Court orders ZAS Investment Company Ltd to pay loans owed to Equity Banks
What you need to know:
- Equity Banks had guaranteed a loan for ZAS, which ZAS failed to repay. Consequently, the banks covered the debt and demanded repayment.
- ZAS contested in court, alleging it received the loan without the banks' backing. However, the court dismissed ZAS's claims and ordered it to pay.
Dar es Salaam. ZAS Investment Company Limited faced a setback in its attempt to evade repayment of a multi-million-dollar loan from Equity Banks Tanzania Limited and Equity Kenya Limited, which was adjudicated in the High Court's Commercial Division.
The court ruled that ZAS violated the bank loan agreement signed on October 5, 2021. As a result, the company was ordered to repay the banks the principal debt of $8,064,807.88, equivalent to more than Sh21 billion.
Additionally, ZAS was ordered to pay compound interest at eight percent on that amount, from the date of counterclaim filing until the judgment date, and seven percent annually from the judgment date until full payment.
Furthermore, the court ordered ZAS's directors and two other companies to pay the banks $7.6 million, equivalent to about Sh19.97 billion, as collateral provided for the loan, due to their failure to fulfill obligations.
Finally, ZAS and its guarantors were ordered to pay the costs of the counterclaim lawsuit.
The company had entered agreements with the banks between September 28, 2020, and October 5, 2021, wherein the banks provided collateral for the loan from an international lender for its other debts and operations.
These agreements enabled ZAS to secure a $7,013,000 loan from Lamar Commodity Trading DMCC (Lamar) in Dubai, United Arab Emirates, facilitated by Numora Trading PTE Limited.
According to the loan agreement, the banks were to provide a Standby Letter of Credit (SBLC) or Letter of Credit (LC) as a condition for the loan, which they fulfilled. To obtain the SBLC/LC, ZAS pledged various movable and immovable assets nationwide as collateral.
However, upon expiration of the loan repayment period, ZAS failed to repay, prompting the banks to cover the loan and demand repayment from ZAS.
Instead of repaying, ZAS took the matter to court, alleging it received the loan independently from Lamar/Numora without the banks' involvement.
In commercial case number 103 of 2022, ZAS argued that the agreements with the banks facilitating the loan were invalid, claiming breach of terms by the banks for not providing the SBLC/LC.
The banks countered, denying these claims and filing a counterclaim against ZAS and its directors who provided personal guarantees and collateral for the SBLC/LC.
During the trial, Judge Butamo Phillip presiding, ZAS presented one witness and 18 exhibits, while Equity Banks, represented by Lawyer Timon Vitalis, presented four witnesses and 95 exhibits.
Judge Phillip dismissed ZAS's primary case, stating it lacked substance and evidence. He upheld the banks' claims, emphasizing they had fulfilled their obligations under the agreements.
The court emphasized the importance of the SBLC/LC in the loan issuance and ruled against ZAS's claims that it received the loan without such collateral.
Judge Phillip concluded that ZAS had failed to prove its claims while the banks substantiated their counterclaims, ordering ZAS to pay costs and issuing various judgments against ZAS and its guarantors.
This case is part of multiple disputes where companies, represented by Lawyer Frank Mwalongo, borrowed from these banks to secure loans from foreign lenders but disputed repayment after the banks demanded, arguing against the banks' guarantees.
