IN THE HIGH COURT OF TANZANIA

(COMMERCIAL DIVISION)
AT ARUSHA
MISC. COMMERCIAL APPLICATION NO. 2 OF 2021
IN THE MATTER OF COMPANIES ACT NO.212 OF 2002
AND
IN THE MATTER OF APPLICATION BY
SHIRIN MOOSAJEE........................................................... PETITIONER
VERSUS
JUZER ZAKIUDDIN MOHAMEDALI................................................... 1stRESPOND
FATEMA JUZER MOHAMEDDALI..............................2nd RESPONDENT
AFRICAN LIGHTENING CENTRE LIMITED............... 3rd RESPONDENT
Date of Last Order: 30/05/2022

Date of Ruling: 02/06/2022

RULING
MAGOIGA, J.
The petitioner, SHIRIN MOOSAJEE by way of petition filed under section 233

(1), (2), (3) (a), (b), (c), and (d); section 121 (1) (a), (b), 121(2) (3) and (4)

of the Companies Act, No. 12 of 2002 against the above named respondents

is moving this court to grant the following orders, namely:

i. A declaration that the 3rd respondent's affairs have been, and still

are, conducted in a manner which is unfairly prejudicial to the

interest of the petitioner and that the forfeiture of the petitioner's

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 10 ordinary shares in the 3rd respondent is so prejudicial to the

petitioner;

ii. A deceleration that the forfeiture of the petitioner's shares in the 3rd

respondent and their subsequent re-allotment to the 2nd respondent

is null and void ab initia,

iii. A declaration that the appointment of the 2nd respondent as a

director of the 3rd respondent is null and void ab initio;

iv. An order directing the 3rd respondent to rectify its register of

member by restoring of the petitioner's name as a shareholder

holding 10 ordinary shares and cancellation of the 2nd respondent's

name;

v. General damages as shall be assessed by the court;

vi. Costs of the petition be borne by the respondents

vii. Any other relief or order this honourable court will deem just and

equitable to grant to enable smooth and proper running of the 3rd

respondent's business affairs in protection of the petitioner's

interests.

The petitioner stated in the petition grounds why this petition should be

granted as prayed and filed as well an affidavit verifying the petition.

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Upon being served with the petition, the 1st and 3rd respondent did not file

any reply to the petition. The 2nd respondent filed a reply to the petition

disputing the petitioner's prayers and stated that the transfer of shares was

legally done on 30th September, 2014 and all legal requirements for transfer

of shares were complied off, hence, officially terminating the shareholding of

the petitioner to the 3rd respondent.

The facts pertaining to this petition are simple and straight forward. The

petitioner is one of the founding members of the 3rd respondent

incorporated in the year 1992 with 10 ordinary shares which constituted

50% shares issued and allotted. Facts went on that, the 1st respondent and

the petitioner served as first directors of the 3rd respondent until when she

was purportedly succeeded by the 2nd respondent, which succession, it is

alleged was fraudulently and illegally done for a number of reasons subject

of this petitioner and prayers as contained therein.

On the part of the 2nd respondent it was stated that the transfer of shares

was legally done and followed all requirements and as such prayed that this

petitioner be dismissed with costs. a

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When this petition was called for hearing, the petitioner was enjoying the

legal services of Mr. Richard Masawe, learned advocate. The 1st and 3rd

respondents were enjoying the legal services of Messrs. Nelson Merinyo and

Lengai Nelson Merinyo, learned advocate. The 2nd respondent was enjoying

the legal services of Mr. Ephraim Koisange learned advocate.

Mr. Masawe when called up to arguer the petition told the court that they

filed written skeleton arguments and prayed to adopt them. In the written

skeleton arguments, Mr. Masawe argued that, the respondents unfairly and

with prejudice to both the petitioner and 3rd respondent have been running

the 3rd respondents company in a manner which is unfairly prejudicial to the

petitioner's interest and interest of the company itself by removing the

petitioner's membership and directorship without due process of the law and

without his consent.

Mr. Masawe cited the case of JANETH KIMARO AND 2 OTHERS vs. PELAGIA

AUYE MREMA AND 2 OTHERS, MISC. COMMERCIAL APPLICATION NO.2 OF

2020 (HC) ARUSHA) (UNREPORTED) which defined unfair prejudice to mean

detriment of some kind, but because it must qualify as 'unfair' it must be

form of detriment which would strike a man of business as unjust and

inequitable.

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According to Mr. Masawe, deprivation of the shareholder's shares (which are

paid up) without his/her knowledge nor consideration is nothing but unfair

prejudice. The learned advocate cited Palmer's Company Law at pgae 8202

in which the learned author cited the of IN RE BOVEY HOTEL VENTIRE

LIMITED, in which Slade, J. said:-

"the test for unfairness must, I think be an objective, not subjective one. In

other words, it is not necessary for the petitioner to show that persons who

have de facto control of the company have acted as they did in conscious

knowledge that this was unfair to the petitioner or they were acting in bad

faith; the test, I think is whether a reasonable bystander observing the

consequences of their conduct, would regard it as having unfairly prejudiced

the petitioner.

On forfeiture which is said to be done, Mr. Masawe sought the guidance in

the case of MOROGORO HUNTING SAFARIS LTD vs. HALIMA MOHAMED

MAMUYA [2017] TLR 384 in which it was held that where forfeiture is

invalid, it follows therefore, the removed director remains a bonafide

shareholder and director of the company.

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Mr. Masawe went on to argue that shareholder ceases to be upon payment

to him or her consideration for his/her interests in the company as held in

the case of NILE ENERGY LIMITED vs. PHOENIX PETROLEUM LTD at page 8

while quoting with approval HENRY KAWALYA vs. DAN SAMAKADDE [1992]

KALR 104. According to Mr. Masawe, this is not the case in this case.

The learned advocate for the petitioner argues that looking at the reply this

petitioner is unopposed and urged this court to determine only two issues,

namely: one, whether the alleged forfeiture that removed the petitioner

from third respondent company and added the 2nd respondent was legal and

followed due procedure and the second is, whether the forfeiture took place

at all and if not, the legality of any other action or procedure that took place.

Mr. Masawe pointed out that the two issue are to be answered in favour of

the petitioner for reasons that; one, the whole procedure, if any, is fraught

with the law, two, the 2nd respondent contradicts herself of what took place

while she was not in the company and contains untruth statements and

should not be believed. Three, the confusion between transfer and

allotment which cannot go at once. Four, forfeiture can only take place

where the shares are unpaid for, which is not the case here. Five no

meetings and resolution authorizing the forfeiture or allotment and no notice

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was given to the petitioner as per article 15 of the Table to the Companies

Act and sections 147 and 148 of the Companies Act. Six, the provisions of

article 4(a) (b) of the Articles of Association were not complied with by

giving reasons and notice of forfeiture or transfer.

On the strength of the above reasons, Mr. Masawe urged this court to grant

the petition as prayed in the petition.

Mr. Merinyo, learned advocate for the 1st and 3rd respondent told the court

that they did not file reply to petition because they don't oppose this

application.

In reply Mr. Koisange, learmed advocate for the 2nd respondent told this

court that they seriously oppose the grant of the application based on facts

as stated in the reply to petition. According to Mr. Koisange, the 2nd

respondent was invited and legally joined the company by acquiring shares

as earlier as September, 2014 and since then she became the director and

shareholder of the 3rd respondent together with the 1st respondent.

Mr.Koisange insisted that since then all documents were dully filed with

BRELA and the petitioner ceased to be part of the company. The learned
advocate for the 2nd respondent argued that the status of BRELA shows that

the 2nd respondent is the owner of ten shares.

Mr. Koisange further argued that given the nature and relationship of the

parties, this petition is triggered by family feuds or family affairs between

the petitioner, the 1st respondent and the 2nd respondent/ which dispute has

nothing to do with the affairs of the company.

On that note, Mr. Koisange urged this court to find no merits in this petition

and proceed to dismiss it with costs.

In rejoinder, Mr. Masawe joins issues with Mr. Koisange that family feuds

have nothing to do with company affairs. According to Mr. Masawe, nothing

was tendered to back up their story and urged this court to disregard it in its

face value. The learned advocate for the petitioner reiterated his earlier

prayers.

This marked the end of hearing of this hotly contested petition for its grant

or not.

Having carefully considered the pleadings, written skeleton and oral

arguments by learned advocates for parties, the law and the cases cited

altogether, I found that the kernel of this dispute is on the fate of the 10

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shares originally owned by the petitioner but later on according to annexure

SM4, now those shares are owned by the 2nd respondent. And as such, in

the circumstances, the first issue for determination is whether the

transfer/allotment/forfeiture, if any, was lawfully done. The second issue will

be, if issue number is answered in the negative, what is the effect of such

transfer/allotment/forfeiture.

Mr. Koisange adopted the contents of the reply in which it was categorically

stated that there was lawful transfer of the share and allotment of the

shares done on 21st November, 2014 and that the 1st respondent officially

terminated the petitioner on 30th September, 2014. To buttress his

arguments on the alleged transfer and allotment, the 2nd respondent

attached annexure FJM-1 to her reply.

On the other hand, Mr. Masawe for the petitioner argues to the contrary that

the whole process of the alleged transfer/allotment/forfeiture is fraught with

a lot of legal procedures, among others, for want of Meetings, Company

resolution, consent of the petitioner and considerations.

I have with a very serious legal eye considered and perused the contents of

FJM-1 in which the 2nd respondent claims to have been made director and

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shareholder of the 3rd respondent but with due respect to both the 2nd

respondent and Mr. Koisange, I find annexure FJM-1 legally devoid of legal

back up of taking the petitioner's shares. The reasons I am taking the above

stance are abound. One, Form No.210b which terminated the directorship of

the petitioner was against clauses 2, 3 and 4 Articles of Association of the

company which in mandatory terms restricts the transfer of shares unless all

the conditions set out there are complied with. These conditions are;

prohibition of any invitation to public to subscribe for shares, veto to refuse

transfer of any share, any new member must be selected by directors, notice

in writing to sale or transfer shares and agreed prices. All these legal

requirements were missing, hence, making Form No. 210b of no effect. Two,

Much as Form No. 210b is of no legal effect as stated above, then, other

Forms No. 55b and 210c which their basis emanates from Form No.210b are

nullity for want of basis upon which to stand. Three, the decision to

terminate a member/director is a serious action that at any rate requires the

person to be terminated to be notified and consent to such termination and

this being a company, in my view, cannot be done by a single director and

without any lawful resolution. The arguments that this is a family company

and that their affairs were handled by the family has no legal basis, and in

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this is fit case for this court to intervene in the manner the affairs of the 3rd

respondent are conducted for interest of justice.

On the foregoing reasons, I find issue number one couched that whether the

allotment/transfer/sale/ forfeiture, if any, of the shares was lawfully done in

the negative that the whole exercise was fraught with serious legal

deficiencies to be legally considered so. Therefore, in their totality the whole

exercise of any was not lawfully done.

Having found issue number one in the negative, issue number two, that

what is the effect of such allotment/transfer/forfeiture/sale is obvious that tis

issue will not detain much of this court's time. Without much ado the whole

transaction, I unreservedly declare was void ab inition for want of following

laid down procedures. Making decision that affect interest of a person must

be done having regards to all laid down mechanism including and not limited

to right to be heard. In this application this was not done at all.

On that note, thefore, the instant petition is hereby granted as prayed in the

following orders:

i. Declaration that the 3rd respondent's affairs have been, and still are,

conducted in manner which is prejudicial to the interests of the

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 petitioner and that the forfeiture of the petitioner's 10 ordinary

shares in the 3rd respondent is so prejudicial to the petitioner;

ii. Declaration that the forfeiture/sale/allotment/transfer, if any, of the

petitioner's shares in the 3rd respondent and their subsequent re­

allotment to the 2nd respondent was null and void abi initio-,

iii. Declaration that the appointment of the 2nd respondent as director

of the 3rd respondent was null and void abi initio;

iv. I further order and direct the 3rd respondent to rectify its register of

members by restoration of the petitioner's name as shareholding 10

shares and cancellation of the 2nd respondent's name with

immediate effect;

v. Given the nature of the relationship between parties I decline to

order for general damages and costs of this application.

It is so ordered and directed.

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