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Refusal of creditor to accept money

Refusal of creditor to accept money

At first it seemed like a friendly gesture but then it did not seem to be so. I continued to pursue him to take his money as it was payable under the agreement but he did not accept the funds. He then  traveled and has recently returned and has fi ed a suit against me in Court claiming the principal sum, interest, penal interest and mesne profit for loss of gainful use of the money due to the delay and/or failure to pay him, which is untrue.

The interest claimed under the suit is three times the principal. Upon investigation I have found out that it was his strategy not to accept the payment from me so that he can claim additional interest. How do I go about this matter? The money was always there for him to receive but he refused. Is there a need for me to pay now?

TK, Dar

This is the first time we are hearing that a creditor refuses to receive sums under a loan agreement especially if the sums being paid back include the interest. We answer this question on the basis that you are not hiding any material facts from us. Generally refusal by the creditor to receive money does not discharge the debtor from the obligation to pay the debt, as in the debt is not extinguished by the mere refusal.

It is the debtors duty to look for the creditor and pay back the debt, which seems to be what you did. If the creditor will not take payment when tendered, the debtor must nevertheless continue to be ready and willing to pay the debt. Your defence should encompass all that you have said above including the fact that you have always been ready to pay the debt save for the creditor not accepting it.

During trial you will have to adduce evidence to that effect. As for the need of paying now, it is unlikely that he will receive the funds now. If you are hinting to us that with the suit the debt is extinguished, please be informed that that is not the case. You must also still be prepared to pay the original sum including interest due at the original time. Should you be successful you will be
required to make the payments as per the original plan and may be entitled to costs of the suit.

We also suggest that you once again recheck your facts as we find some of them very hard to believe. Shareholder not paying share capital We registered a company in which each of the four shareholders were supposed to inject Tsh 10M into the company. Whilst three of us have injected the money as part of the share capital and the shares, the fourth shareholder is refusing to pay saying that he does not have the money.

He also hinted to us that by operation of law, since the company has already been registered, he is already a shareholder in the eyes of the law. It seems that he is trying to get away with free shareholding. What can we do?

GO, Dar

In most articles especially if you have adopted Table A under the Companies Act, the following provision appears: The company shall have a first and paramount lien on every share (not being a fully paid share) for all moneys (whether presently payable or not) called or payable at a fixed time in respect of that share; but the directors may at any time declare any share to be wholly or in part exempt from the provisions of this regulation.

The company’s lien, if any, on a share shall extend to any amounts payable in respect of it. The Act further states that the company may sell, in such manner as the directors determine, any shares on which the company has a lien if a sum in respect of which the lien exists is presently payable and is not paid within fourteen clear days after a notice in writing has been given to the holder of the share, or the person entitled thereto by reason of the death or bankruptcy of the holder, demanding payment and stating that if the notice is not complied with the shares may be sold.

To give effect to any such sale the directors may authorise some person to transfer the shares sold to , or in accordance with the directions of, the purchaser thereof shall be registered as the holder of the shares comprised in any such transfer, and he shall not be bound to see to the application of the purchase money, nor shall his title to the shares be affected by any irregularity or invalidity in the proceedings in reference to the sale.

The net proceeds of the sale shall be received by the company and applied in payment of such part of the amount in respect of which the lien exists as is presently payable, and the residue, if any, shall (upon surrender to the company for cancellation of the certificate for the shares sold and subject to a like lien for sums not presently payable as existed upon the shares before the sale) be paid to the person entitled to the shares, at the date of the sale.

From the above, it is quite clear that the company has a lien over the shares that are unpaid for. You can hence proceed to call a board meeting and proceed to transfer or sale the shares. The fourth shareholder cannot own something he has not paid for. This is a fundamental principle in law that applies here.

Send in your questions by e-mail to: qa@fbattorneys.com or by post to: Q&A with FB Attorneys C/o The Daily News, P.O. Box 9033 DSM, Tanzania. To receive this column by email, please send a blank e-mail to qa@fbattorneys.com. You can also read the column online. Logon to www.fbattorneys.com and click on news.

This column is intended to give you a general overview of the Law. It is not a substitute to the role of your legal advisor. If you have legal issues, you are strongly recommended to contact your attorney.

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Author: FB ATTORNEYS

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