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Gasto Sabas Nyogo Vs Bombo Johnson Nyamwera (PC Civil Appeal 13 of 2020) 2020pg 3 and 4 Not Benefit

The High Court of Tanzania ruled on Civil Appeal No. 13 of 2020, where the appellant, Gasto Sabas Nyogo, contested a loan agreement with the respondent, Bombo Johnson Nyamweru, claiming it was illegal due to the respondent lacking a business license. The court found that the loan transaction was indeed illegal and unenforceable, ordering the appellant to repay only the principal amount of Tshs 1,500,000 without interest, along with Tshs 500,000 in damages. The judgment emphasized that illegal agreements cannot be enforced and that the respondent's actions were in violation of banking laws.

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30 views7 pages

Gasto Sabas Nyogo Vs Bombo Johnson Nyamwera (PC Civil Appeal 13 of 2020) 2020pg 3 and 4 Not Benefit

The High Court of Tanzania ruled on Civil Appeal No. 13 of 2020, where the appellant, Gasto Sabas Nyogo, contested a loan agreement with the respondent, Bombo Johnson Nyamweru, claiming it was illegal due to the respondent lacking a business license. The court found that the loan transaction was indeed illegal and unenforceable, ordering the appellant to repay only the principal amount of Tshs 1,500,000 without interest, along with Tshs 500,000 in damages. The judgment emphasized that illegal agreements cannot be enforced and that the respondent's actions were in violation of banking laws.

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IN THE HIGH COURT OF THE UNITED REPUBLIC OF TANZANIA

(IN THE DISTRICT REGISTRY OF KIGOMA)

AT KIGOMA

APPELLATE JURISDICTION

(PC) CIVIL APPEAL NO. 13 OF 2020

(Arising from Civil Revision No. 1/2020 Kigoma District Court Before:

Hon. K. Mutembei - SRM and Originating from Civil Case No. 189/2018
from Ujiji Primary Court Before: Hon. E.B. Mushi - RM)

GASTO SABAS NYOGO.................................................. APPELLANT

VERSUS

BOMBO JOHNSON NYAMWERU............................ RESPONDENT

JUDGMENT

10/11/2020 & 13/11/2020

A. MATUMA, J

In the Primary Court of Ujiji at Kigoma, the Appellant stood sued by the
Respondent for a claim of Tshs 4,490,000/= arising from a loan
agreement."

The Appellant admitted the debt stating that he has already paid Tshs
140,000/= out of that debt. The respondent acknowledged that he was
paid the said Tshs 140,000/= and therefore the outstanding debt
remained to be Tshs 4,350,000/=. The Primary Court decreed such

sum.

i
The Appellant having learnt that the loan agreement accrued from illegal
transactions moved the District Court to call for records of the trial Primary
Court and revise the same. The District Court in its Revisional order

refused to revise the trial Courts records hence this appeal with, three
grounds of Appeal which was argued generally before me to the effect
that;

"The District Court erred in law and facts in not


revising the lower Courts decision accordingly
thereby letting the Respondent illegally enrich
himself without licenses".

At the hearing of this appeal both parties appeared in person and they in
their respective submissions agreed that the original loan by the
Respondent to the appellant was Tshs 1,500,000/= but it was taken on
agreement that it will be repaid in a month with an interest of Tshs
300,000/= and witnesses' costs at the tune of Tshs 20,000/= thereof
making the total sum to be repaid by the appellant to the Respondent to
be Tshs 1,820,000/ = .

They further agreed in their respective submissions that the appellant


defaulted to repay the said loan as it was agreed. As such on 27/9/2018
just four months form the date in which the loan was advanced, the
appellant was forced to reduce such loan agreement in writing before Mr.
Silvester Damas Sogomba learned Advocate.

They executed such agreement into writing before the said advocate but

in it, it was written that the principal loan is-Tshs 4,530,000/ =

purporting to have no interest in it;

2
"Kwa kuwa mdai amekuwa na desturi ya kukopwa pesa na mdai

na kuzirejesha bila matatizo, na kwa kuwa pande zote mbi/i


wameki/i kuwa na mahusiano mazuri, mkopo huu ulitolewa
kindugu na hakuna riba itakayotozwa au Hiyotozwa

wakati wa kukopwa au itakayotozwa wakati wa

kurejesha."

It is that contract which formed the basis of the claim by the respondent

in the Primary Court.

When I asked the respondent how did it get into such amount Tshs
4,530,000/= from the real advanced loan, he honestly replied that it was
due to interests as the appellant stayed with his money without repaying

it back for three years.

As reflected herein above, the parties are not at issue on the facts lead to
this case. It is therefore, easy to determine this appeal just for
determining the issue as to whether the loan transaction between
the parties was legal capable of being executed.

To answer that issue there is the question of the legality of the


business transaction which resulted into the suit and subsequently a
decree subject to this appeal. The business transaction was that the
Respondent did lend Tshs. 1,500,000/= to the appellant on agreement of
interest at Tshs. 300,000/= in a month. The appellant defaulted to
repay the principle sum of the loan and the subsequent agreed interests
thereof. The claim was thus raised to Tshs. 4,490,000/ = . Was this

business legal? The answer is not.

Nobody can dispute that the agreement between the parties herein
on the loan was in the nature of busin£ss"fransaction. That is because it

3
was in the capital of Tshs. 1,500,000/= invested into lending with an
expected profit of Tshs. 300,000/= per month. In other three months it

raised into millions of monies as herein above stated. Therefore, it was a

business transaction.

Section 3 (1) (a) of the Business Licencing Act, Cap. 208 R.E. 2002
prohibits any person to carry on business without having a valid business
licence.

It provides;

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

a principal or agent, any business unless

(a) he is the holder of a valid business licence


issued to him in relation to such business."
The Respondent herein had no business licence to that effect and
therefore was doing illegal transactions. He was actually contravening the
Banking and Financial Institutions Act, Cap. 242 R.E. 2002 in which only
Banks and Financial Institutions can run business in the nature of financial
transactions like lending money on interest basis. That law under Section
4(1) & (2) restricts business in the nature of financial transactions to
Banks and Financial Institutions subject to the application and grant of
licence to that effect under Section 6 of the Act. The Procedures on how
to apply and grant of the licence are provided for under section 7 of the
said Law. In the circumstances, the respondent was violating the law by
carrying on business without being registered for and licenced as such.

He cannot be allowed to benefit from illeq^J businesses. My learned

brother Josephat M. Mackanja Judge, as^Te then was, at one time faced

4
the similar problem in the case of David Charles V. Seni Manumbu

(HC) Civil Appeal no. 31 of 2006 and ruled out that;

"As it has come to pass that, and since the loan

was advanced and was received in contravention

ofthe law, it cannot be enforceable."

I hold the same view that the agreement between the parties herein
were illegal and not enforceable in terms of section 23(1) (a) (b) and (2)
of the Law of Contract Act, Cap. 345 R.E. 2002. Section 23(1) (a) & (b)
of the Law of Contract supra defines that any agreement forbidden by
Law or an agreement which is of a nature that if permitted would defeat
the provisions of the Law is unlawful. Subsection (2) thereof declares that

unlawful agreements are not enforceable.

It provides;

"23(2) In each of the cases referred to in

subsection (1), the consideration or object of an

agreement is said to be unlawful; and every

agreement of which the object or consideration is

unlawful is void and no suit shall be brought for

the recovery of any money paid or thing delivered

or for compensation for anything done, under any

such agreement."

It was wrong therefore for the court to receive and register such a
suit which based on illegal transaction. The acts of the respondent to carry
on such illegal business of lending money on interest basis is not only
illegal but also criminally punishable under Section 4(3) of the Banking
and Financial Institutions Act, supra whjoh'^rovides;

5
"Any person who contravenes the provisions of
this section commits an offence and on conviction
is liable to a fine of not less than one million
shillings or to imprisonment for a term of not less
than five years or to both such fine and
imprisonment."

Had the District Court on Revision considered all these it would have ruled

that the circumstances in this matter dictated revision of the trial court's
findings to meet the end of justice.

I therefore step into the shoes of the District Court and exercise Revisional
powers to remedy the situation. In the premises the order of the District
Court is hereby quashed so does that of the primary court. I order the
Appellant to refund back Tshs. 1,500,000/= to the Respondent the
s

principal debt with no interest.

I have also considered the fact that the respondent is a honest man who
has decided to declare the true status of the loan between him and the
Appellant contrary to the false executed loan agreement which was
dishonestly drafted by the learned advocate purporting to establish false
loan facility hiding in it interests. I further find that, the appellant ought
to have repaid his real principal loan of Tshs 1,500,000/= on 1/7/2018
which was agreed period. He did not however repay it to date which is
three years and almost five months. He has thus caused the respondent
to suffer some damages.

I asked both parties what should be the remedy in the circumstances.

The appellant offered to pay the principal amount of Tshs 1,500,000/=

and damages for his delay to the tune of Tshs 500,000/= in disregard to

Tshs 140,000/= which he has alreadyx^aid to the respondent. The

6
respondent agreed to be paid such amount (Tshs 2,000,000/=) but

prayed tnat ne be paid it at once (in a lump sum) so that it can be useful
to him. The Appellant undertook to pay such amount by the 30th
December,2020.

Since the parties are in agreement as such, I do hereby declare that the

respondent in addition to the principal sum of Tshs 1,500,000/= be

paid Tshs 500,000/= as general damages and not interest. The whole
sum be paid before or by 30th December,2020. Failure of the Appellant to

repay such amount in the stated agreed period shall entitle the

respondentto execute the decree by attachment and sell of the landed


property of the Appellant which was subject to the execution proceedings
in the trial Primary Court.

In the circumstances, this appeal is allowed to the extent herein above


stated and as the parties mutually agreed to settle the dispute between

them, I order no costs to either party.

Court: Judgment delivered in chambers in the presence of both


parties in person. Right of Appeal explained.

Sgd: A. Matuma

Judge

13/11/2020

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