Double blow for car importer ordered to pay Ecobank Sh400 million

Wednesday August 25 2021
Ecobank pic

An Ecobank staff attends to a customer during a past event at the bank’s premises. PHOTO | FILE

By The Citizen Reporter

Dar es Salaam. The distributor of new and used commercial vehicles, Benbros Motors Limited, has been ordered to pay Ecobank Tanzania Limited Sh399 million in unsettled loan it secured for importation of vehicles.

The Commercial Division of the High Court has rejected defence of the vehicle importers and three guarantors of the loan who had shifted the blame to the bank over their failure to repay the loan secured in 2015.

Judge Stephen Magoiga ordered the car dealer to pay Ecobank Sh387.7 million plus $4.9 million and dismissed the firm’s counter claim that sought, among other thing, an order that the bank’s actions frustrated their efforts to repay the loan.

The company also suffered double blow after the court appointed Mr Gaspar Nyika to manage all its assets with powers to sale mortgaged properties and ordered eviction of Benbros from its landed property at Mikocheni Industrial Area.

Ecobank brought a suit against the car dealer and three guarantors of the loan--Yasser Mohammed Es-Haq, Noufal Mohammed Es-Haq, and Yusra Mohammed Abdullah Es-Haq--in 2018 to compel the company to repay loan.

It also sought an order for appointment of Mr Gasper Nyika to take control of all assets of Benbros Motors Limited, with powers to sale, lease or collect income of the assets that were used to secure the loan.

Advertisement

The bank also wanted the court to order eviction of the company from plot number 72 Mikocheni Industrial Area that served as security for the disputed loan.

When called to defend the case against them, the defendants jointly admitted the outstanding amount but accused the bank of frustrating the whole loan repayment arrangement by slowness in reacting to their several requests for rescheduling of the loan and the bank’s refusal to release vehicles to waiting customer.

They argued that the situation badly affected Benbros’s liquidity and ability to pay back the loan.

On mortgaging of the plot number 72 at Mikocheni Industrial Area, Benbros argued that the mortgage deed was signed under some constraints and undue influence.

It was further contention of the vehicle dealer that its efforts to secure other financiers ready to buy the loans such as Azania Bank, Equity Bank and CRDB Bank were frustrated by Ecobank.

“Even when we made efforts to get new financiers who were ready to buy out the loan and pay the bank on condition that the bank help remove Benbros from the Bank of Tanzania (BoT)’s list of non-performing debtors in order for new financiers to take the matter, they unreasonably refused by not responding even after six months, causing interested financiers to drop the idea,” argued Benbros. The defendant raised a counter claim against the bank in attempts to escape liability in the Sh398 million suit. What would later lead to strained business relation between the bank and the car dealer that started on June 26, 2014 when the bank gave a $3.5 million for financing importation of brand new vehicles, buses, trucks trailers and tyres from Great Wall Motors, Sinotruck Hubei Co. Limite, Aelos Tyres Limitea and Yutong Bus Manufacturing Co Limited.

In addition, the bank, on May 27, 2015 gave Benbros a $10 million loan for securing any claims by beneficiary arising from default to borrower for the purchase of brand new Yutong against local purchase order.

Again, on December 2, 2016 Benbros applied to the bank for variation of the two loan agreements which was approved by extending the annual renewal to 90 days and decreasing the exposure to $5,312,000. Also on the plaintiff’s request, the bank on March 31, 2017 renewed the existing loan agreements to $5 million.

The court heard that the three loans were guaranteed by a long term security over Benbros assets and persona guarantees of the second, third and fourth defendants.

Also a landed property on plot number 72, Mikocheni Industrial Area was mortgaged for the purposes of securing the loan.

Mr Mohamed Abdullah Ahmed who is the chairman of Benbros admitted in court they entered into loan agreement with the bank and that the second, third and fourth defendants were guarantors for the loan.

He told the court he did not dispute that the payments were overdue but was quick to accuse the bank of frustrating the performance of the contracts for failure to allow restructuring of the loan due as to adverse business conditions that existed.


Benbros defence fails

In his recent decision, Justice Magoiga rejected Benbros claims that the terms of payment of the three loans were frustrated by Ecobank.

“The defendant’s (Benbros) allegations of frustration were based on email communications and letter dated 16th April, 2018.

“But careful perusal of exhibits answers and negate all the efforts of the defendant which did not meet the terms as set by the plaintiff (bank) which were necessary for a defaulter who was requesting more funding. In this circumstances, it cannot justifiably said the plaintiff frustrated the exercise,” said the judge.

The judge declined to accept Benbros’ claim that Ecobank frustrated plans to let other financiers to take over the loan.

“Apart from mentioning CRDB Bank and Equity Bank nothing was tendered to substantiate the allegations of those financiers willingness to take up the matter nor was any witness from those banks produced to support his allegations.

“In absence of such evidence, there is no way it can be conclusively be concluded that the plaintiff in any way frustrated any effort of payment,” said the judge.

On claim that Benbros executed mortgage deed on plot nuber 72 Mikocheni Industrial Area under duress, the judge said the admission by the advocate who represented the defendants that they had nothing to submit on the issue at the hearing of the case was no more than that nothing was put forward to prove the issue.