Arrangement no sales will been made and even if that fails and winding-up proceedings activated he will only n r pollected assets. We have given him no powers to sell. How then will we calculate 0 o f the gross realisation? Again, 011 this, I am pursuaded that the only logical step

to take is to call upon Mr. W arioba to chart out his duties, and the task ahead o f him as he perceives it and quote his charges which would then be tabled in Court in the presence o f objectors for comments and observations before the Court makes a decision on an appropriate remuneration. Finally, I will make a brief observation on what the petitioners call ulterior motives by objectors. This charge is too unfortunate, for, there is no scintilla o f evidence suggesting what is alleged and I am glad that though while thus charging the Petitioners concede in the same submission, “there is no direct evidence that the objectors are actually making a proxy effort to kill the Pepsi-Cola business”. The Petitioners’ conduct, including unclear “hive-down” o f some o f the assets into another newly formed Company would naturally generate suspicions, resistance and mistrust on the part o f objectors/creditors. Their reactions cannot therefore be faulted. In conclusion therefore: (a) The preliminary objection by Mrs. Rwebangira for Kioo Ltd that the Petition by Fahari Bottlers should be thrown out for having been filed in bad faith is dismissed. (b) The prayer by Petitioners that Objectors be declared to have no Locus standi is dismissed (c) The Application for appointment o f Provisional Liquidator in respect o f the Petitioners (the 10 Companies) is granted (d) 1 he prayer that M ark Danhi Bomani, Paul Howard Finn and Kevin Anthony M urphy should be appointed Provisional Liquidators is dismissed on basis o f

Conflict o f interest and instead Joseph S. W arioba is appointed. (e) The prayer that the Provisional Liquidator’s Powers should encompass all powers o f a Liquidator under s. 190 (1) (a) to (f) and 190 (2) (a) to (h) o f the Ordinance Cap 212 is dismissed except as embodied in this ruling, and which pow ers are wider than mere collection and preservation o f Petitioner’s assets, for they include formulation o f a Scheme o f Arrangement (f) The prayer that the Provisional Liquidator’s remuneration be 12 1 / 2 % o f Gross realization is dismissed and instead the person appointed Provisional Liquidator should sketch his duties and submit his quotations which shall be tabled in Court in the presence o f parties for decision within 7 days o f the delivery o f this ruling (g) O ther prayers, that Costs o f appointing an advocate and providing security; that all other proceedings in this Court, subordinate Court or Tribunal be stayed pending the winding up order or further, order, that hearing o f the petition be adjourned to a date after the creditor’s meeting to vote on the Scheme o f Arrangement, if any, and that costs o f the application be defrayed from the assets o f the petitioners, stand allowed. (h) The Provisional Liquidator will be at liberty at any time, to apply to the Court for directions and guidance on anything he deems proper and which has a bearing to Petitions. L.B. KALEGEYA JUDGE

Order: To be dilivcred by the SDR-IIC on 20/9/99

i f no such Arrangement is reached, pending a Winding Up Order and the appointment o f a Liquidator. 3. To prepare a list o f all creditors which should he submitted to the Court within 3 weeks. 4. To prepare a statement o f the Petitioners ’affairs within 5 weeks 5. To prepare a proposal fo r a Scheme o f Arrangement, i f fo u n d feasible, within 6 weeks and apply to the Court fo r an order to convene a creditors' meeting to consider and vote upon the scheme. 6. To appoint such persons as he may deem f i t to assist him discharge his duties. The schedule within which to take the steps, for one reason or another, may prove insufficient. In that case, he will be allowed to apply for extension o f time. The question o f restructuring and its indispensability being a condition precedent to the recapitalization should not take much o f our breath. We have provided wide powers to the Provisional Liquidator. Armed with that he will investigate full activities o f the Petitioners and will come up with whether restructuring is necessary and in what form and thats why he is em powered to formulate a Scheme o f Arrangement, which has to be accepted by the creditors and approved by the Court. The benefits enumerated by the Petitioners should not carry the show o f the day for the Provisional Liquidator has to go into them thoroughly and satisfy himself that they are real and workable and a not a “sham” (to borrow the language o f one o f objectors’ Counsel). While still on this I should touch the argument that the initial Report o f Provisional Liquidators and their work so far done should not be wasted. I am afraid this Court cannot issue an order for its utility. The Provisional Liquidator should be left free to