IN THE HIGH COURT OF THE UNITED REPUBLIC OF TANZANIA

COMMERCIAL DIVISION
AT PAR ES SALAAM
WINDING UP COMMERCIAL CAUSE N0.38/2023
IN THE MATTER OF THE COMPANIES ACT NO.12 OF 2002
AND
IN THE MATTER OF PETITION FOR WINDING UP OF HOTEL CONTINENTAL
BETWEEN
LINDA SAMWEL MACHANGU............................................... 1st PETITIONER
JACQUELINE SIA MACHANGU............................. 2nd PETITIONER
AND
HOTEL CONTINENTAL LIMITED................................................... RESPONDENT
RULING

Date of Last Order: 07/06/2024

Date of Ruling: 21/06/2024

GONZI, J.

The two petitioners filed the petition under Sections 275,279(1)(e),

282(1) and 295(1) of the Companies Act, Act No. 12 of 2002 praying for

Orders that:

a) The Company be wound up by the Court under the

provisions of the Companies Act.

b) That the Court grants interim and or preservatory

orders safeguarding the Company and its
shareholders who are also Petitioners herein.

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 c) Appointment of a provisional liquidator to take
into custody and control of the Company's affairs,
books, records and assets; freezing the
Company's bank accounts styled as Hotel
Continental Limited operated at CRDB Lumumba
Branch with account number 0U1007567900.

d) Appointment of a provisional liquidator to take

into custody and control of the Company's assets
styled as Hotel Continental building with
registered title number 186013/58.

e) Appointment of a provisional liquidator to take

into custody and control of the Company's assets
styled as follows: furniture, equipment, fridges,
mattress, televisions, air conditioner and printer.

f) Any other order(s) as it deems fit.

g) That the official receiver be appointed by the

Court.

The reasons constituting "just and equitable" ground upon which the

winding up order is sought, are stated under paragraph 6 of the petition. It

is alleged that there is just and equitable cause that the Company should be

wound up for there is a complete breakdown in relation among the directors

and shareholders of the Company. In particular it was stated that:

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a) The Company was under maximum supervision of the late Samwel

Machangu who employed his prime time to run the activities of the

Company as an experienced businessman when it comes to hotel

Management businesses.

b) Upon death of Samwel Machangu the business of the Company declined

to the extent that the hotel was operating under loss for more than 10

years as a result the Company was subjected to voluntary members'

winding up.

c) That since the demise of the late Samwel Machangu the Company has

never declared dividends to its shareholders. The petitioners have never

made any profits from the Company.

d) That the breakdown of relationship among the directors and shareholders

has caused poor management of the Company which has resulted to poor

operations of the same, resentment, cost overruns and loss of business.

e) That the petitioners have no access to or control of the Company's books,

office, assets and records and thus in absence of a winding up order, the

petitioners will continue be held accountable for losses, actions and

omissions by the Company's directors.

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f) That it is for very long time now that neither directors nor shareholders

annual general meeting or extraordinary meeting have been called to

discuss affairs of the Company which is against the articles of our Company

and the Companies act and its regulations.

g) That the hotel is not renovated for a long time now due to financial

constraints as a result the hotel has been in ruins.

h) That some of the directors and shareholders are living outside Tanzania

as a result the management of the Company is not in the required

standards.

i) Basing on the above misunderstanding, the Company on 17th November

2021 resolved by special resolution to wind up the Company voluntarily

and went further to appoint Mr. Ayoub Mtafya of NexLaw Advocates to be

liquidator for purposes of such voluntary winding up. Mr. Mtafya managed

to file members' voluntary winding up declaration of solvency at BRELA

Copies of notice of appointment (form 360a) and members' voluntary

winding up declaration, special resolution dated 17th November 2021 are

both collectively attached and marked as annexture Continental 5.

j) Upon appointment, Mr. Mtafya managed to notify the public on resolution

to winding up the Company voluntarily via Government Gazette dated 4th

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 February 2022 at page 15. A copy of the said Government Gazette is

attached and marked annexture Continental 6.

k) That in the middle of the ongoing process of winding up, out of dismay

some directors and shareholders denied to recognize Mr.Ayoub Mtafya

and the process itself that they didn't consent the said voluntary winding

up.

I) Upon the said ambiguous denial from some of directors and shareholders,

despite the process of winding up being at advanced stages, where the

liquidator was in final stage of collecting Company's assets, Mr. Ayoub

Mtafya decided to resign as liquidator at a meeting held on 12th April

2023. Upon resignation, he notified the Registrar of Companies, the

Business, Registration and Licencing Agency with a copy of the Company.

Copies of the resignation dated 19th may 2023 with reference number

NEX/BRELA/HCL/23/01 together with attached liquidator report are both

collectively attached and marked as annexture Continental 7.

m) Upon receipt of the notice of resignation of the liquidator, and resolution

to cancel the voluntary winding up process, the Registrar of Companies

officially cancelled the process of winding up. A copy of the letter dated

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 4th July 2023 notifying the cancellation of winding up is attached and

marked as annexture Continental 8.

Based on the foregoing reasons, the Petitioners prayed, under paragraph

7 of the Petition, that in the circumstances it is just and equitable that the

Company should be wound up as the petitioners are justifiably and genuinely

concerned that the absence of a winding up order from this Honourable

Court, the Company's debts, liabilities, reputations shall be unbearable to

directors and shareholders.

Under paragraph 2 of the Petition, the Respondent Company sought to

be wound up, is described as a limited liability Company duly incorporated

on 19th December 1977 under the Companies Act No. 12 of 2002 and was

issued with Certificate of Incorporation No.6032. The petitioners attached

the incorporation certificate as annexture Continental 1 to their petition. The

registered office of the Company is described as Hotel Continental, Nkrumah

Street, Plot No. 1516/159 Floor II, Ilala, Dar es salaam, Tanzania. The

Petitioners attached a copy of the Certificate of Title as annexture

Continental 2. The share capital of the Respondent Company is described as

Tshs.5,000,000/= divided into 5,000 shares of Tshs.1000 each and that the

amount of capital paid up or credited to be paid up is Tshs.5,000,000. The

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Petitioners attached a copy of memorandum and articles of association of

the Respondent Company bearing the foregoing facts, as Annexture

Continental 3. The memorandum and articles of association show further

that when the Respondent Company was incorporated in 1977, it had three

shareholders namely Samwel Machangu holding 60% of total shares, Pascal

Matunda holding 30% of total shares and Mohamed Husein Sumar holding

10% of total shares. All shares are ordinary or equity shares. According to

official search report dated 12th September 2023 issued by the Registrar of

Companies (BRELA) to Richard Samwel Machangu, the Company has 5

directors namely:

(i) Pascal Matunda,

(ii) Betty Machangu,

(iii) Richard Machangu,

(iv) Jollyn Machangu Samuel, and

(v) Jacqueline Sia Machangu Motcho.

The current shareholders of the Company are shown to be nine (9) namely:

i) Rex Hotels Limited (3250 shares),

(ii) S.M Investments Limited (940 shares),

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(iii) Pascal Matunda (500 shares)

(iv) Betty E. Machangu (270 shares)

(v) Sia Jacquelin Machangu (08 shares)

(vi) Jollyn Samwel Machangu (8 shares)

(vii) Linda Machangu (08 shares)

(viii) Tamara Shedrack Machangu (08 shares)

(ix) Olivia Samwel Machangu (08 shares).

The search report from BRELA shows that the latest annual returns were

filed in 2016 and that the following are the registered charges:

1. Debenture dated 25th May 1999 in favour of CRDB (1996) Bank to secure

a sum of Tsh.20,000,000.

2. Debenture dated 21st November 2013 in favour of CRDB Bank PLC to

secure the sum of Tshs.50,000,000/=

3. Mortgage dated 27th November 2013 in favour of CRDB Bank PLc to

secure the sum of Tshs.50,000,000/=

Upon the petition being filed, the Court directed the Petitioners to

advertise the same and it was advertised in the Government Gazette of 1st

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September 2023 at page 22 and Mwananchi Newspaper of 1st September

2023 at page 7. The Petitioners through their Advocate, Mr. Maunda Raphael,

filed an affidavit in compliance on 13th September 2023 pursuant to Rule 105

(1), (2) and (3) of the Companies (Insolvency) Rules No.43 of 2005,

providing proof of the advertisement of the petition in the Government

Gazette and the Newspaper. The advertisement attracted responses from

one opposer and 4 supporters as follows:

The opposer was Mr. Richard Machangu also known as Richard Samwel

Machangu of Moshi, Kilimanjaro, who described himself as a son of the late

Samwel Machangu and a director and shareholder of the Respondent

Company herein as well as a director and shareholder of S.M Investment

Limited. He filed an affidavit in opposition under Rule 106 (1) of the

Companies (Insolvency) Rules No.43 of 2005. Mr. Richard Machangu stated

in his affidavit that whereas the 1st Petitioner is a shareholder in the

Respondent Company, the 2nd Petitioner is not a shareholder. He attached

the official search report from BRELA dated 12th September 2023 as

annexture HCT1 to substantiate it. He stated that the late Samwel Machangu

left behind two widows namely Betty E. Machangu and Magret Sandi (now

deceased). He stated that his later father left behind a Will that was revealed

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in the family meeting on 13th May, 2006. He attached a supporting affidavit

of Prof. Robert Shedrack Machangu as the person in possession of the Will.

Also, he attached Minutes of the family meeting, collectively as annexture

HCT 2. He stated that the late Samwel Machangu left behind 12 issues

namely:

i) Emma Machangu,

ii) Anna Machangu,

iii) Linda Machangu,

iv) David Machangu,

v) Grace Machangu,

vii) Richard Machangu,

vii) Suzan Machangu,

viii) Esther Machangu,

ix) Jacqueline Machangu,

x) Jolly Samwel Machangu,

xi) Olivia Samwel Machangu and

xii) Tamara Shedrack Machangu.

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 Mr. Richard Machangu testified further in his affidavit in opposition

that the shares of the late Samwel Machangu in the respondent Company

were not inherited by all his 12 heirs enumerated above, but that the shares

were mischievously transferred to Betty Machangu and her 4 biological

daughters only namely Sia Jacqueline Machangu, Jollyn Samwel Machangu,

Tamara Shedrack Machangu and Olivia Samwel Machangu as well as to the

first petitioner Linda Machangu. He stated that the rest of the heirs of the

late Samwel Machangu were left out by Betty Machangu who took out letters

of administration in Court mischievously. He attached annexture HOT 3 being

copies of the share transfer forms.

Mr. Richard Samwel Machangu testified further that during the life time

of his late father, he was working close with him and other directors

managing all affairs of the respondent Company and that the business was

doing very well. He attached annexture HCT 4 being a copy of audited

financial statement for the year ended 2005 wherein his name appears as

one of the directors. He testified that even if the business is operating under

loss, it is not a good and fair reason to wind up the Company. He stated that

since the demise of the late Samwel Machangu, management of the

Company fell in the hands of Betty E. Machangu, together with her biological

11
daughters namely Jollyn Machangu samwel, and Jacqueline Sia Machangu

Motcho and that the other director Pascal Matunda and the opposer were

not allowed to take part in the Company management and operations of the

business. He said that Mr. Pascal Matunda and he accepted the set up so as

to bring harmony and that there is no conflict as to the management of the

business of the Company. He stated that non-issuance of dividends is not a

good cause to wind up the Company as there is an alternative remedy to

sustain business operations of the Company including employing new

management and changing strategies. He stated that the hotel is centrally

located in city center and it can flourish and benefit all the shareholders, but

winding up the Company, will erase the legacy of its founders. He stated that

the voluntary winding up process was initiated without good intentions by

not involving other shareholders and directors of the Company. He stated

that there is pending Revision Application No.30 of 2021 in the High Court

of Tanzania atTemeke against Betty E. Machangu to revoke her appointment

as an administratix of estate and to challenge the way she has administered

the estate of the deceased person including the shares of Samwel Machangu

in the respondent Company. He attached Chamber Summons and affidavit

in Revision No.30/2021 as annexture HCT 5. He stated that the hotel building

12
has 32 rooms and is located in prime area and thus it is illogical to wind up

the Company.

The advertisement of the winding up petition on the other side,

attracted 4 supporters who, on 21st September, 2023, filed a joint affidavit in

support of the petition. These are Betty Machangu, Jollyn Samwel Machangu,

Olivia Samwel Machangu and Tamara Shedrack Machangu. They stated that

in addition to the grounds for winding up as disclosed in the petition, the

shareholders have not benefited since the demise of the late Samwel

Machangu who was the engine of the Respondent Company's business. They

also cited poor relationship between directors and shareholders as the cause

for poor performance of the Company and that they are afraid that the

Company may continue to accumulate losses which may make them

eventually accountable for the losses incurred.

Although the petition was duly advertised pursuant to orders of the

predecessor Judge, and hence it was brought to the attention of the general

public, on 7th June 2024, I ordered the Petitioners to effect service of the

petition to Tanzania Revenue Authority (TRA) specifically on the

understanding that they may be interested in the outcome of the petition

one way or the other. I granted TRA 7 days in case there was a need for

13
them to bring to the attention of the Court any relevant fact in connection

with the present petition. Upon being served, on 14th day of June 2024, TRA

filed in Court an application by Chamber summons and affidavit to be joined

as a party to the winding up proceedings. Their interest to join the case was

premised on the fact that the Respondent Company sought to be wound up

by order of the Court owes TRA Tshs.152, 635,047.31 which comprises of

corporate tax TZS 84,327,479.88; SDL TZS 49,366,268.00; PAYE TZS

2,793,341.00 and VAT TZS 16,147,958.43. The petitioners, upon being

served with the application by TRA to join the petition as interested party,

responded that whereas the alleged tax liability is neither admitted nor

disputed, it can be dealt with in the course of winding up of the Company.

The Petitioners stated that in case a liquidator is appointed, TRA will be one

of the secured creditors to be paid first. The Petitioners resisted the said TRA

to join in the petition arguing that their application had been overtaken by

events as the Court had already heard the matter by way of written

submissions and had scheduled a Ruling date on 21st June 2024. The

Opposer and Respondent as well as supporters did not respond to TRA's

request to join.

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 I was satisfied that the claims by TRA had been entered in Court

record. I took notice of the fact that hearing of the case had already been

done by way of written submissions and the fact that in the event of an order

of winding up of the respondent Company being issued, the liquidator would

be informed of the tax debt of the Respondent Company, which debt was

not disputed by the Respondent Company nor the Petitioners in their counter

affidavit, I proceeded with determination of the petition on merits after

admitting TRA as an interested party supporting the petition subject to

recognition of the respondent's tax liability.

The hearing of the Petition proceeded by way of written submissions. The

two Petitioners (Linda Samwel Machangu and Jacqueline Sia Machangu)

were represented by Mr. Maunda Raphael, learned Advocate. The

Respondent Company (Hotel Continental Limited) and the Opposer (Richard

Samwel Machangu) were at different times represented by Mr. Gratian B.

Mali, learned Advocate. The written submissions, however, expressly stated

that they had been filed for the opposer Richard Machangu, hence I take it

that they were not for the Respondent Company. The Supporters (Betty

Machangu, Jollyn Samwel Machangu, Olivia Samwel Machangu and Tamara

Shedrack Machangu) were represented by Ms. Mary Brown Francis, learned

15
Advocate. I thank all the learned counsel for their insightful arguments and

authorities presented.

Mr. Maunda Raphael, learned Advocate for Petitioners submitted that

the petition was brought under Section 275, 279(l)(e), 282(1) and 295 (1)

of the Companies Act, No. 12 of 2002. He submitted that the only opposition

to the petition comes from Richard Samwel Machangu who is challenging

the Petition on the basis of a Probate case related to the late Samwel

Machangu, thus not a subject of the petition at hand.

Mr. Raphael, learned Advocate, submitted that there are six reasons

why the Petitioners are praying for winding up of the Respondent Company.

The first ground is that the Company is operating under loss and has not

declared dividends to its shareholders for a long time. He argued that upon

the demise of its founder Samwel Machangu in 2006, the Respondent

Company dealing with hotel management, was placed under new

management team but still their efforts proved futile. He submitted that in

2010 the Company's business closed and was re-opened in 2015 only to

close again in 2017. He submitted that in 2019, two directors Betty Machangu

and Pascal Matunda decided to take a loan from CRDB Bank to revive the

Company's hotel business but there was no business due to COVID -19

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pandemic and hence the hotel business of the respondent Company

continued to make losses. As a result of sustaining losses, he argued, the

Respondent has failed to pay dividends, salaries as well as creditors' and

Government bills. He submitted that while under section 180(1) and (2) of

the Companies Act, Directors are obliged to declare dividends, the

Respondent Company has not declared any dividends since 2006 upon the

death of the late Samwel Machangu.

The second ground presented by Mr. Raphael, learned Advocate was

that the Company has not called up for any periodic meetings for a significant

period of time. He submitted that under section 133(1) of the Companies

Act, a Company should call for regular statutory meetings every year. He

submitted that it has been more than 5 years now since the Respondent

Company's Directors convened a general meeting to discuss affairs of the

Company. He argued that the meeting of 17th November 2021 is the only

meeting called and whose sole agenda was to pass a resolution for voluntary

winding up of the Respondent Company. He referred to annexture

Continental 5. Mr. Maunda Raphael learned Advocate, proceeded to submit

that the Respondent Company has not been audited for a long time now or

at least no such audited report has ever been shared with the shareholders.

17
He argued that this contravenes section 164(1) of the Companies Act and it

is a sufficient ground for winding up. He referred to the case of In the

matter of Petition for Winding up of Kilwa Ruins Limited between

Amir Ramadhan Mpungwe and Michael John Lancaster and Others,

Misc. Commercial Application No. 14 of 2021 decided by this Court, for the

rule that where a Company is run contrary to the law by not holding statutory

meetings and is characterized by disputes which make it impossible to

conduct its business, that constitutes a good cause for winding up.

The fourth ground advanced by Mr. Maunda Raphael, learned

Advocate, was that there is a breakdown of relationship between the

shareholders and directors which has made the Company cease its

operations. He argued that since the demise of the co-founder Mr. Samwel

Machangu, who was a business tycoon in hotel management, there is no

peace and harmony between and among the shareholders and directors of

the Company. He referred to paragraph 8 of the affidavit in opposition where

the opposer Mr. Richard Samwel Machangu stated that he left the

management position of the Respondent Company due to breakdown of

relationship between and among the directors and shareholders. He

submitted that some shareholders are living outside Tanzania namely Jollyn

18
Machangu Samuel, Olivia Samwel Machangu and Tamara Shedrack

Machangu and they have lost interest in the affairs of the Respondent

Company and that makes it difficult to convene meetings physically due to

difficulty of obtaining the requisite quorum. Mr. Raphael submitted that the

other founder co-shareholder Mr. Pascal Matunda, is not participating even

in the winding up proceedings rather his son Pascal Matunda Jr is the one

who has been participating and saying that his father is too old and ill such

that he cannot handle Company affairs. Mr. Raphael submitted that

Annexture 5 (special resolution) dated 17th November 2021 is a clear proof

of the misunderstanding among the shareholders and directors of the

Company whereby they had resolved to wind up the Company voluntarily

and had proceeded to appoint Mr. Ayoub Mtafya as the official liquidator but

there emerged misunderstandings among the shareholders and directors of

the Company which forced the said official liquidator to cancel the voluntary

winding up process by filing Form No.360 with the Registrar of Companies.

The said official liquidator cited the misunderstandings among the

shareholders and members as the cause that made his work impracticable.

Mr. Maunda Raphael, learned Advocate, referred to paragraphs 2.4 and 2.5

of the petitions. Mr. Raphael submitted further that in the case of Ernest

Andrew versus Francis Philip Temba, (1996) TLS LR 287 at page 291,
19
the Court held that: "it would be just if the Company is wound up because

the former directors were not in talking terms so to speak, each director

accusing the other director of one or the other." The Court proceeded to wind

up the Company in terms of section 167(f) of the Companies Act and

appointed the Registrar of Companies to act as official receiver. He submitted

that a similar position was taken by the Court in the case of in the matter

of winding up of Joelle Dahan versus Albero Italian restaurant &

Hotel and another, Misc. Civil Cause No.3 of 2017. The case cited serious

differences or misunderstandings between the shareholders/ directors,

which hinder smooth and efficient running of the Company as a commercial

concern, as a good cause for winding up of the Company. He buttressed his

argument further by relying on the cases of in the matter of petition for

winding up of Bazizane Company Limited, Civil Cause No.224 of 2020

decided by the High Court of Tanzania as well as the case of Chu versus

Lau (British Virgin Island) UKP 24 decided by the Privy Council in 2020.

He argued that in both cases, misunderstandings or management deadlock

were cited as a good cause for winding up of a Company.

The sixth reason advanced by Mr. Raphael learned Advocate was with

respect to the petitioners not having access to books, office assets and

20
records of the Company. He relied on sectionl51 (1) of the Companies Act

which requires every Company to keep books of account accessible to

directors showing balance sheet of profits and losses. He submitted that the

Company's premises are closed down, and shareholders and directors do not

know the balance in the Company's bank account No.01J1007567900 CRDB

Lumumba Branch. They do not known the status of their assets and there

are no audited reports for years. He argued that these circumstances justify

winding up of the Company.

Based on the foregoing six reasons, Mr. Raphael, learned Advocate,

prayed that this Honourable Court be pleased to find that it is just and

equitable to wind up the respondent Company; grant interim and or

preservatory orders to safeguard the Company and its shareholdesers. He

prayed further that the Court be pleased to appoint a liquidator to take

custody and control of the Company's affairs, books, records and assets,

freezing the Company's bank account No.01J1007567900 in the name of

Hotel Continental Limited maintained with CRDB Bank Lumumba Branch. He

also prayed for the Court to order that the liquidator should take into custody

and control the Company's assets styled as Hotel Continental building with

21
Title Number 186013/58 together with furniture, equipment, fridges,

mattresses, televisions, air conditioner and printer.

The supporters through their learned Advocate Ms. Mary Brown

Francis, filed reply submissions fully supporting the petition for winding up

of the Respondent Company. They cited the reasons mentioned under

paragraph 6 (a) - (m) in the petition as having raised sufficient grounds for

winding up of the Company by the Court on just and equitable grounds. In

addition, the learned counsel submitted that since the death of the co­

founder, the late Samwel Machangu, the shareholders have not received any

dividend as the Company has not made any profit from its business. She

submitted that the survival of the Company depends upon its financial

capabilities. She relied on the case of Winding Up Petition in the matter

of Winding up of Benson Informatics Limited, Misc. Commercial Cause

No.57/2020 as well as Shell Tanzania Limited versus Scandinavian

Express Services Limited, Misc. Commercial Case No.36 of 2005. The

supporters also cited reasons such as loss of mutual confidence among

directors and shareholders, failure to keep books of account at the registered

office of the Company, failure to hold annual general meetings, foreign

residence of some of its shareholders as well as the termination of the

22
voluntary winding up process, as other "just and equitable" causes for

winding up of the Company. Ms. Mary Brown Francis, learned Advocate,

concluded that the Company be wound up as there are genuine concerns

that in absence of the winding up order, the Company's debts, liabilities,

reputation shall be unbearable to directors and shareholders.

For the Opposer, Richard Samwel Machangu, reply submissions were

filed by Mr. Gratian B. Mali, learned Advocate. He submitted that upon the

death of the late Samwel Machangu, the management of the Company fell

in the hands of Jacqueline Sia Machangu (Petitioner), Betty Machangu and

Jollyn Machangu (supporters). He submitted that the said Jacqueline Sia

Machangu and Jollyn Machangu are biological daughters of Betty Machangu.

He submitted that after the new team of management took over, the opposer

Richard Machangu, and the other director and co-founder Paschal Matunda,

were not allowed to participate in the Management of the affairs of the

Company. He argued that in order to keep harmony, the duo decided not to

interfere with new management thereby leaving all duties and obligations of

running the Company upon the new management team and that the two

directors after stepping down have never complained. Mr. Gratian Mali,

learned Advocate, submitted therefore that all the allegations made by the

23
petitioners and the supporters like not declaring dividends, having no access

to Company's books of accounts and office, failure to call annual general

meetings and others are all complaints by the petitioners and supporters

against themselves as the directors of the Company.

Mr. Mali, learned Advocate, submitted further that under the provisions

relied upon to file the present petition, the Court can wind up the Company

where, in the opinion of the Court, it is just and equitable that the Company

should be wound up. The learned counsel for the Opposer submitted that

the six reasons advanced by the petitioners do not constitute just and

equitable ground for winding up of the Company because the Petitioners and

Supporters constitute one team as managers and directors of the business

of the Respondent Company. He submitted that all that has been submitted

is just a mere narration not backed up by substantive evidence to assist the

Court to see that it is indeed just and equitable that the Company be wound

up.

On break down of relationship among the shareholders and directors,

Mr. Gratian Mali, learned Advocate, submitted that since the petition is

brought by the petitioners and supported by supporters, who are the very

persons in the management of the Company, they should have disclosed who

24
among them is responsible for the breakdown of the relationship that affects

smooth management of the Company among them. He submitted that the

other Directors Richard Samwel Machangu and Paschal Matunda ceased to

have active role in the management of the Company after the demise of the

late Samwel Machangu and, as such, they should not be associated with

flimsy unfounded allegations of mismanagement as advanced by petitioners

and supporters. Mr. Gratian Mali, learned Advocate, submitted that the

petition is an abuse of Court process with an ill motive of disposing of the

assets of the Company. He submitted that all the alleged problems, if they

exist, are made up by the Petitioners and supporters themselves. He relied

on the case of Ebrahim versus Westerbiurne Galleries Limited (1973)

AC 360 where the Court of Appeal of England held that:

"Petitioners should come with dean hands. That is,

they should not themselves be guilty of

unconscionable conducts. If the petitioners'

conducts led to the reasons for winding up, the relief

will be denied".

Mr. Mali, learned Advocate, submitted further that in the case of Re-

Yenidje Tobacco Co.Ltd (1916) 2 Ch.426, it was held that: "refusal to

meet on matters of business is a good cause for winding up but such

25
impossibility should not have been caused by the person seeking to take

advantage of it".

Mr. Gratian Mali, learned Advocate, submitted that the ground for

winding up, relied upon by the petitioners and the supporters, is "just and

equitable". He argued that the words "just and equitable" were defined by

Lord Wilberforce in Ebrahim versus Westerbourne Gallaries Limited

(supra), in relation to winding up to mean:

"Recognition of the fact that, a limited Company is

more than a mere legal entity, with personality in

law of its own; there is a room in Company law for

recognition of the fact that behind it or amongst it,

there are individuals, with rights, expectations and

obligations interse, which are not submerged in the

Company structure."

Mr. Gratian Mali, learned Advocate, argued that winding up order is a

death sentence on a Company, it is an order of the last resort. Unless there

is evidence, that pursuit of the alternative remedy has failed, the petition

should fail. He relied on the case of Re-A Company, Ex parte Estate

Acquisition and Development (1991) BCLC 154 for the foregoing

position. He also relied on section 282(2) of the Companies Act for the

position that the Court will wind up a Company if, in the absence of any
26
other remedy, it would be just and equitable that the Company should be

wound up. He concluded that in the case of Yusufali versus Bhardwaj

(2008) 2 EA, which was referred to by the Court of Appeal of Tanzania in

Hashim Hassan Mussa and 3 Others, Civil Appeal No.515 of 2021, the

rule was established that unless there is evidence that the pursuit of

alternative remedy has failed, the petition should fail.

Mr. Gratian Mali, learned Advocate, submitted that the Respondent

Company carries on a sound and viable business and owns a hotel building

with 32 rooms in a prime area in City Center of Dar es Salaam with huge

value and it is still operating. He argued that there are several alternative

remedies including the petitioners and supporters selling their shares at a

fair value whereupon the opposer can buy out the petitioners and that the

opposer had once approached the petitioners for purchase of their shares

but the parties could not agree on the fair price.

Mr. Gratian Mali, learned Advocate, submitted that in the case of

Yusufali versus Bhardwaj (supra) the Court held that where there is an

alternative remedy and offer is made to purchase minority's shares, the

Company ought not be wound up but a proper formular for valuation of such

shares should be provided so that the dissent shareholders go out of the

27
Company leaving other shareholders to run. Also, he referred the Court to

the case of Hashim Hassan Mussa versus Dr.Chrispin Semakula and

2 Others, Civil Appeal No.515 of 2021 wherein directors had reached a

deadlock but the Court was still of the opinion that there existed alternative

remedy which the parties were unreasonably not pursuing and hence

declined to make winding up order. Mr. Gratian Mali, learned counsel,

concluded his submissions by praying that the petition be dismissed with

costs or alternatively that the Petitioners be ordered to agree on alternative

remedy of their value of shares being established for proper disposal thereof.

By way of rejoinder, the learned counsel for petitioners, Mr. Raphael

Maunda, submitted that the submissions by the opposers' learned counsel

are not supported by the affidavit in opposition. He submitted that the

submissions by the opposers did not attach any of the unreported authorities

relied upon, hence not credible.

Mr. Maunda submitted that even before filing the petition in Court, the

Company was not doing well and that the stepping down of Mr. Richard

Samwel Machangu and Paschal Matunda from directorship of the Company,

is a proof of the serious breakdown of relationship. He submitted that among

the persons who can petition for winding up under section 281 (1) of the

28
Companies Act, Cap 212, the petitioners are inclusive. Mr. Raphael reiterated

the position in the cases of Re-Yenidje Tobbacco Co.Limited (1916)

(supra) and In the matter of petition for winding up of Joelle Dahan

versus Albero Italian Restaurant (supra) that serious misunderstandings

or breakdown of relationship between directors/shareholders, is a just and

equitable cause for winding up of a Company by the Court. He refuted

allegations of petitioners intending to benefit as there is nothing to benefit

from but that the petitioners are looking for benefits of all shareholders. He

concluded by submitting that the Opposer does not have serious intention

to buy the shares of the other shareholders but is merely bluffing as he was

given enough time by the Court to negotiate on that possibility but he failed

and, therefore, he is now delaying the process maliciously for his own gains.

Ms. Mary Brown Francis, learned Advocate for supporters, also filed

rejoinder submissions. She argued that despite the stepping down of Richard

Samwel Machangu and Paschal Matunda from directorship, the situation did

not ease rather the hostility increased as the relationship between

stakeholders (directors and shareholders) is poor and irreparable. She

argued that the Company is now at the edge of a certain death with no

meetings held, properties deteriorating in value, majority shareholders

29
residing outside Tanzania, and they do not speak to each other. She

reiterated the position in the two cases of Chu versus Lau (supra) and In

the matter of winding up of Joelle Dahan versus Albero Italian

Restaurant (supra) that where misunderstandings hinder the smooth

management of the Company as a commercial Company, winding up order

should be issued by the Court. Ms. Mary Brown Francis, learned Advocate,

concluded by arguing that the allegation of the opposer's intention to

purchase the shares of the other shareholders is not genuine as he has failed

to do so despite being given enough time. That marked the end of the

submissions by the learned counsel for the petitioners, Supporters and the

Opposer in this petition.

The numerous related parties with common surnames tend to obscure

the reality in this case somehow. Therefore, before considering the written

submissions by all parties, I should underscore some critical observations

emanating from the pleadings exchanged and filed relating to the parties

herein and their connection with the Respondent Company. Essentially there

are two major camps. The first one is that of the two petitioners assisted by

four supporters. The second camp is that of the lone opposer. Petitioners for

winding up are Linda Machangu who is a shareholder with 8 shares and

30
Jacqueline Sia Machangu who is a shareholder with 8 shares and also serving

as a director in the respondent Company. The supporters of the petition for

winding up are (i) Betty Machangu who is a shareholder with 270 shares and

also a Director in the Respondent Company;(ii) Jollyn Samwel Machangu

who is a shareholder with 8 shares who is also a Director in the Respondent

Company;(iii) Olivia Samwel Machangu who is a shareholder with 8 shares

and(iv)Tamara Shedrack Machangu who is a shareholder with 8 shares.

Brought together, the petitioners and Supporters directly own 310 shares in

the respondent Company and indirectly they own 3250 shares through their

other Company called Rex Hotel Ltd. According to Annexture Continental 5

to the Petition, which is a special resolution for the abortive attempt for

voluntary winding up of the respondent Company passed on 17th November

2021, the Directors who transact business for Rex Hotel Limited are Tamara

Shedrack and Betty E.Machangu. This holding Company is the majority

shareholder in the Respondent Company holding 3250 shares out of the total

5000 issued shares. Annexture Continental 5 also shows that the other

holding Company is S.M Investment Limited which is holding 940 shares in

the Respondent Company. The directors of S.M. Investment Limited are

Tamara Shedrack and Betty E. Machangu whose names are shown in

annexture Continental 5. The other director is Richard Machangu according

31
to his affidavit a fact which has not been disputed by the other parties.

Annexture Continental 5 shows further that the shareholders of S.M

Investment Limited are Sia Jacqueline Machangu, Jollyn Samwel Machangu,

Linda Machangu, Tamara Shedrack Machangu, Olivia Samwel Machangu and

Betty E. Machangu. According to the affidavit of Richard Machangu in

opposition to the petition, he is also a shareholder in S.M Investment Limited.

As the breakdown of shareholding in S. M. Investment Limited is not shown

in annexture Continental 5, it is only safe to say that the Petitioners and

supporters have the majority on the Board of Directors of that Company and

they own substantial number of shares in it as well. Without taking into

account the number of shares held by the petitioners and supporters in S.M

Investment Limited, still it can be said with certainty that the Petitioners and

Supporters own or have controlling shareholding of more than 71.2% of the

total shares in the Respondent Company (Hotel Continental Limited).

The Opposer Richard Samwel Machangu is a Director in the

Respondent Company without directly holding any shares in it. Richard

Samwel Machangu indirectly owns shares through his partial shareholding in

another holding Company called S.M Investments Limited which is holding

32
940 shares in the Respondent Company. Not all 940 shares belong to him

through.

The following critical observations are made from all that:

(i) Petitioners and Opposers directly and indirectly own or have a control of

at least 3560 shares out of the total 5,000 shares in the respondent

Company. They are the majority or controlling shareholders of not less

than 71.2% in the Respondent Company.

(ii) The Petitioners and Supporters have 3 out of 5 members in the Board of

Directors of the Respondent Company. These are Jacqueline Sia

Machangu (First Petitioner), Betty Machangu (supporter of the petition)

and Jollyn Samwel Machangu (supporter of the Petition).

(iii) It is not disputed that currently the three Directors who are the

petitioners and the supporters of the petition are the only ones in control

of the Company after the other two directors, Richard Machangu and

Paschal Matunda, stepped down from active Management of the

Respondent Company.

(iv) The opposer Richard Machangu is not a shareholder in the Respondent

Company. Through his partial shareholding in S.M Investment Limited,

33
 he may only constitute the minorities side in the respondent Company.

He is also a minority in the Board of Directors.

(v) The Respondent Company is neither opposing nor supporting the present

petition. In fact, during the Court proceedings, Mr. Gratian Mali, learned

Advocate used to appear for the respondent Company but in drafting the

affidavit in opposition as well as the written submissions, Mr. Gratian Mali,

ended up representing Richard Machangu, the opposer. As Richard

Machangu and Hotel Continental Company Limited are different persons

in law, in effect, the Company did not file any pleading nor written

submissions.

(v) The Respondent Company was not represented at all by the persons who

in law should have acted as its agents namely directors. One of its

directors Jacqueline Sia Machangu is the Petitioner for winding up of the

Company. The other two directors Betty Machangu and Jollyn Machangu

support the petition for winding up of the Company hence acted against

the Company too. The fourth director Mr. Paschal Matunda opted not to

take any part in the petition. After it was advertised, he did not enter

appearance to oppose or resist it personally or on behalf of the Company.

The fifth director Mr.Richard Machangu challenged the petition, not on

34
 behalf of the Company, but on behalf of himself personally as an alleged

heir to the estate of his late father, Samwel Machangu.

(vi) There is a breakdown of relationship between the Petitioners and the

supporters on one hand and the Opposer on the other hand. The

breakdown of relationship is so serious that Betty Machangu, one of the

supporters believes that an armed robbery incident at her house in

Shirimatunda, Moshi in which her sister was shot at, is connected with

the disputes concerning this Company and the attack was intended at

her.

(vii) There is a raging inheritance dispute between children of the late

Samwel Machangu born from the wombs of different women. On one

hand, the Petitioners and supporters constitute the widow of the late

Samwel Machangu and her biological daughters, while the Opposer is a

biological son of the late Samwel Machangu, from another mother.

(vii i) There is mismanagement of the Respondent Company. The incidents

complained of include: not declaring dividends to its shareholders, not

being able to make any profits, poor operations of the Company,

resentment, cost overruns and loss of business. Others include

directors and shareholders having no access to or control of the

35
 Company's books, office, assets and records. Also, that neither

directors' nor shareholders' annual general meetings or extraordinary

general meetings have been called and that no audited accounts nor

annual returns have been filed for a long time. Other mismanagement

issues raised include the allegation that the hotel is not renovated for

a long time now due to financial constraints as a result the hotel has

been in ruins and that some of the directors and shareholders are living

outside Tanzania as a result the management of the Company is not in

the required standards. In short it is clear that the Articles of

Association of the Respondent Company as well as the relevant legal

provisions have been not complied with by Respondent's Directors and

supporters.

With the above picture and reality in mind, I proceed to determine the

petition while considering the evidence in the affidavits, the arguments

advanced by all the parties in their written submissions and the position of

the law in this regard.

In determining the present application, I will consider the meaning,

scope and limitations of the ground upon which the application was brought

namely "just and equitable". Then I will assess and test the material facts of

36
the present case in view of the prevailing position of the law so as to get the

outcome justified by the law and that suits justice of the case at hand.

In Winding-Up Cause No 12 Of 1977, In Re Garnets Mining Co Ltd, the

High Court of Kenya at Nairobi, held that:

The application is usually made by the creditors who

want the Company to pay its debts, and it is

uncommon for it to be made by the shareholders

because the legislation for companies is designed to

permit the members of a Company to manage its

own affairs including winding it up.

In Re Cuthbert Cooper & Sons Ltd [1937] Ch 392 the Court laid an

emphasis that:

"Each Company had its common law in the form of

its memorandum and articles of association which

should be sufficient for its disputes. So, applications

under the "just and equitable"subsection tended to

be confined to instances where the deadlock,

oppression or exclusion could be shown to be due to

the mala tides or lack of bona tides of the

opponents:"

The two cases above are to the effect that the memorandum and

articles of association of a Company should be the first port of calling

37
whenever internal disputes occur in the Company. If there is no alternative

remedy capable of being pursued practically in the Company's constitution

or the relevant provisions of the Companies Act, then resort can be had to

the Court under the ground of just and equitable cause seeking for an order

of the Court to wind up the Company. Also, the authorities show that

ordinarily a petition for winding up under just and equitable cause is

expected to be presented in Court by creditors rather than shareholders

because the shareholders have an alternative way, namely the internal

mechanism of solving their disputes or making decisions through Company

meetings. In the present case, the petition has been brought by not only

shareholders, but the majority and controlling shareholders who are also the

majority and the only active members of the Company's Board of Directors.

This is unusual in Company law. I have looked at the Articles of Association

of the Respondent Company with respect to its decision-making mechanism

in both the member and directors' meetings. The Memorandum and Articles

of Association were attached by the Petitioners as annexture Continental 1

to the petition. Correctness of the same has not been disputed by the

Respondent, the Opposer or by the Supporters.

38
 The decision-making power of the Members in their general meetings

is covered in many provisions, in particular the following articles:

Article 46 provides that:

"An ordinary genera! meeting of the Company shall

be held once in every calendar year at such time (not

being more than fifteen months after the holding of

the last preceding ordinary genera! meeting) and

place as the Board shall appoint"

Article 47 provides that:

"all genera! meetings other than ordinary genera!

meetings shall be called extraordinary general

meetings."

"52. No question shall be transacted at any general

meeting unless a quorum of Members is present at

the time when the meeting proceeds to business;

save as herein otherwise provided two members

present in person or by proxy shall be a quorum."

Under the Articles of association of the Respondent Company, it is the

Members Annual General Meeting which is vested with powers even to

resolve to have the Company wound up under Article 130 that provides that

"the Company may be wound up by a special resolution of the Company. "In

39
the case at hand, it appears that the Petitioners and the Supporters

have neglected to exercise their powers and follow the procedures

contained in their own Memorandum and Articles ofAssociation. "

They requisite quorum of at least two members.

The decision-making powers of the board of directors are stipulated under

the following Articles:

POWERS AND DUTIES OF DIRECTORS

"51. The management of the business of the

Company shall be vested in the Board which, in

addition to the powers and do all such acts and

things as may be exercised or done by the Company

and are not hereby or by Ordinance expressly

directed or required to be exercised or done by the

Company in genera! meeting.

91. The quorum necessary for the transaction of the

business of the Board may be fixed by the Board and

unless so fixed shall be two.

90. The Board may meet together for the dispatch of

business, adjourn and otherwise regulate its

meetings as it thinks fit. Questions arising at any

meeting shall be decided by a majority of votes. In

40
 case ofequality of votes the Chairman shall not have

a second or casting vote."

In the present case, the petitioners and the supporters constitute the

majority shareholders and the majority members of the board of directors.

The articles of association show that in both the members general meetings

and directors' meetings, majority of votes would determine the poll and

decide the matters transacted. In both the members' general meetings and

board of directors' meetings, the necessary quorum is 2 members or two

directors only. The petitioners and the Supporters side in this case has 7

members namely Linda Machangu, a shareholder with 8 shares, Jacqueline

Sia Machangu, a shareholder with 8 shares, Betty Machangu, a shareholder

with 270 shares, Jollyn Samwel Machangu, a shareholder with 8 shares,

Olivia Samwel Machangu, a shareholder with 8 shares, Tamara Shedrack

Machangu, a shareholder with 8 shares and Rex Hotels Limited, a

shareholder with 3250 shares. The Petitioners and supporters, without

considering their shareholding in S.M Investment Limited, have at least 3560

shares out of 5000 shares which is 71.2%. They also have three out of five

members of the board of directors namely Jacqueline Sia Machangu, Betty

Machangu and Jollyn Samwel Machangu. With the quorum requirements set

as low as two members and with the rule that decision making will be on the

41
number of shares held by the member, with the power of calling both

members' annual general meetings and meetings of board of directors,

vested upon the directors, I cannot see any impediment to the Petitioners

and supporters to utilize the internal mechanism in their articles of

association to resolve all their disputes and make important decisions for the

continuance of the Company, through either the meetings of board of

directors or the members annual general meetings. Actually, the opposer is

not personally even a member or shareholder. If he comes through his partial

shareholding in S. M. Investment Limited that holds only 940 shares out of

the 5000 shares of the Respondent Company, the opposer will belong to the

minority and cannot create any deadlock in decision making of the

respondent Company. I find that the Petitioners and supporters have

neglected to make use of their own agreed internal legal framework for

governing the Company. They have completely abandoned the articles of

association or perhaps they did not know the central role of the articles of

association in Company management.

In Company law when a person subscribes to become a member of

the Company, he must be deemed to be aware from the outset of his position

42
under the articles because, as per Lord Selborne LC in Oakbank OH Co v

Crum (1882) 8 App Cas 65, 70, 71), the position of the law is that:

"Each party must be taken to have made himself

acquainted with the terms of the written contract

contained in the articles of association, and the Acts

of Parliament, so far as they are important He must

also in law be taken (though that is sometimes

different from what the fact may be) to have

understood the terms of the contract according to

their proper meaning; and that being so he must

take the conseguences, whatever they may be, of

the contract which he has made, (emphasis

supplied)"

I asked myself whether with all the avenues in the Memorandum and

Articles of Association through which the members and Directors could have

sorted out their differences according to their own agreed rules for

management of their Company, was it really justifiable for the Petitioners

and supporters in this case to rush to Court seeking a winding up order under

the ground of just and equitable cause? I find it not to be the case. The

resort to the discretionary powers of the Court to order a compulsory winding

up on "just and equitable" ground should be the avenue of last resort after

having exhausted all practicable alternative remedies available to members

43
and directors of the Company. It is my ruling that the other available

remedies ought to have been exhausted before resorting to the discretionary

powers of the Court under "just and equitable" ground for winding up of the

Company. I find backing for my foregoing position from statutory provisions

and judicial precedents. Firstly, is the provision of section 282 (2) (b) of the

Companies Act, Cap 212 which stipulates that:

"282.-(l) On hearings winding-up petition the Court

may dismiss it, or adjourn the hearing conditionally

or unconditionally, or make any interim order, or,

any other order that it thinks fit.

(2) Where the petition is presented by members of

the Company as contributories on the ground that it

is just and equitable that the Company should be

wound up, the Court, ifit is of opinion —

(a) that the petitioners are entitled to relief either by

winding up the Company or by some other means;

and

(b) that in the absence ofany other remedy it would

be just and equitable that the Company should be

wound up, shall make a winding-up order, unless it

is also of the opinion both that some other remedy is

available to the petitioners and that they are actino

unreasonably in seeking to have the Company

44
 wound up instead of pursuing that other remedy

(emphasis supplied)."

On judicial decisions, I rely on the case of In The Matter of

Compulsory Winding Up of INETS Company Limited Between

Ephraim Solomon Swila and INETS Company Limited, Misc.

Commercial Cause No. 48 of 2022, where Hon. Mbagwa,!, observed at

pages 10 and 11 that:

"This Court has held, on different occasions, that

winding up a Company is tantamount to killing or

burying the Company hence there should be genuine

reasons. See the cases of Dangote Cement Limited

vs NSK OH and Gas Limited, Misc. Commercial

Application No.8 of2020, HC (Commercial Division)

Arusha and Tanzaiasa Limited vs Tractors Limited,

Misc. Commercial Cause No. 11 of 2022, HC

(Commercial Division) at Dar es Salaam. With the

above position in mind, are there genuine reasons to

kill the respondent Company which is trading at

profit and manned by two directors? Again, my

answer is absolutely no. Indeed, the petition is

devoid of compelling reasons for the Court to wind

up the Company"

45
In KiritbhaiR. Pate! v. Lavina Construction & Finance Ltd, [ 1999], the

Gujarat High Court reached the conclusion that:

When other remedies fail to adequately protect the

Company's genera! interests, a Court may resort to

relief based on the just and equitable ground,

I find that the Respondent Company's Articles of Association contain

alternative remedies which are adequate enough to protect the Company's

interests and deal with the disclosed management crisis rather than for the

Petitioners and supporters seeking a Court order for compulsory winding up

of the Company on the "just and equitable" ground which is discretional. In

the case at hand, it is the Directors and shareholders of the Company who

have chosen not to implement the avenues available under the articles of

association and rushed to Court seeking the intervention of the Court on a

matter which the Articles of Association of the respondent Company and the

Companies Act have given them all the necessary powers to handle. If the

directors and shareholders will be allowed to easily abdicate their powers

under the articles of association and the provisions of the Companies Act and

instead rush to Court for each and every management dispute, then

companies' business will stagnate since it would take more time for Courts

of law to resolve those disputes than the well-tailored internal mechanisms

46
under the articles of association of the companies. The delayed disposal of

companies' disputes in Court will eventually stifle national economic growth

as companies are principally formed to do business. Also, if every dispute in

the Company, for which the articles of association and the Companies Act

adequately vest practicable powers to the members or directors of the

Company to handle, is filed in Court, the Courts will be flooded with

multitudes of disputes related to management of the companies than the

Courts will be able to handle and dispose of timely. The very essence of the

law to enable individuals organize themselves in a Company, was inter alia,

to secure their collective self-regulation by way of constitutive technique.

The law constitutes the several persons as members of the Company and

then regulates them collectively as such in terms of the provisions of the

Companies Act. On the other hand it enables them to regulate themselves

internally by way of their articles of association. Under the Articles of

association of the respondent Company, the petitioners and supporters who

are the majority shareholders, and are the majority and the only sitting

members of the Board of directors of the Company, had all the mechanisms

they needed to control and manage their Company but none was utilized by

them, instead, they rushed to Court seeking for a compulsory winding up

order on the ground of just and equitable cause. All the complaints advanced
47
in the Petition as grounds for winding up of the Respondent Company which

allegedly constitute the "just and equitable cause" could be solved by the

members and the directors by resorting to the provisions of the articles of

association of their Company. The alternative remedies under the Articles of

Association of the Respondent Company have not been pursued.

In addition to, and in tandem with, pursuing the remedies under the

Articles of Association, there were other alternative remedies for rescuing

the Company from the crisis under the Companies Act, Cap 212. One such

alternative to seeking the winding up order, was seeking an administrative

order under section 247 of the Act. I reproduce the relevant part:

(2) An administration order is an order directing

that, during the period for which the order is in force,

the affairs, business and property of the Company

shall be managed by a person ("the administrator")

appointed for the purpose by the Court.

(3) The purposes for whose achievement an

administration order may be made are —

(a) the survival of the Company, and the whole or

any part of its undertaking, as a going concern....

Apart from the administration order, the petitioners and supporters had

an alternative and practicable remedy of entering into a voluntary

48
arrangement under section 240 of the Act. This could be done through the

Company meetings something which was in the mandate and capacity of the

Petitioners and supporters as the majority shareholders and directors without

recourse to the discretionary powers of the Court. I reproduce sections 240

and 243 of the Act on voluntary arrangement.

"240.-(I) The directorsofa Company (other than one

for which an administration order is in force, or

which is being wound up) may make a proposal

under this Chapter to the Company and to its

creditors fora composition in satisfaction ofits debts

or a scheme of arrangement of its affairs (from here

on referred to, in either case, as a "voluntary

arrangement").

(2) A proposal under this Chapter is one which

provides for some person ("the nominee") to act in

relation to the voluntary arrangement either as

trustee or otherwise for the purpose of supervising

its implementation; and the nominee must be a

person who is qualified to act as an insolvency

practitioner in relation to the Company.

243.-(I) The meetings summoned under section 242

shall decide whether to approve the proposed

49
 voluntary arrangement (with or without

modifications)."

Another alternative statutory remedy was filing an application on the

grounds of unfair prejudice or derivative action by the minorities members

(the two petitioner) who are complaining of being sidelined in the

management of affairs of the Company. This option is available under section

233 of the Companies Act. It provides:

"233.-(I) Any member of a Company may make an

application to the Court by petition for an order on

the ground that the Company's affairs are being or

have been conducted in a manner which is unfairly

prejudicial to the interests of its members generally

or of some part of its members (including at least

himself) or that any actual or proposed act or

omission of the Company (including an act or

omission on its behalf) is or would be so prejudicial.

If the Court is satisfied that the petition is well

founded, it may make such interim or final order as

it sees fit for giving relief in respect of the matters

complained of."

If the petition based on derivative action or unfair prejudice was

successfully brought by a member, the Court could issue an array of relevant

orders as prescribed under section 233(3) of the Act including an order to:
50
 " {a) regulate the conduct of the Company's affairs

in the future, (b) require the Company to refrain

from doing or continuing an act complained ofby the

petitioner or to do an act which the petitioner has

complained it has omitted to do,

(c) authorize civil proceedings to be brought in the

name and on behalf of the Company by such person

or persons and on such terms as the Court may

direct,

(d) provide for the purchase of the shares of any

members of the Company by other members of the

Company or by the Company and, in the case of a

purchase by the Company, for the reduction

accordingly of the Company's capital, or otherwise."

Another alternative remedy to Court order for compulsory winding up

on the just and equitable ground, which was available to the petitioners and

supporters herein, was members' voluntary winding up under section 333

of the Companies Act. I reproduce it

"333-(l) A Company may be wound up voluntarily-

(a) when the period, if any, fixed for the duration of

the Company in the articles expires, or the event, if

any, occurs, on the occurrence of which the articles

provide that the Company is to be dissolved, and the

51
 Company in general meeting has passed a resolution

requiring the Company to be wound up voluntarily;

may be wound up voluntarily;

(b) if the Company resolves by special resolution

that the Company be wound up voluntarily;

(c) if the Company resolves by special resolution to

the effect that it cannot by reason of its liabilities

continue its business, and that it is advisable to wind

up."

The resignation of Mr. Mtafya as a liquidator during the voluntary

winding up was unfounded. He had support of majority members.

The consequence of members' voluntary winding up would be no

different from the ones sought herein, but its grounds would be different.

Whereas there might be no grounds for compulsory winding up of a

Company by order of the Court under the just and equitable cause, the same

Company might be wound up by way of members' voluntary winding up

process. The two are different in many respects. Before me is an application

by way of petition to wind up the respondent Company by order of the Court

on the ground of just and equitable cause. I find that as the Petitioners and

supporters had alternative remedies, the Court cannot proceed to use its

discretionary power under section 282 of the Companies Act.

52
 All the alternative remedies I have explained herein above were readily

and practicably available to the petitioners and supporters before they could

resort to the discretionry remedy of compulsory winding up on the just and

equitable ground. I take note that all the arrangements I have shown above,

require participation by the members through their duly convened meetings.

The opposer, personally, is not a member in the respondent Company. He

could not, as such, have been directly a party to the decision-making process

in pursuit of any of the remedies above enumerated which were available to

the members of the Company. The opposer, in his affidavit in opposition,

alleged that he is a biological son of the late Samwel Machangu and that he

has a probate matter wherein he is claiming for inheritance of a portion of

the shares in the Respondent Company by virtue of an alleged Will. Until that

inheritance right is established, shares are transmitted and the opposer's

name is entered into the register of members of the Company, the opposer

is not a member of the Respondent Company. At any rate, if the opposer is

representing another Company (S.M Investment Limited) which is holding

940 shares in the respondent Company, he was supposed to transact

business, including attending meetings of the respondent Company in the

name of S.M Investment Limited and not as Richard Samwel Machangu. Even

the objection or opposition to the present petition by Richard Machangu

53
should have been brought in the name of S.M Investment Limited wherein

he is a director (and shareholder) or in the name of the Respondent Company

wherein he is among the Directors but without shares. The power of Mr.

Richard Machangu in the meetings of the Respondent Company would

depend on the amount of shares held by him in that other (holding Company)

and on the instructions given to him as an agent/director of S.M Investment

Limited. If he is a minority shareholder in S.M Investment Limited and the

other shareholders are unfairly not taking into consideration his interests in

S.M Investment Limited in relation to the 940 shares that S.M Investment

Limited holds in the Respondent Company, Mr. Richard Machangu, as a

member of S.M Investment Limited, should have taken a remedial action in

respect of the said S.M Investment Limited. At the moment, in so far as Hotel

Continental Company Limited is concerned, as it has been shown in this

petition, neither of the holding companies (Rex Hotels Limited and S.M

Investment Limited) holding 3250 shares and 940 shares respectively in the

respondent Company, filed any objection or in resistance to the aborted

members voluntary winding up process or the present petition for winding

up by order of the Court. My reluctance to allow this petition therefore, does

not tacitly endorse the opposer, in his personal capacity, as a member and

or shareholder of the respondent Company. That is a contentious issue in

54
the pending probate matter and which is not the subject of this case at all.

My reluctance to allow the petition is based on the fact that the petitioners

and supporters are not entitled to the order of Court for compulsory winding

up based on just and equitable cause. In the circumstances of the present

case, even if the petition had not been opposed by Mr. Richard Machangu, I

would still have declined to exercise my discretion to wind up the respondent

Company because in my opinion it is not "just and equitable" to do so. Among

the reasons which make it not just and equitable to issue the winding up

order in the present petition is the fact that whereas the petitioners and

supporters had alternative remedies handy at their disposal, they opted for

this discretionary remedy of seeking Court order for winding up on just and

equitable cause without legal basis to prefer their petition under it.

The petitioners and supporters have argued that there is deadlock in

decision making of the Company, but the circumstances of the case do not

support that allegation. Decision making is not based on unanimity of all

shareholders or all directors. According to the articles of association of the

Respondent Company, decision making in the annual general meeting is on

the basis of number of shares held. Decision making in the board of directors

is on majority vote. The factual circumstances prevailing in both fora with

55
respect to the respondent Company, do not indicate possibility of there being

a deadlock in passing resolutions by vote. The petitioners and supporters

have the overwhelming majority. The Petitioners and supporters control over

71.2% votes, by virtue of their direct and indirect shareholding in the

respondent Company. The petitioners and supporters have three votes in the

Board of Directors made of 5 members. The opposer is not a member in the

respondent Company. He is one of the 5 directors in its board. I don't see

any deadlock there. Deadlock is among the acceptable circumstances where

a Court may exercise its discretion to issue an order that it is just and

equitable for the Company to be wound up. In cases of a deadlock, even if

the Court were to leave the Company management to its own devices under

the internal decision-making machinery in its articles, no progress could take

place as no decisive voting could be possible. Deadlock as a relevant factor

for winding up of a Company on just and equitable cause, was also judicially

acknowledged in Ebrahimi v. Westbourne Galleries Ltd ( 1973 AC 360 :

(1972) 2 WLR 1289), where it was held that there are three instances to

grant winding-up order on just and equitable ground—

CO When the main object of the Company has failed and

it becomes impossible for the Company to achieve

the object.

56
 (ii) Due to the shareholders' dispute, a deadlock

situation arises.

(Hi) When there is complete loss of confidence amongst

the shareholders.

The first ground above is not applicable as the petitioners have failed to

prove that it has become impossible for the Company to achieve its objective.

The impossibility complained of is with respect to deadlock in decision

making which actually does and cannot exist looking at the membership and

shareholding structure of the Company. The third ground in the case above

also doesn't apply since the loss of confidence is only alleged to relate

between the petitioners and the supporters on one hand as against the

opposer on the other hand. The opposer, however, is not a shareholder in

the Respondent Company. Equally, in the present petition, therefore,

deadlock does not arise. The only resistance in decision making is alleged to

come from the opposer in his personal name while he is not a member of

the Respondent Company. Even if the opposer succeeded to acquire shares

by way of inheritance from his late father, through the pending probate

Revision Application No.30 of 2021 in the High Court of Tanzania at Temeke,

that shareholding would still be not enough to make him a member in the

Respondent Company. I talked in length about this position of law in Misc.

Commercial Cause No. 192 of 2023 Mary Deogratias Magubo (Formerly

57
Known as Mary Boniface Fungo and 3 Others Versus the Registrar

of Companies, and I need not repeat it here. Suffice it to say that decision

making in a private Company is in the domain of members of the Company

and not shareholders. A member is a person whose name has been entered

in the Company's share register or one who subscribed to the memorandum

and articles of association. This point was well captured by the High Court

of India in the case of Kedar Nath Agarwal v. Jay Engineering Works

Limited (1963) 33 Com Case 102 Cal., where Gowans,J., observed that:

*7/7 some situations and contingencies, the

"member" may be different from a "holder". A

member may be a holder ofshares but a holder may

not be a member..."member" has a distinct

connotation in the Companies Act. He is either a

subscriber of a memorandum of a Company or a

person who agrees to become a member of a

Company and whose name is entered in the register

of members."

The only impediment to smooth and effective decision making in the

management and the running of the affairs of the respondent Company is

alleged to have come from Richard Samwel Machangu, who as it has been

shown, is not a member of the respondent Company. Properly speaking, that

58
impediment should not have happened in the first place if the Directors and

members of the respondent Company had abided by the laws regulating

private companies.

The other impediment to decision making pursuant to the articles of

association of the respondent Company is alleged to have come from the

other co-founder, Pascal Matunda, but the shareholding of Pascal Matunda

is on the minority side of members of the Company such that he cannot

create a deadlock in the decision making of the respondent Company.

Members' votes in the Company's meetings are counted on the basis of their

number of shares held and the class of shares. As shown above all the

shares in the Respondent are ordinary shares and hence they rank in pari

passu. Even the articles of association of the Company recognize that votes

shall be weighted based on the number of shares held by the member .such

that each one share shall constitute one vote. The Petitioners and

supporters, directly, and indirectly through their two other companies holding

shares in the respondent Company, are the majority shareholders and

members. Also, they are the sitting majority directors in the board of

directors of the respondent Company. All the above enumerated alternative

remedies were therefore, legally and practically available to them and were

59
fully at their disposal. They forsake the alternative remedies and opted,

instead, to pursue a discretionary order of the Court to wind up the Company

on the ground of just and equitable cause, which ground is ordinarily not

available to them as the majority and controlling members of the Company.

They are not the minority members who might not practically be able to use

the internal Company's management system as per the articles of association

to decide and pursue the desirable course of action by the Company. The

petition at hand is therefore objectionable as a matter of principle.

When the legislature introduced the alternative remedies to rescue a

Company which is in crisis, and made the winding up of the Company by

order of the Court on just and equitable grounds, a discretionary and

alternative remedy of the last resort, it had a policy objective behind. It

would be going counter to the objectives of the Companies Act, if the Courts

readily intervened in the administration of companies by performing the

tasks which were entrusted by the law into members and directors of the

Company. That would be contrary to the spirit of treating a Company as a

separate autonomous business entity- a spirit that is statutorily prescribed

and recognized in the agreement of members of the Company expressed in

the form of the Memorandum of association. I fully subscribe to the holding

60
in Winding-Up Cause No 12 of 1977 in Re Garnets Mining Co Ltd, where

the High Court of Kenya at Nairobi, held that;

It is uncommon for [the application for Court order

to wind a Company on just and equitable cause! to

be made by the shareholders because the legislation

for companies is designed to permit the members of

a Company to manage its own affairs including

winding it up. (emphasis supplied!

I find that the scheme of the Companies Act of Tanzania, of 2002 was

also, amongst others, tailored to further a similar objective of enabling

members to take effective control of their Company and, indirectly through

their elected directors, or directly through the members' general meetings,

manage all its affairs pursuant to the Memorandum and Articles of

Association and the provisions of the Companies Act. Members and directors

should bonafidely attempt to use the internal mechanism of dispute

avoidance, crisis management and resolution in the articles of association

and the Act, before they could justifiably resort to the discretionary powers

of the Court to seek an order for the Company to be compulsorily wound up

on just and equitable cause which essentially is reserved as the remedy of

the last resort.

61
 I have also noted in the present petition that the Objector/ Opposer,

Richard Samwel Machangu, who filed an affidavit in opposition in his

personal name, ended up describing himself as the Respondent in the written

submissions written by his learned counsel Mr. Gratian Mali. The current

Petition was filed by the petitioners against the respondent Company as the

sole Respondent and not against Richard Samwel Machangu, who entered

appearance as an objector after the petition had been advertised. Out of the

5 directors of the respondent Company disclosed in the search report from

the office of Registrar of Companies, three belong to the team of the

petitioners and supporters of the winding up petition. The 4th director is

Pascal Matunda who took no role in these proceedings despite the petition

being advertised. The 4th director is the Objector/ opposer Richard

Machangu. This being a case involving internal disputes in the management

of the respondent Company, is the one where, in my view, a board resolution

was mandatory for a director to represent the Company in signing pleadings

for and on behalf of the respondent Company. In the case of Simba Paper

Converters Limited versus Packaging and Stationery

Manufacturers Limited and Dr.Steve K.Mworia, Civil Appeal No.280 of

2017, delivered by the Court of Appeal of Tanzania at Dar es salaam on 23rd

May, 2023 at page 18 it was held that:

62
 'We subscribe to the saidposition to the extent that

it relates to the institution of a suit by one or more

directors in the name of Company whereas in the

present matter it resolves on the internal conflict

within the Company. In any other case we will be

hesitant to extend the rule any further mindful ofthe

legal position relating to the power of the Company

to be sued in its own name.

I take the above holding as an authority that where one director wishes

to institute a suit in the name of the Company and where there are internal

conflicts within the Company, a board resolution is necessary. Richard

Machangu was not sued, he entered appearance in the petition, in effect

joining it, as an objector thereby advancing his claim against the Petitioners.

If he were thereby representing the Respondent Company as the written

submissions purported to show, or representing the holding Company S.M

Investment Limited, he needed a Board resolution. However, as I have

endeavored to show, he actually joined the petition as an objector in his own

individual capacity as shown in his affidavit in opposition. I take it that the

Opposer in this case, despite purporting to file reply submissions as if he

were the Respondent Company, was actually proceeding on his own accord

as an objector or opposer.

63
 Under the circumstances of the present petition, I asked myself

whether it is just and equitable for the Court to exercise its discretion and

grant the winding up order on the ground of just and equitable cause? In

S.P. Jain v. Kalinga Tubes Ltd ( AIR 1965 SC 1535.) the Supreme Court

observed that:

it is not enough for the petitioner to show that there

is just and equitable cause for winding up of the

Company although that must be shown as a

preliminary to the application ofSection397. It must

further be proved that the conduct of the majority

shareholders was oppressive to the members and

this requires that the events have to be considered

not in isolation but as a part of consecutive story.

The conduct must be burdensome, harsh and

wrongful and mere lack of confidence between

majority and minority shareholders is not enough for

considering the application unless such lack of

confidence springs from oppression of the minority

by a majority.

I find that it will neither just nor equitable, even in the literal meaning

of the phrase to order the Winding Up of the Respondent Company. The

petitioners and supporters of the petition are the majority shareholders and

members who also constitute majority of the board of directors hence

64
wielding massive control of the respondent Company through their

overwhelming voting power, hence not prone to oppression by the minority.

In Lord Clyde, in Baird vLees 1924 SC 83, 92, said:

"A shareholder puts his money into a Company on

certain conditions. The first of them is that the

business in which he invests shall be limited to

certain definite objects. The second is that it shall be

carried on by certain persons elected in a specified

way. And the third is that the business shall be

conducted in accordance with certain principles of

commercial administration defined in the statute,

which provide some guarantee of commercial profit

and efficiency. If shareholders find these conditions

or some of them are deliberately and consistently

violated and set aside by the action ofa member and

official of the Company who wields an overwhelming

voting power, and if the result of that is that, for the

extrication of their rights as shareholders, they are

deprived of the ordinary facilities which compliance

with the Companies Act would provide them with,

then there does arise, in my opinion, a situation in

which it may be just and equitable for the Court to

wind up the Company."

65
 The foregoing authorities form further basis for my decision to decline

to grant the application at hand. It would not be "just" or "equitable" to do

so. It would encourage members and directors of companies holding

majority shares and having decision making power, to discard and ignore the

internal scheme for resolution of disputes in the Company, and opt to rush

to Courts over matters which were precisely intended to be put in their full

control and for which there is no impediment to exercise their powers in

respect of.

There is another unpalatable taste to the scheme under the present

petition for winding up of the Respondent Company. As it was argued

correctly by Mr. Gratian Mali, learned Advocate, all the misconducts and

violations of the law are conspicuously raised by the petitioners and

supporters as shareholders and directors of the respondent Company, and

the attack is directed towards the petitioners and supporters themselves as

the majority members, shareholders and directors who should have acted to

alleviate the worst situation the respondent Company has found itself in. Not

calling statutory members meetings, not holding directors meetings, not

filing annual returns, not conducting audits and providing audited reports,

not disclosing the amount in the bank account of the Company, and not

66
keeping books of accounts of the Company, are all omissions by the Directors

of the Company. These are among the duties of the Directors. Doing all that

is what would have constituted "directing" the Company. The petition has

alleged that upon assumption of management role by the new directors who

belong to petitioners and supporters herein, the other two directors namely

Richard Machangu and Pascal Matunda stepped down (although it seems

their stepping down was done informally as the official records at BRELA still

recognize them as directors). This fact has not been disputed by the

petitioners and supporters. This means that for all this period, the active

management of the respondent Company has always been in the exclusive

control of the remaining three directors who incidentally belong to the camp

of Petitioners and the Opposers seeking to wind up the Company due to

mismanagement! They allege that they do not know the bank balance, if

any, in the Company's bank account, that they have no access to books of

accounts of the Company, that they are not able to convene statutory

meetings, that they cannot preserve the assets of the Company from

deteriorating, that they cannot access the head office of the Company and

so many allegations signifying total failure to manage the Company.

Incidentally, at the far end of the blame, one finds the same petitioners and

supporters as the majority members and directors of the Company therefore

67
being the object of the blame and who should have remedied the litany of

breaches complained of. One may wonder what were they managing as

directors of the respondent Company? Using their powers as majority

shareholders and directors, what have they done to remedy the problems

complained of? Against whose actions and omissions are they complaining?

The authors of Equity: Doctrines Remedies (1st Edn) (1975),

Meagher, Gemmow and Lehane, observe that

"Anyone whose conduct has been improper in any

relevant way in some transaction who wants reliefin

equity will be refused it."

In The Matter of Compulsory Winding Up of INETS Company

Limited Between Ephraim Solomon Swila and INETS Company

Limited, Misc. Commercial Cause No. 48 OF 2022, Hon.Mbagwa,!,

observed at page 9 that:

"It is the settled position that the Court can issue a

winding up order if it is satisfied that it is just and

equitable to do so. In the case of Dr. Hashim Hassan

Mussa vs Dr. Crispin Msemakuia and 2 Others, Civil

Appeal No. 515 of2021, CAT at Dar es Salaam, the

Court of Appeal held that winding up is both

68
 statutory and equitable remedy as such, a petitioner

should go to Court with dean hands. The question

for consideration at this juncture is whether the

petitioner, under the circumstances of the case, has

dean hands to move this Court to grant a winding up

order. My quick answer to this question is'no'.....

In Ebrahimi v Westbourne Gallaries Ltd [1973] AC 376, 387, Lord Cross

of Chelsea, said:

"A petitioner who relies on the "just and equitable"

clause must come to Court with dean hands, and if

the breakdown in confidence between him and the

other parties to the dispute appears to have been

due to his misconduct he cannot insist on the

Company being wound up if they wish it to

continue."

I am alive to the rule in Re Bleriot Manufacturing Air Craft Co (1916)

32 TLR 253, where it was stated at page 255 that:

"The words just and equitable' are of the widest

significance and do not limit the jurisdiction of the

Court to any case... It is a question of fact and each

case must depend on its circumstances."

69
 I have considered whether or not it would be just and equitable to

grant the orders sought? I am not persuaded. It would tantamount to the

Court facilitating and blessing the wrong doer to benefit from his own wrong.

The Companies Act provides under section 282 that:

"282. -(1) On hearing a winding-up petition the Court

may dismiss it, or adjourn the hearing conditionally

or unconditionally, or make any interim order, or,

any other order that it thinks fit."

In the case at hand, after hearing the winding up petition, I am

satisfied that it is not just and equitable to grant the orders sought. In the

upshot the petition fails and I proceed to dismiss it in terms of section 282(1)

of the Companies Act. Given the relationship of the parties to this petition, I

make no order as to costs. It is so ordered.

21/06/2024

70
Ruling is delivered in Court this 21st day of June, 2024 in the presence of Mr.

Maunda Raphael learned Advocate for the Petitioners, Ms. Nicolina Hondo

learned Advocate for the supporters, and Mr. Gratian Mali learned Advocate

for the Respondent. TRA as an interested party was represented by Ms.

Consolata Andrew and Ms. Rose Sawaki, learned Advocates while the

Opposer Mr. Richard Machangu was absent but was aware of the date of

delivery of the Ruling.

21/06/2024

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