' 1. The petitioners filed a notice of motion application dated 2nd April 2025 brought under inter alia section 504 of the Insolvency Act and rule 10 of the Insolvency Regulations, seeking the following orders:
“1. Spent.
2. SHAMINDER KAUR KALSI, MANJIT KAUR KALSI, JASPAL SINGH HARDEN SINGH KALSI and HARDEV SINGH KALSI, being persons who have been concerned with the promotion, formation and management of MC BUILDER LIMITED be summoned to be examined in Court on 9th April 2025, as to their conduct in relation to the management of MC BUILDER LIMITED
3. If at the conclusion of the examination, the Court finds that SHAMINDER KAUR KALSI, MANJIT KAUR KALSI, JASPAL SINGH HARDEN SINGH KALSI and HARDEV SINGH KALSI have misapplied or retained, or become accountable for money or property of MC BUILDER LIMITED or committed misfeasance or a breach of any fiduciary or other duty in relation to MC BUILDER LIMITED, an order be made compelling SHAMINDER KAUR KALSI, MANJIT KAUR KALSI, JASPAL SINGH HARDEN SINGH KALSI and HARDEV SINGH KALSI to repay, restore or account for the money or property or any part of it, with interest at such rate as the Court considers appropriate and contribute such amount to MC BUILDER LIMITED''s assets as compensation for the misfeasance, breach of fiduciary or other duty as the Court considers fair and reasonable.
4. Any other or further relief this honourable court deems fit and just to grant.
5. The costs of this application be provided for.”
2. The application was grounded on the fact that the named individuals were directors and shareholders of MC Builder Limited, which had admitted indebtedness to Astrum Limited, the Petitioner herein, but failed to honour promises of payment. Despite several court mentions and correspondence, they allegedly ignored communications and frustrated efforts to settle the admitted debt of KES 1,787,428/-.
3. It was averred that their conduct was contrary to their fiduciary duty and raised apprehension of misapplication or retention of company assets.
4. The matter was fixed for mention on 9/4/2025, and the applicants urged that the directors be summoned and examined as to their conduct in the interest of justice. The application was supported by the affidavit of Andrew Koech, the petitioner’s director.
Analysis and determination
5. The petitioner filed written submissions dated 2/5/2025 in support of the instant application. At the time of writing this ruling, there had been no participation nor response to the instant application by the respondent company nor by its directors.
6. The petitioner instituted this suit vide a petition dated 15/7/2024. The petitioner asserted that the respondent company is indebted to it to the tune of Kshs.. 1,787,428.00 and prayed for an order of the court to liquidate the company under the Insolvency Act and for the appointment of Phillip Ibrahim Onyango as the liquidator of the company.
7. The petitioner then filed the instant application before the court pursuant to section 504 of the Insolvency Act which states:
“ (1) This section applies to the following persons—
(a) an officer or former officer of a company that is in liquidation (whether by the Court or voluntarily);
(b) a person who is or has acted as the liquidator of such a company;
(c) not being a person referred to in paragraph (a) or (b), a person who has been concerned in the promotion, formation or management of such a company.
(2) If, during the course of the liquidation of a company, it appears that a person to whom this section applies has or may have—
(a) misapplied or retained, or become accountable for, money or property of the company; or
(b) committed misfeasance or a breach of any fiduciary or other duty in relation to the company,
the Official Receiver, the liquidator of the company or a creditor or contributory of the company may make an application to the Court to conduct an examination under subsection (6).
…
(6) On the hearing of an application made under subsection (2), the Court may undertake an examination into the conduct of the person in relation to whom the application was made.
(7) If, at the conclusion of the examination, the Court finds that the person examined has engaged in conduct of a kind referred to in subsection (2), it may make an order compelling the person—
(a) to repay, restore or account for the money or property or any part of it, with interest at such rate as the Court considers appropriate; or
(b) to contribute such an amount to the company''s assets as compensation for the misfeasance, breach of fiduciary or other duty as the Court considers fair and reasonable.”
8. From the above provision, it is clear that section 504 is only triggered where a company is already under liquidation, either by order of the court or voluntarily. It empowers the court, on application, to examine officers or other persons concerned with the company’s affairs if allegations of misfeasance or breach of duty arise in the course of such liquidation.
9. It is clear from the wording of Section 504(2) of the Act that its provisions can only be invoked once a winding-up or liquidation order has been made. The statutory powers of examination and recovery under the provision are exercisable in the course of liquidation, and cannot be invoked before the court has actually ordered liquidation.
10. In the present case, the respondent company has not been placed under liquidation. The liquidation petition filed by the petitioner is still pending determination before this court.
11. In the circumstances, section 504 of the Insolvency Act is inapplicable at this stage. The court cannot, at this stage, summon officers of the respondent company for examination as prayed in the application. The application is therefore premature and misconceived.
12. For avoidance of doubt, the dismissal of this application does not prejudice the petitioner’s right to reapply under section 504 of the Insolvency Act should the liquidation petition succeed and the respondent company be placed under liquidation.
13. Accordingly, the application dated 2nd May 2025 is hereby dismissed with no orders as to costs since the Respondents did not file any responses to the application.
14. It is so ordered.
SIGNED, DATED, and DELIVERED IN VIRTUAL COURT THIS
25TH SEPTEMBER 2025
ADO MOSES
JUDGE
In the presence of: -
C/A – Moses
Asheley Mungai……….………..for the Petitioner
Muthama.………….…..... for the Respondent
'
“1. Spent.
2. SHAMINDER KAUR KALSI, MANJIT KAUR KALSI, JASPAL SINGH HARDEN SINGH KALSI and HARDEV SINGH KALSI, being persons who have been concerned with the promotion, formation and management of MC BUILDER LIMITED be summoned to be examined in Court on 9th April 2025, as to their conduct in relation to the management of MC BUILDER LIMITED
3. If at the conclusion of the examination, the Court finds that SHAMINDER KAUR KALSI, MANJIT KAUR KALSI, JASPAL SINGH HARDEN SINGH KALSI and HARDEV SINGH KALSI have misapplied or retained, or become accountable for money or property of MC BUILDER LIMITED or committed misfeasance or a breach of any fiduciary or other duty in relation to MC BUILDER LIMITED, an order be made compelling SHAMINDER KAUR KALSI, MANJIT KAUR KALSI, JASPAL SINGH HARDEN SINGH KALSI and HARDEV SINGH KALSI to repay, restore or account for the money or property or any part of it, with interest at such rate as the Court considers appropriate and contribute such amount to MC BUILDER LIMITED''s assets as compensation for the misfeasance, breach of fiduciary or other duty as the Court considers fair and reasonable.
4. Any other or further relief this honourable court deems fit and just to grant.
5. The costs of this application be provided for.”
2. The application was grounded on the fact that the named individuals were directors and shareholders of MC Builder Limited, which had admitted indebtedness to Astrum Limited, the Petitioner herein, but failed to honour promises of payment. Despite several court mentions and correspondence, they allegedly ignored communications and frustrated efforts to settle the admitted debt of KES 1,787,428/-.
3. It was averred that their conduct was contrary to their fiduciary duty and raised apprehension of misapplication or retention of company assets.
4. The matter was fixed for mention on 9/4/2025, and the applicants urged that the directors be summoned and examined as to their conduct in the interest of justice. The application was supported by the affidavit of Andrew Koech, the petitioner’s director.
Analysis and determination
5. The petitioner filed written submissions dated 2/5/2025 in support of the instant application. At the time of writing this ruling, there had been no participation nor response to the instant application by the respondent company nor by its directors.
6. The petitioner instituted this suit vide a petition dated 15/7/2024. The petitioner asserted that the respondent company is indebted to it to the tune of Kshs.. 1,787,428.00 and prayed for an order of the court to liquidate the company under the Insolvency Act and for the appointment of Phillip Ibrahim Onyango as the liquidator of the company.
7. The petitioner then filed the instant application before the court pursuant to section 504 of the Insolvency Act which states:
“ (1) This section applies to the following persons—
(a) an officer or former officer of a company that is in liquidation (whether by the Court or voluntarily);
(b) a person who is or has acted as the liquidator of such a company;
(c) not being a person referred to in paragraph (a) or (b), a person who has been concerned in the promotion, formation or management of such a company.
(2) If, during the course of the liquidation of a company, it appears that a person to whom this section applies has or may have—
(a) misapplied or retained, or become accountable for, money or property of the company; or
(b) committed misfeasance or a breach of any fiduciary or other duty in relation to the company,
the Official Receiver, the liquidator of the company or a creditor or contributory of the company may make an application to the Court to conduct an examination under subsection (6).
…
(6) On the hearing of an application made under subsection (2), the Court may undertake an examination into the conduct of the person in relation to whom the application was made.
(7) If, at the conclusion of the examination, the Court finds that the person examined has engaged in conduct of a kind referred to in subsection (2), it may make an order compelling the person—
(a) to repay, restore or account for the money or property or any part of it, with interest at such rate as the Court considers appropriate; or
(b) to contribute such an amount to the company''s assets as compensation for the misfeasance, breach of fiduciary or other duty as the Court considers fair and reasonable.”
8. From the above provision, it is clear that section 504 is only triggered where a company is already under liquidation, either by order of the court or voluntarily. It empowers the court, on application, to examine officers or other persons concerned with the company’s affairs if allegations of misfeasance or breach of duty arise in the course of such liquidation.
9. It is clear from the wording of Section 504(2) of the Act that its provisions can only be invoked once a winding-up or liquidation order has been made. The statutory powers of examination and recovery under the provision are exercisable in the course of liquidation, and cannot be invoked before the court has actually ordered liquidation.
10. In the present case, the respondent company has not been placed under liquidation. The liquidation petition filed by the petitioner is still pending determination before this court.
11. In the circumstances, section 504 of the Insolvency Act is inapplicable at this stage. The court cannot, at this stage, summon officers of the respondent company for examination as prayed in the application. The application is therefore premature and misconceived.
12. For avoidance of doubt, the dismissal of this application does not prejudice the petitioner’s right to reapply under section 504 of the Insolvency Act should the liquidation petition succeed and the respondent company be placed under liquidation.
13. Accordingly, the application dated 2nd May 2025 is hereby dismissed with no orders as to costs since the Respondents did not file any responses to the application.
14. It is so ordered.
SIGNED, DATED, and DELIVERED IN VIRTUAL COURT THIS
25TH SEPTEMBER 2025
ADO MOSES
JUDGE
In the presence of: -
C/A – Moses
Asheley Mungai……….………..for the Petitioner
Muthama.………….…..... for the Respondent
'