Court orders Maxcom to pay Stanbic Sh12 billion

Dar es Salaam. The High Court has ordered ICT giant Maxcom Africa Public Limited to pay Stanbic Bank Tanzania Limited Sh12 billion for breach of loan agreement.

Seven other defendants, including the company’s top director, Juma Rajabu Furaji, are to pay the amount jointly, according to the order issued recently by the commercial division of the High Court.

Others are Nasibu Victor Makasi, Ahmed Salum Lussasi, Hashim Ibrahim Lema, Banda Beach Property, Developers Limited, Lubross Holdings Limited, and J-Link Limited.

The court has rejected claims by the leading ICT firm that the government’s decision to terminate its services agreement following the introduction of the Government Electronic Payment Gateway (GEPG) is to blame for the frustration.

The company’s counsel, Mr Selemani Almas, had argued that the cancellation of its service contracts frustrated the financial arrangement between Stanbic Bank and his client, Maxcom.

The decision is a double blow for the ICT firm, whose lucrative service contracts with key government institutions and agencies were cancelled between 2017 and 2018.

Maxcom is known to have secured contracts with the Dar Rapid Transit Agency, Morogoro Municipal Council, the Muhimbili National Hospital (MNH), the Tanzania Revenue Authority (TRA), and the Tanzania Electric Supply Company Limited (Tanesco) before they were stopped.

Stanbic Bank, through its counsel, Mr Waziri Mchome, strongly disputed the claims of frustration with business arrangements, saying Maxcom had secured contracts with other customers than the government institutions.

He argued that the fact that the company had freely entered into an agreement with the bank for restructuring the unpaid loan after the government had stopped its services was clear evidence that the claim of frustration by business could not stand.

Apart from restructuring the loan, evidence produced in court shows the company applied for and was given another loan of Sh164 million for the purchase of point of sale (POS) devices.

“The question to ponder is, if the government had terminated the first defendant’s (Maxcom’s) services as indicated and that the government was the sole customer of the first defendant, as the defendants want this court to believe, what was the reason for the purchase of point of sale devices?"

“In my opinion, this tells it all that the first defendant’s business was not only dependent on the government institutions; rather, there were other customers apart from the government,” said judge Awamu Mbagwa in a recent decision.

The court also considered testimony by the fourth defendant, Ahmed Salum Lussasi, that Maxcom was also operating in Rwanda and Burundi. A witness for Stanbic Bank dismissed claims of frustration, saying Maxcom had secured a tender for the installation of a fare collection system in Mozambique.

“Since the first defendant (Maxcom) entered into a restructuring agreement after the government had terminated its service and, through the agreement, it was given another Sh164 million for the purchase of point of sale devices, it goes without saying that the defendants’ claim of frustration is without merit,” said the judge.

In yet another attempt to have the suit against them dismissed, the defendants claimed that the interest rates were unrealistic, exorbitant, illegal, and beyond commercial practices for business enterprises.

The argument was dismissed by the bank, which gave evidence to the effect that the interest rates charged were below the threshold set by the Bank of Tanzania (BoT), which at the time of signing the agreement stood at 21 percent.

“The defendants have not adduced any evidence to prove the illegality and excessiveness of the interest rates. Exhibit 1 makes it very clear that the interest rate to be charged was 6 percent below the Bank of Tanzania Shillings Base Lending Rate, that is to say the interest rate was 14 percent.

“It should be noted that the interest rate was set as one of the terms and conditions of the agreement that both parties voluntarily entered into. Throughout the evidence, there were no allegations of inducement from either party,” said the judge.

The judge has allowed the bank to sell plot number 205 located at Mbezi Wami Area, Dar es Salaam, if the defendants fail to settle the amount within 60 days running from April 6, 2023.

The mortgaged property is registered in the name of Banda Beach Property Developers Limited.