Court Orders Bank of Tanzania Governor to Explain Payment of 92bn/-
The High Court has ordered the Governor of the Bank of Tanzania (BoT) and Statutory Manager with FBME Bank Limited to give accounts how the decree for payments of over 92bn/-given in favour of Coast Textiles Limited should be implemented.
According to the order issued by Deputy Registrar Projest Kahyoza, the BoT Governor, Professor Benno Ndulu and Statutory Manager Lawrence Mafuru, who is currently the Treasury Registrar, risk being taken to prison as civil prisoners if they will not give sufficient explanations on execution of the decree.
The execution of the decree originates from a civil case that was decided against FBME Bank Limited after selling property, including a plant owned by Coast Textiles Limited, which was later transferred to Five Star Investment Limited following a dispute relating to overdraft facility.
Records show that the Bank of Tanzania, who was not part to the original proceedings, is linked in the matter after taking over the management of FBME Bank Limited, having being implicated with money laundering crimes in Cyprus in order to protect Tanzanian customers.
The court had ordered the two senior government officials to appear before it to show cause on the satisfaction of the decree in question on September 16, this year, but the session was halted temporarily following an ex-parte ruling given by Judge Ama Munisi.
Judge Munisi gave such temporary order in absence of counsel for Coast Textiles Limited, pending hearing of an application for suspension of such execution proceedings inter-parties (in present of both parties).
The parties are scheduled to appear before the judge today for mention of the application. On December 31, 2015, the court issued a garnishee order directing the Governor of BoT to attach accounts belonging to FBME Bank Limited in execution of the decree issued by High Court Judge Aloysius Mujulizi for payments of 92,265,023,140/-, which include principal sum and interests.
Following such garnishee order, the BoT filed an application requesting the court to investigate into legal ownership and, or status of the fund held in the two bank accounts and eventually lift and set aside such garnishee order.
Reasons advanced were that the FBME Bank Limited was currently managed by BoT, thus having interest on its affairs, thus no attachment could be made in respect of those accounts, which are legally known as Statutory Minimum Reserve Account and no third party could claim interests therein.
The court was told such accounts are opened for specific purposes and could not be attached until when the banking operation of a particular financial institution extinguishes.
In its ruling, however, the court agreed to lift the garnishee order issued, but that could not exonerate the BoT to satisfy the decree. It noted that FBME Bank Limited was operating smoothly its business in Tanzania though they were under the management of the BoT and was getting profit out of the daily transaction and that the profit was kept in different accounts apart from the ones that were thought to be garnished or attached.
As a result, the court ordered the Governor of the Central Bank and the statutory manager of FBME Bank Limited to appear before the court personally to explain how they are going to pay the decree holder, Coast Textiles Limited, who are represented by advocate Joseph Lutabingwa.
Coast Textiles Limited was at all material times a customer of FBME Bank Limited since 1997 and had been extended an overdraft facility by Trust Bank, through its branch in Kenya. But the amount involved, which is about 600,000 US dollars, was not credited to Coast Textiles Limited account in India.
A dispute ensued relating to the repayment of the overdraft, leading FBME Bank Limited to consolidate two credit facilities. Coast Textiles Limited claimed that the concentration of the two credit facilities granted by two banks was wrong and in breach of the agreement.
By deed of transfer from Delphis Bank (T) Limited, predecessor in title of FBME Bank Limited dated June 28, 2001, the latter bank’s interest in Coast Textiles Limited were transferred to Loan and Advances Realization Trust, the predecessor in title to Consolidated Holding Corporation.
Consequently, the Consolidated Holding Corporation, exercising powers granted to it under the law, transferred the landed property, including plant and machinery as mortgaged by debenture in favour of FBME Bank to secure Coast Textiles Limited liabilities by way of sale to Middle East Properties Limited.
Originally published on DailyNews Tanzania