2 contractors get civil jail sentence

TWO directors of a private construction firm renovating the Julius Nyerere International Airport have been committed to two months civil imprisonment each for failure to pay 554,941 dollars loan they obtained from Barclays Bank Tanzania Limited in 2003.

Judge Salum Massati of the High Court's Commercial Division ruled yesterday that Phillip Grissel and Pradeep Gajjar, directors of P.G. Associates Limited be committed to civil jail as a way to compel them pay the bank's loan.

He rejected their plea for at least a week to settle the debt, saying it lacked merit. The court had originally ordered them to settle the debt in April last year.

Judge Massati also told the bank to deposit 200,000/- with the Prisons Department as one month's subsistence allowances for the two judgement debtors. Advocate Paschal Kamala, for the bank, assured the court that his client would do so.

Civil imprisonment is one option under civil law to enforce repayment of a debt. In other cases banks usually sell off the collateral for a loan. The money that a creditor pays to have a debtor in civil imprisonment is non refundable.

It appears by resorting to civil imprisonment, Barclays Bank believes that the debtors would opt to repay the loan faster than go to prison. Grissel and Gajjar had acted as guarantors for a loan advanced to their company apparently without collateral.

On August 30, last year, the bank filed an application for the duo to show cause why they should not be committed to prison for defaulting the court's settlement order issued on April 24.

The court had ordered the debtors to settle the loan on installments of 30,000 dollars each on August 1, 2006, November 1, 2006 and February 1, 2007. Thereafter they would pay 40,000 dollars each on April 1, July 1, October 1 and January 1 of each calendar year.

Advocate Dilip Kesaria, for the bank, had told the court that the debtors paid 30,000 dollars only by two separate installments of 15,000 dollars in November and December last year and issued a dishonoured banker's cheque of 30,000 dollars for February installment.

In his ruling, the judge said the debtors had acted in bad faith and they did so in order to obstruct or delay the bank in execution of the court's decree. He, therefore, ordered them to be arrested and committed to the said period of civil imprisonment.

The debtors had told the judge that if jailed their 780m/- contract they signed with the airport's authority on October 3, this year, would be cancelled. Under such situation, they alleged, it would be difficult for them to pay back the loan even in first installment.

However, the judge said if he would decide as requested by the debtors, would amount at varying his earlier orders in which he ordered that they would only escape the jail term under one condition of fully paying the loan, the soonest possible.

SOURCE: DAILY NEWS