UBUNGO GARMENTS LTD v HASSAN NURU HASSAN AND ANOTHER 1996 TLR 295 (HC)

UBUNGO GARMENTS LTD v HASSAN NURU HASSAN AND ANOTHER 1996 TLR 295 (HC)

Court High Court of Tanzania - Dar es Salaam

Judge Kyando J

CIVIL CASE NO 15 1996 H

13 February, 1996

Flynote

Company law - Power of company to institute legal proceedings - Company declared

a specified public corporation under Public Corporations (Amendment) Act 16 of

1993 - Such company has I no locus standi to institute proceedings on its own

1996 TLR p296

-Headnote

The plaintiff company, a limited liability company, brought suit against the

defendants for A a permanent injunction preventing them from putting the plaintiff

into receivership and claiming damages for the advertising of the alleged fact of

having been cut into receivership. The defendants raised two preliminary objections,

viz that as a specified public corporation under the Public Corporations (Amendment)

Act 16 of 1993, the B plaintiff had no locus standi to bring the suit, and, secondly,

that having been put under receivership the plaintiff had no power to apply for the

relief which it sought.

Held:

(i) In terms of the provisions of Act 16 of 1993 the plaintiff could not

institute legal C proceedings on its own: it had to do so at least jointly with PRSC;

(ii) The authority cited by the defendants for the second proposition was

no authority for saying that a company placed under receivershp could not challenge

the appointment of a receiver or being placed under receivership. D

Case Information

Application struck out for incompetence.

Case referred to:

1. Moss Steamship Co v Whinney [1912] All ER Rep 344 E

Mr Mziray for the applicant/plaintiff company.

Mr Uzanda for the respondents/defendants.

[zJDz]Judgment

Kyando, J:

The plaintiff, a limited liability company incorporated under the Companies

Ordinance, F Cap 212, has brought a suit against the defendants seeking that they be

restrained, by a permanent injunction, from putting it under receivership. It also

claims damages for having been advertised as having been placed under receivership.

Pending the determination of the suit it has filed an application in which it seeks that

(1) the G respondents/defendants be restrained from `commission of illegal and

unjustified acts of putting under receivership the applicant company'; (2) the

respondents/defendants be restrained from harassing and/or interfering with the

applicant's premises; (3) costs and (4) any other reliefs. H

The defendants, through their counsel, Mr Uzanda have raised points by way of

preliminary objections to the application. These are that (1) Ubungo Garments

Limited-in receivership-having been declared a specified Public Corporation under

the Public Corporations (Amendment) Act (16 of 1993) have no locus standi to file

the application I as the powers of the applicant/plaintiff company to institute or

cause proceedings to be instituted have since been vested

1996 TLR p297

KYANDO J

entirely in the Presidential Parastatal Sector Reform Commission (PSRC); (2) the A

applicant company having been put under receivership by the National Bank of

Commerce effective 17 November 1995 it (the applicant) has no power to apply for a

temporary injunction against the National Bank of Commerce and for the receivers

appointed by the said Bank. B

I do not think the second point raised by the respondents is tenable in the

circumstances of this case.

Mr Uzanda relies on the following passage from the case of Moss Steamship Co v

Whitney (1) in support of his arguments on the point: C

`The appointment of a receiver and manager over the assets and business of a

company does not dissolve or amibilate the company, but it does entirely support the

company in the conduct of its business and deprives it of all power to enter into

contracts in relation to that business or to sell, D pledge, or otherwise dispose of the

property put into the possession or under the control of the receiver manager. The

business of the company is carried on by the receiver and manager, but not as the

company's agent. He supersedes the company and the transactions are his transactions

on E which he is personally liable with a right to be indemnified out of the assets of

the company in respect of liabilities which he may incur.'

But, in my view and with respect, this passage applies to a situation where the

appointment of a receiver has been made and there is no resistance or challenge to it.

In F the instant matter the very appointment of a receiver by the second respondent

is being challenged and this in fact is the suit which the applicant company has

brought. The passage above is no authority for saying that a company placed under

receivership cannot challenge the appointment of a receiver or being placed under

receivership. That G passage, as stated already is therefore inapplicable to the present

case and I overrule Mr Uzanda on the second point above.

Concerning the first point Mr Uzanda submits that under GN 400 of 1995 upon a

company or corporation being declared a specific public corporation its supervision,

H management and control vest in the Parastatal Sector Reform Commission. He

sites ss 39, 40 and 43 of the Public Corporations (Amendment) Act, 1993.

The applicant company on the other hand relies on s 42 which provides: I

`Notwithstanding that a public corporation may be declared a spe-

1996 TLR p298

KYANDO J

cified public corporation it shall be the duty of the Board of every Public

Corporation. A

(a) to ensure that the corporation continues to carry out its functions in

accordance with its statement of corporate strategy and

(b) to cooperate with and ensure that the officers and employees of such

corporation cooperate with the commission in order to facilitate that the

restructuring of the Public Corporation is B successfully achieved.'

So, according to the applicant/plaintiff company, declaration of a corporation as a

specified public corporation does not affect its continuing to run its activities, until

such C time that the said public corporation has been put under receivership. It is

contended on behalf of the applicant/plaintiff company that supervision, management

and control of the applicant company is not at all with the PRSC. `This is further, it is

contended, proved' by the fact that to date the said Parastal Sector (sic!) has not issued

a notice of D receivership to the applicant's company as it has been the case with

other specified public corporations'.

Now it is undisputed that the applicant/plaintiff company has been declared a

specified public corporation. Once a corporation has been so declared, its state in my

view is E diminished, as Mr Uzanda rightly submits, it becomes subject to the

supervision management and (though it continues to run it continues for the limited

and specified purposes as provided for in s 42), and control of PRSC. It cannot on its

own institute legal proceedings. It has to do so at least jointly with PRSC. This has not

been done in F this case and I have, hereby do, uphold the first preliminary point

raised on behalf of the respondents/defendants. The application for temporary

injunction is struck out for incompetence, it having been led by a person with no

locus standi to file it. The G respondents/defendants are awarded the costs of the

application.

1996 TLR p299

A