Court name
High Court of Tanzania

Tanzania Knitwear Ltd vs Shamshu Esmail () [1989] TZHC 13 (15 April 1989);

Law report citations
1989 TLR 48 (TZHC)
Media neutral citation
[1989] TZHC 13
Coram
Mapigano, J.

Mapigano, J.: Let me state the background first. The plaint says that the applicant's employment as manager of the respondent company was terminated by a resolution E passed by an extraordinary meeting of the directors held on 23/l2/86, on account of gross mismanagement; that the applicant has not abided by that resolution and continues to manage the business of the company to the detriment of the company; and that unless he is restrained from managing the business of the company the company will continue to F suffer considerable loss. Wherefore the respondent prays that the termination be affirmed and the applicant be restrained, permanently, from managing the business of the company. It is to be noted that the applicant is not only a shareholder in the company but a director as well. G
On 22/1/87 the respondent made an ex-parte chamber application, seeking an order for temporary injunction against the applicant to restrain him from entering the business premises of the company pending the determination of the suit. On the same day the learned J.K. granted the application, observing that the applicant's employment had H already been terminated.
The applicant filed his W.S.D. on 23/6/87. It is evident from that pleading and the materials now before this court that the applicant was aware, at the time of filing the W.S.D., of the existence of the ex-parteinjunction and that the injunction was granted I when he had already resigned from the management of the company.

On 3/l2/87 a resolution was passed by the directors of the company to issue 800 shares. A It was also resolved that "each shareholder be offered to purchase the said shares according to individual shareholding".
The present application was brought on 3/2/88. The application is made under 0.37 rr. l B and 4 and section 68 of the C.P.C. The applicant wants the order for temporary injunction dissolved and the respondent be restrained from floating the 800 shares. The reasons are stated in his affidavit, particularly in paras 3, 4 and 5. He has deposed that the management of the company is now in the hands of Messrs Thakrar and Lakhani and C alleged that the company's business does not receive proper attention because one "is in London since the last six weeks" and the other "is always engaged in his other business." He has contended that the proposed issue and allotment of 800 shares is invalid because the meeting that passed the resolution in that respect was not called in D accordance with the rules of the Articles of Association and because the said issue was meant to oppress him.
The respondent has opposed the application and Mr. Thakrar who is one of the directors has sworn and filed a counter-affidavit. In paras 3, 7, 8 and 9 he repeats the E charge of gross-mismanagement against the applicant and illustrates the same. In para 4 he alleges that the applicant has made some efforts to close down the business of the company, which allegation is not disputed. In para 10 he asserts that the issue of 800 shares is not ill-motivated but is an action the directors believe to be in the best interests F of the company. And in para 12 he points out that the company is now managed by one Mr. Edwini and not Messrs Thakrar and Lakhani.
Mr. Kesaria, learned counsel for the applicant, has submitted in regard to the ex-parte temporary injunction, that such injunctions are granted only in exceptional circumstances. G He has cited the case of Janmohamed v Madhani (l953) 20 EACA 8. In his opinion there was no such circumstance in this case. With regard to the floating of the 800 shares, Mr. Kesaria has put forward two propositions. The first proposition is that it was illegal because it contravened the provision of section 51 (2) of the Companies H Ordinance. The second is that it is invalid because it was designed to oppress the applicant, and the learned advocate has cited Clemens v Clemens Bros. Ltd. [l976] 2 All E.R. 268 in support.
Mr. Ismail who represents the respondent has attached the application for being duplex I in that the applicant has united two distinct applications in one application, namely an application for

setting aside the temporary injunction and an application for injunction order to stop the A floating of the 800 shares. Mr. Ismail has submitted that the application is bad at law on that score, but has not backed up his contention with any authority. Next, learned counsel has submitted that the application, to the extent that it seeks the discharge of the injunction order is time barred. He has relied on the provision of Article 21, Part B III, First Schedule to the Law of Limitation Act, 1971. And as regards the application, to the extent that it relates to the floating of the 800 new shares, he has pointed out that the shares have already been floated and remarked that the applicant should have been advised to apply for a revocation of the issue rather than an injunction. In any case, he C contended, the creation and the floating of those shares was done in good faith and that neither the company nor the applicant has been hereby prejudiced. Lastly Mr. Ismail has informed this court that the applicant has already instituted legal proceedings D in a bid to have the company liquidated.
In reply Mr. Kesaria has contended that the joinder of two applications is not prohibited by law. In his opinion it is inferable from 0.2 r. 3(1) of the C.P.C. that such joinder is, on the contrary, countenanced. Against the proposition that the application E for discharge of the temporary injunction order is time barred, Mr. Kesaria has replied, if I understand him correctly, that the provisions of the Law of Limitation Act were not applicable to the matter.
I now proceed to decide the various points that have been raised in this application. In my opinion the combination of the two applications is not bad at law. I know of no law F that forbids such a course. Courts of law abhor multiplicity of proceedings. Courts of law encourage the opposite.
I am also disposed to share Mr. Kesaria's view that the Law of Limitation Act, 1971, does not apply to an application for discharge of temporary injunction. For very G obvious reason. An order for temporary injunction is essentially an interim order. But it may last several years and circumstances may change and the order may become unduly harsh or unnecessary or unworkable. It would thus be improper and unwise to make such an order the subject of any law of limitation. H
On the question whether the learned J.K. was justified to dispense with service of notice to the applicant, I have to refer to the wording of 0.37 r. 3 of the C.P.C. It seems to me that the requirement of giving notice to the opposite party is mandatory. I The exception is where it appears that the delay involved in the

issue of notice will defeat the object of the injunction. As mentioned above, the reason A given by the J.K. for dispensing with the issue notice was that the services of the applicant had been terminated. However, the materials deposed by Mr. Thakrar in his affidavit of 20/1/87, which depositions stand uncontroverted to-date, I think that the application satisfied the requirement of 0.37 r.3 of the C.P.C. and I am satisfied that B the injunction was not irregular.
I turn to the issue of the 800 new shares. The first point to consider and decide is whether the resolution of the directors in that respect was ill-motivated i.e. whether it C was framed and passed in order to divest the applicant of his rights as a shareholder holding 300 shares in the respondent company. In Clemens v Clemens Bros. Ltd. to which Mr. Kesaria has made reference and which is about the leading case on the point, certain resolutions to increase the capital and issue of new shares in such a way D as to deprive the plaintiff, a shareholder, of her "negative control" in the defendant company were set aside as having been passed by an inequitable use of the defendant's voting rights. These were the facts of the case: The plaintiff owned 45% of the issued share capital of the defendant company and her aunt hold the remaining 55%. Although E at one time both the plaintiff and her aunt had been directors of the company, at the relevant time the plaintiff was no longer a director. The aunt and her fellow directors proposed to increase the company's share capital by the creation and issue of further shares. The proposal was to issue them as 200 to the directors and as to the remaining F 850 to a trust for long-serving employees. Resolutions to give effect to these proposals were passed at an extraordinary general meeting notwithstanding the plaintiff's proxy voting against them. The plaintiff was concerned that the proposed share issue would dilute her own holding and voting power from 45% to marginal less G than 25%, in other words, she would lose "negative control". She commenced proceedings against the company and the aunt seeking a declaration that the resolutions were oppressive, and an order setting them aside. Forster, J. acceded and made the order asked for having formed the view that the resolutions were "specifically and H carefully designed to ensure not only that the plaintiff can never get control of the company but deprive her of what has been called her negative control" i.e. the power to prevent the passage of any special resolutions of which she disapproved.
It seems to me that the analogy between Clemens case and the present case fails on a I vital point. Here it has not been established that the alteration of capital by the creation of the new shares and

floating the same was meant to delete the applicant's holding and voting power. As we A have seen, all the shareholders including the applicant were offered to purchase the new shares on a pro-rata basis and in the circumstances I fail to understand how the applicant can be heard to complain that the resolution was oppressive to him. I accept the version of the respondent that the increase of the capital and the issue of the new B shares was solely done in order to strengthen the company's capital base and that it suited the requirements of the company.
With regard to the allegation that the company is being mismanaged, I am not satisfied C that is actually the case. In any case I do not think that the discharging of the injunction order would be the solution of the problem.
Finally, I come to the question whether the passing of the resolution contravened the provision of the Companies Ordinance. It is not in dispute that the resolution was D passed by the directors at their meeting held on 3/l2/87. By section 51(2) of the Companies Ordinance the power to increase capital must be exercised by the company by passing a resolution in a general meeting and directors have no power to exercise it. The resolution was, therefore, illegal and should not be allowed to stand. I set it aside. No order for costs. E
Order accordingly.

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