Pursuant to leave granted on 21 st December 2024, the 13 Ex parte Applicants filed a Notice of Motion dated 6 th January 2025 seeking an order of Certiorari quashing the 1 st Respondent’s letter dated 17 th December 2024 barring them from holding office as officials of the 2 nd to 14 th Respondents being their respective primary SACCOS and in any other Sacco; and an order of Prohibition prohibiting any other or further decisions to bar them from holding office.
The application is verified by the affidavit sworn by Andrew Okwach Ayarah, the 7 th Exparte applicant and a statutory statement, both dated 19 th December 2024.
The Ex parte Applicants’ case is that all the members of the KUSCCO Board are originally members of primary Saccos which is a pre-condition for being elected to sit on the said KUSCCO Board. It is deponed by the 7 th Ex parte Applicant that during his tenure as a Board member, he offered invaluable contributions geared towards good corporate governance.
Further, that cumulatively as a Board, during the time that he served, he witnessed responsible management for the benefit of all stakeholders. It is deposed that their collective tenure as a Board was brought to a halt on 6 th May 2024 when they were removed unceremoniously without due process being followed. It is their case that the removal was done through a press statement released on the even date by the Cabinet Secretary in charge of the Ministry of Cooperatives and MSME Development.
That upon their removal, the Cabinet Secretary directed the 1 st Respondent to appoint an interim Board allegedly in compliance with the Cooperative Societies Act to oversee the transformation of and rehabilitation of KUSCCO.
According to the exparte applicants, their removal from the KUSCCO Board is on account of alleged mismanagement and misapplication of funds based on a forensic audit that they had not set their eyes on. It is their case that the said audit was spearheaded by the interim Board.
The Ex parte Applicants contend that their removal on account of mismanagement was occasioned by malice as management of KUSCCO is a preserve of the management officials and the main decision-making organ of KUSCCO is the Annual Delegates Meeting.
It is their case that the decision to remove them was undertaken by the 1 st Respondent despite having permanent representation in the KUSCCO Board since its inception and having the sole mandate of approving and giving validity to the financial statements of the Board.
The Ex parte Applicants aver that they have only had stints sitting at the KUSCCO Board, which Board is dynamic and their tenure based on election by the respective regions. They state that the appointment of the interim Board was done contrary to the provisions of by law 27 of the 11 th Edition of KUSCCO by laws which provides for the elaborate procedure of constitution of the Board.
That the 1 st Respondent appointed one David Mategwa as the Chairperson of the interim board despite being ineligible to serve as a member of the Board for contravening by law 29(t) of KUSCCO by-laws by having legal suits against KUSCCO.
That by letters dated 17 th December 2024, similar in substance but addressed to the 2 nd to 14 th Respondents separately, the 1 st Respondent took a unilateral decision to bar the Ex parte Applicants from holding office as officials in the 2 nd to 14 th Respondents respectively and any other co-operative forthwith.
The Ex parte Applicants state that notably, this directive had been applied selectively with the Chairperson of the interim Board and Director Philip Rilei, who were part of the former Board members of KUSCCO being exempted from the findings and being placed in the interim Board which spearheaded the forensic audit.
They further state that the 1 st Respondent, in violation of its statutory mandate has now opted to further persecute them by directing that they be removed from the offices they hold in their primary saccos and any other cooperatives forthwith purportedly acting on the recommendation of the interim Board.
The Ex parte Applicants further state that the said decision barring them from holding offices in their primary Saccos and any other co-operative forthwith offends the specific procedure on election and removal of officials in the respective primary Saccos and was pursued without following the due process.
According to the exparte applicants, the decision has been undertaken in violation of the 4 th Schedule of the Constitution which confers County Governments with the function of trade development and specifically regulation of co-operative societies and as such that the 1 st Respondent has arrogated to himself a function contrary to the supreme law of the land.
They also state that the 1 st Respondent purports to have relied on Section 93A(d) of the Cooperative Societies Act yet this provision does not grant overarching powers to be applied as the 1 st Respondent pleases and definitely does not provide any powers that contravene the Constitution.
That in an attempt to remedy this apparent illegality, the 1 st Respondent has enlisted County Directors for Cooperative Societies. It is the Ex parte Applicants’ case that the Constitution does not envisage a duty bearer taking instructions from any party who is not constitutionally mandated to perform a constitutional duty.
They assert that they have not been furnished with the alleged incriminating report, have not been accorded a hearing, the ‘specific culpability of each of them has not established and as such ‘the reason for the bar to hold office in their primary Saccos and any other co-operative forthwith is not established in total violation of their right to fair administrative action as guaranteed under Article 47(2) of the Constitution.
That the 2 nd to 14 th Respondents have proceeded to act on the 1 st Respondent’s recommendation and the only bar to this has been the stay orders granted by this Court, nonetheless the 7 th and 13 th Respondents have opted to disobey the Court orders necessitating the urgency in removing the 1 st Respondent’s decision to avert a miscarriage of justice.
The Exparte Applicant’s Further Affidavit
The Ex parte Applicants also filed a Further Affidavit sworn 26 th March 2025 by Andrew Okwach Ayarah. In the said affidavit, it is deposed that despite KUSCCO being an umbrella union of SACCOs, it is not governed by Sacco Societies Regulatory Authority as averred by the 1 st Respondent. Further that under KUSCCO By-laws and the Co-operative Societies Act Cap. 490, KUSCCO is defined as a Cooperative Union of Primary SACCOs and not a SACCO, that it is an umbrella union of primary SACCOs regulated by the Co-operative Societies Act Cap. 490 and its membership is restricted to primary SACCOs and that it is only primary SACCOs that are governed by SASRA.
The Applicants state that whilst the books of accounts and By laws of primary SACCOs are approved by SASRA, those of KUSCCO are approved by the 1 st Respondent himself and that despite being assigned the above mandate, the 1 st Respondent's allegations on acts of illegality are a mere afterthought as he signed and approved the by-laws and books of accounts which act of signing only alludes to a conclusion that the 1 st Respondent admits the business of KUSCCO.
The Ex parte Applicants also aver that in the said by laws, paragraph 3(h) provides that one of the objects of KUSCCO is to establish a Central Finance facility for inter-lending among its members and provide money remittance services which acts the 1 st Respondent claim to be illegal despite approving the said by laws.
They state that at no point of the approvals did the 1 st Respondent make a determination that KUSCCO is dealing in fraudulent and illegal actions and the subsequent claims are only afterthoughts to pursue political interests as against them.
It is their case that in disregard to the rules of natural justice, the 1 st Respondent who has a permanent representative in the Board of KUSSCO, not only approved the books of account, that are now being challenged but that he is also the prosecutor, the investigator and judge in this matter in a clear violation of the said rules. They urge that without a doubt, justice is not even faintly seen to be done as against them.
According to the applicants, paragraph 3(u) of the bylaws provides for the objective of creating KUSCCO subsidiaries in Insurance, ICT, Housing Cooperative Foundation save for the fact that the 1 st Respondent approved the bylaws of KUSCCO which clearly delineate and outline the said objectives.
It is stated that the spirit of the drafters of the Constitution was to place Co-operative Societies under the County Governments for avoidance of political interference from the national government thus the Cabinet Secretary has no powers and mandate to regulate co-operative societies and his actions on the Ex parte Applicants’ removal from their primary SACCOs is unconstitutional.
They also urge that the instant suit does not in fact contest their removal from the Board of Directors of KUSCCO as claimed by the 1 st Respondent but contests their removal from the primary SACCOs which actions of the 1 st Respondent on the same is in total violation of Schedule 4 of the Constitution.
They also state that while the 1 st Respondent claims that the accounts were doctored one Mr. Javel M. Murira, an auditor for the 1 st Respondent approved and signed the books of accounts to reflect the true financial position of the institution. In addition, that it is the 1 st Respondent who provides for the list of approved auditors who verify the books of accounts.
The Ex parte Applicant’s further assertion is that routine inspections were conducted on 11 th January 2024 which exonerated the Board as there were no acts of illegality. Further, that the recommendations of the inspection was to re-organize the entire Board and not for removal of the Directors as performed by the 1 st Respondent. According to them, the Board had commenced the re-organization as recommended by the inspection report.
They state that Section 93 of the Co-operatives Societies Act which mandates the Cabinet Secretary to direct the 1 st Respondent to exercise his powers and duties is in total violation of Schedule 4 of the Constitution which powers are accorded to the County Governments and that the decision taken by the 1 st Respondent was thus taken in his own capacity and was not inclusive of the County Government mandated with the same tasks.
The Applicants also state that with respect to KUSCCO financial irregularities, the 1 st Respondent is put to strict proof as KUSCCO was operating as per the bylaws and the audited accounts approved by the 1 st Respondent confirmed that KUSCCO was making profits.
It is the Ex parte Applicants’ case that the said audit was conducted by Omenye & Associates duly approved by the 1 st Respondent to conduct the audit.
The Ex parte Applicants state that the 1 st Respondent attends the annual delegates meeting and has never raised any issue as to actions of illegality and the need to obtain requisite licenses. Also, that it is in contravention of the law to state that KUSCCO ought to have obtained license from SASRA yet in reality it is governed by the Co-operative Societies Act and not under SASRA. They urge that it is known to the 1 st Respondent, that KUSCCO is under the supervision of the Ministry of Cooperatives.
According to the applicants, the Inspection Report given on 11 th January 2024 only recommended the reconstitution of the Board and by no chance, did it recommend removal of the Board of Directors. Additionally, that the Board's role is to formulate policies and is not responsible for the day-to-day management of KUSCCO.
The exparte applicants state that the 1 st Respondent had a personal representative who acts as a technical advisor to the Board in the process of conducting its business and that upon approval of a report by the Board, the report is taken to the 1 st Respondent for approval and subject to the 1 st Respondent's approval, a subsequent approval is later done in the Annual Delegates Meeting. It is urged that the entire process is conducted with the aid of an internal auditor.
It is the Ex parte Applicants’ case that the appointment of Mr. David Mategwa whom some of the Ex Parte Applicants passed a vote of no-confidence has created vilification and hatred against them contrary to the spirit of Article 33(2)(d) of the Constitution. The 1 st Respondent’s actions are said to be discriminatory.
That the effect of culpability being taken only on immediate former members leaving out long-term serving members of the Board is in total violation of the Constitution and impairs the right not to be discriminated under Article 27 of the Constitution in that; five members who were appointed to the Board on 29 th May 2021 are being blamed for alleged systemic long-term mismanagement yet members who have been serving in the Board from 2010 are excluded from culpability and are in fact appointed to the interim Board.
The Ex parte Applicants argue that despite a consultative meeting being held on 25 th April 2024, from the onset, the Board was not aware of the existence of the meeting and were only invited on the day of its occurrence.
Consequently, that the membership of the organization comprises of 3500 members as noted in Paragraph 4 which members were not properly represented as majority attendances represented SACCOs from Nairobi Region being 120, Rift Valley 11, Mt. Kenya 61 and Coast Region 21. Notably, that there was no representation from the Western Kenya Region in totality.
Their case is that the meeting for the removal of the Board was not properly constituted and was in contravention of paragraph 24 (c) (ii) of the bylaws which provides for the constituting of a Special Delegates meeting with at least one half of the delegates. Further, that the 1 st Respondent ought to have constituted a delegates meeting and not a general meeting, worse off, composed of some few and carefully handpicked SACCOs.
It is their case that insolvency is not an out of court structure, and therefore a company can only be declared insolvent upon a court's determination of its inability to pay debts and the mere fact that there exists a need to restructure the organization does not declare a company insolvent.
According to the Ex parte Applicants, in the said minutes of the meeting, misappropriation of funds is not mentioned anywhere and consequently non-regulation of the Central Finance Fund is not a ground for removal from the Board of the Organization
They also argue that in utter surprise, the Interim Board appointed constitutes a team of 14 members despite the resolutions suggesting a team of 7 members. That the selective reliance on the recommendations is a clear demonstration of bad faith on the part of the 1 st Respondent and vested interest. The Ex parte Applicants deny knowledge of any forensic audit report.
That there being no forensic report or audit produced in their unprocedural removal undermines their right to fair hearing under Article 50 and Freedom of Association guaranteed under Article 35 as it secludes them from joining other associations. They also urge that their respective primary SACCOs have nothing whatsoever against them and that if existent, channels for removal in the respective bylaws can be explored.
Responses
1 st Respondent’s Replying Affidavit
The 1 st Respondent filed grounds of opposition dated 31 st January 2025 and a Replying Affidavit sworn on even date by David Obonyo, the 1 st Respondent’s Office holder.
The 1 st Respondent contends that the instant application as filed offends the provision of Section 9 (2) of the Fair Administrative Action Act and sections 76 and 77 of the Co-operative Society Act.
It is also urged that the former employer of the Ex parte Applicants, Kenya Union of Savings and Credit Co-operatives Limited (KUSCCO) is a Cooperative Society registered on 19 th September 1973, registration number CS/2171, under the Co-operative Societies Act Cap. 490 and the subsidiary legislation thereunder.
Further, that KUSCCO is the umbrella Union of Savings and Credit Cooperative Societies (Saccos) in the country, governed by the Sacco Societies Act and the attendant Regulations, including the Sacco Societies (Deposit-Taking Sacco Business) Regulations, 2010 and the Sacco Societies (Non-Deposit-Taking Business) Regulations, 2020. Also, that it is governed by the Sacco Societies Regulatory Authority (SASRA).
The 1 st Respondent urges that the main objective of KUSCCO includes, the promotion of Saccos (both internationally and locally), spokesman ship and advocacy; representation; risk management services; Central Finance Fund; education and training and corporate affairs and marketing.
According to him, the common bond of KUSCCO was expanded to admit individual members. In addition, that the Union diversified its activities to include housing, mortgage, insurance and registered subsidiaries, namely, KUSCCO Housing Co-operative Society Limited and KUSCCO Mutual Assurance Limited.
That KUSCCO has a share capital of Kes. 3.3 billion, Kes. 15.3 billion deposits and savings both amounting to Kes. 18.6 billion and loans to members of Kes. 14 billion. The 1 st Respondent states that t he State Department for Co-operatives is responsible for among other functions, growth and development of co-operatives including formulation, adoption and implementation of policy and legal framework for the development and growth of all cooperatives in keeping with the overall national development policies and priorities.
He argues that the Co-operatives Act under Section 3(1) establishes the office of the Commissioner for Co-operative Development and Section 3(3) of the Act provides for the role of the Commissioner. Section 60A of the Act is said to empower the Commissioner to carry out routine inspection. Section 93 is said to provide that the Minister may at any time and on any matter direct the Commissioner as to the exercise of his powers and duties under the Act.
It is argued that concerns by various quarters were raised to the Ministry responsible for co-operatives in respect to KUSCCO’s financial irregularities, operational inefficiencies, failure to adhere to regulatory requirements among other issues. The said concerns were met with consternation and rightly so, as the impact to the members, economy and the society at large would be dire.
According to the 1 st Respondent, the member SACCOS would incur financial loses running into billions of shillings inevitably leading to their collapse, reduced trust and credibility and operational disruptions.
That in addressing the concerns, the Cabinet Secretary responsible for Cooperatives and Micro, Small and Medium Enterprises (MSMEs) Development provided policy and strategic guidance on the matter and the Commissioner undertook various interventions in accordance with the requisite law.
The 1 st Respondent’s further contention is that it is the mandate of the Cabinet Secretary and Commissioner to address concerns and complaints raised in respect to cooperative societies including KUSCCOs, expeditiously and in accordance with the requisite law, failure to which would be tantamount to disregarding duty.
As such, that it was agreed that a review of the financial status of KUSSCO be carried out to inform any further necessary action. Consequently, the Commissioner undertook a review of the accounts for KUSCCO, with a view to establishing its financial status and the authenticity of the financial statements presented to members.
That the inspection is said to have revealed that despite the financial statements of KUSCCO obtaining unqualified auditors’ opinion in 2022, the value of the assets and liabilities materially differed from available primary documents. This rendered the audit opinion questionable.
The 1 st Respondent asserts in deposition that the inspection also revealed that KUSCCO did not meet the required prudential standards as contained in the Sacco Societies Act, Cap 490B and Sacco Societies (Deposit-Taking Sacco Business) Regulations as it had a material asset deficiency of Kes. 12.5 billion and an even larger liquidity deficit of approximately Kes. 14.9 billion.
That despite holding substantial amounts of members deposits and operating Deposit-Taking Business, KUSCCO had failed to obtain the requisite licenses from SASRA to operate Deposit-Taking Business pursuant to Regulation 4 of the Sacco Societies (Deposit-Taking Sacco Business) Regulations, 2010 and the requisite approval to operate as a Non-Withdrawable Deposit-Taking Business in accordance with Regulation 5 of the Sacco Societies (Non-Deposit-Taking Business) Regulations, 2020. Thus, KUSCCO was operating in contravention of the law.
The aforesaid preliminary findings were discussed during subsequent meetings held with the then Board of Directors (Ex parte Applicants) of KUSCCO on 8 th and 15 th December 2023.
That taking into account Section 28(5) and (6) of the Act and Clause 30 and 31 of the KUSCCO By laws Eleventh Edition (amended) 2020, the then board members (Exparte Applicants) cannot delegate responsibility and accountability so as to absolve themselves from the losses KUSCCO suffered. The 1 st Respondent states that they failed to carry out the business of the Union with the prudence and diligence of ordinary businessmen as is required by the Act and the By-laws.
It is the 1 st Respondent’s case that it is only after carrying out investigations and appointing the Auditors Firm of Grant Thornton that the Commissioner discovered systematic deficiencies in the management of resources, including creative and unreliable financial records. Further, that it’s worth noting that the interim Board is properly constituted.
The 1 st Respondent states that a consultative meeting with KUSCCO and its affiliates was held on 25 th April 2024 at All Saints Cathedral, Nairobi, convened by the Commissioner pursuant to Section 27(8) of the Act and that the only way to pursue a restructure of KUSCCO obligations was through consensual out of court restructure (corporate restructuring), company voluntary insolvency arrangement or through administration as per the Insolvency Act.
The attendees of the said meeting are said to have included the then Board of Directors (Ex parte Applicants) and Management of KUSCCO, Chairpersons and Executive Officers of member SACCOs of KUSCCO, the Cabinet Secretary in charge of cooperatives and the Commissioner of Cooperatives.
The 1 st Respondent’s case is that members were informed of the financial mismanagement and irregularities which were so acute that they severely hindered KUSCCO’s ability to operate efficiently. These included inter alia:- challenges in respect to the Central Finance Fund (CFF) including; Rapid and panic withdrawals of deposits by members critically affecting liquidity; On regulation of Central Finance Fund; Acute liquidity crunch; Inability to meet loan demands; Long term/ slow maturing investments; Mismatch of investments and reduced market confidence
That the CFF is a platform used by all deposit-taking SACCOs affiliated to KUSCCO which operates on the same principles as the inter-bank lending facility used by banks. The financial capital for KUSCCO’s CFF is sourced from regular deposits by deposit-taking SACCOs with KUSCCO paying interest on the deposits, which are then disbursed quarterly to its member Societies. Consequently, any loss of funds of the CFF means that the deposits of the deposit taking SACCOs are essentially lost.
The 1 st Respondent argues that cooperatives in this regard KUSCCO is autonomous and operates on democratic member control. Section 27(1) of the Act which refers to the supreme authority of a co-operative as being vested in the general meeting is referred to.
That accordingly, during the meeting held on 25 th April 2024, the officials of the members of KUSCCO aired their grievances, with the apprehension of the loss of their deposits and demanded the refund of their deposits and following lengthy deliberations by the members of KUSCCO, the members unanimously agreed and resolved on a recovery plan for KUSCCO.
This plan included; A moratorium of one-year interest of funds held at CFF; The appointment of an interim Board; The appointment of an interim Board in tandem with the one-year moratorium on interest of funds; The membership of the interim Board to comprise of seven members drawn from small SACCOs and one big SACCO and the five KUSCCO regions according to shareholding and the Commissioner to appoint the interim board.
According to the 1 st Respondent, the Ex parte Applicants were removed from being in the Board as a result of the findings of the forensic audit conducted on the affairs of KUSCCO that revealed mismanagement, outright theft and falsification of accounts to conceal the losses of Kes. 12.5 billion by the Union.
It is the 1 st Respondent’s case that the fraudulent aspect(s) revealed by the said forensic audit has led it to be in the custody of investigative agencies and subject of investigation by these agencies.
The Commissioner, it is argued, appointed the interim Board and took remedial measures as provided for under Section 93A of the Co-operatives Act and Rule 54 of the Co-operative Societies Rules. The interim Board is said to have had the following Terms of Reference:-Develop and implement a recovery strategy of the Union; Cause the reconstruction of the books of accounts to reflect the true and fair view of the Union affairs; Oversee the completion and implementation of the statutory audit; Amend the Union by laws to accommodate the recommendations of the recovery strategy and plan, oversee and facilitate the election of the delegates and the Board.
The 1 st Respondent states that one of the ways the interim Board will attain the recovery strategy of the Union was by carrying out a forensic audit, for this would reflect the true and fair state of KUSSCOs affairs. Further that there was need for the Ex parte Applicants to be removed from their positions as Board members to facilitate a comprehensive audit of the Union’s operations and financial records.
That after the investigations and forensic audit there was need to stop the Ex parte Applicants from holding positions in their primary cooperatives because they had acted contrary to Section 28(6) of the Act and this is a preventative measure to ensure they do not mismanage the funds in their primary co-operatives.
According to the 1 st Respondent, in dismissing the Ex parte Applicants from being officials in their respective primary cooperatives, he acted within his mandate as provided for under Sections 3(3) and 93A(d) of the Act and Rule 54 of the Co-operative Societies Rules 2004.
That the 1 st Respondent appreciates cooperatives is a devolved function under the Constitution and therefore he had to inform the respective County Directors for Cooperatives of his decision. Therefore, in no way did his actions contravene the Constitution.
The 4 th Respondent’s Replying Affidavit
The 4 th Respondent filed a Replying Affidavit sworn by Francis Murithi Rimberia who introduces himself as the Chairman of the Board of Directors of the 4 th Respondent. The Affidavit was sworn on 20 th March 2025.
Mr. Murithi in his affidavit states that the 4 th Respondent, Solution Sacco, is a Savings and Credit Co-operative Society registered under the Co-operative Societies Act Cap 490 whose mandate amongst others includes receiving deposits from members and issuing loans for the growth of member’s welfare.
He depones that the 4 th Respondent aligns itself with the averments of the Commissioner for Co-operative Development in the Ministry of Cooperatives and Micro, Small and Medium Enterprises, State Departments for Cooperatives.
The 4 th Respondent’s case is that as a result of the actions of KUSSCO’S management, the 4 th Respondent, entrusted to hold its member’s deposits was at the risk of losing a substantive amount of the said deposits.
It is deposed that the 4 th Respondent is still at risk of losing Kshs. 294,402,915 as at 20 th March 2025 which is invested in various products at KUSCCO, hence keen to have KUSCCO recover in order to avert the loss of members funds invested therein.
The deponent. Mr. Murithi states that it was imperative that the Commissioner appointed an Interim Board in compliance with the Co-operative Societies Act Cap 490 in order to oversee the recovery of KUSCCO which holds a substantive amount of money belonging to the 4 th Respondent’s members.
According to him, the Ex parte Applicants have failed to demonstrate a prima facie case to warrant court to grant the orders sought as the 1 st Respondent acted within his mandate as provided in law and the orders sought seek to unlawfully curtail the constitutional and statutory mandate of the 1 st Respondent.
The 13 th Respondent’s Replying Affidavit
The 13 th Respondent filed a Replying Affidavit sworn on 6 th February 2025 by Elizabeth Wambui Njoroge who introduces herself as the Chief Executive Officer of the 13 th Respondent.
In the affidavit Ms. Wambui states that the instant application offends the legal doctrine of exhaustion as the Ex parte Applicants have not exhausted internal mechanisms for appeal or review as provided for under section 76 and 77 of the Co-operative Society Act and section 9 (2) of the Fair Administrative Action Act.
It is also the 13 th Respondent’s case that the Ex parte Applicants ought to have served a notice of intention to sue upon the 13 th Respondent as mandatorily required hence the application offends the provision of rule 5 of Fair Administrative Action Rules.
It is the deponent’s case that on 20 th December, 2
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The application is verified by the affidavit sworn by Andrew Okwach Ayarah, the 7 th Exparte applicant and a statutory statement, both dated 19 th December 2024.
The Ex parte Applicants’ case is that all the members of the KUSCCO Board are originally members of primary Saccos which is a pre-condition for being elected to sit on the said KUSCCO Board. It is deponed by the 7 th Ex parte Applicant that during his tenure as a Board member, he offered invaluable contributions geared towards good corporate governance.
Further, that cumulatively as a Board, during the time that he served, he witnessed responsible management for the benefit of all stakeholders. It is deposed that their collective tenure as a Board was brought to a halt on 6 th May 2024 when they were removed unceremoniously without due process being followed. It is their case that the removal was done through a press statement released on the even date by the Cabinet Secretary in charge of the Ministry of Cooperatives and MSME Development.
That upon their removal, the Cabinet Secretary directed the 1 st Respondent to appoint an interim Board allegedly in compliance with the Cooperative Societies Act to oversee the transformation of and rehabilitation of KUSCCO.
According to the exparte applicants, their removal from the KUSCCO Board is on account of alleged mismanagement and misapplication of funds based on a forensic audit that they had not set their eyes on. It is their case that the said audit was spearheaded by the interim Board.
The Ex parte Applicants contend that their removal on account of mismanagement was occasioned by malice as management of KUSCCO is a preserve of the management officials and the main decision-making organ of KUSCCO is the Annual Delegates Meeting.
It is their case that the decision to remove them was undertaken by the 1 st Respondent despite having permanent representation in the KUSCCO Board since its inception and having the sole mandate of approving and giving validity to the financial statements of the Board.
The Ex parte Applicants aver that they have only had stints sitting at the KUSCCO Board, which Board is dynamic and their tenure based on election by the respective regions. They state that the appointment of the interim Board was done contrary to the provisions of by law 27 of the 11 th Edition of KUSCCO by laws which provides for the elaborate procedure of constitution of the Board.
That the 1 st Respondent appointed one David Mategwa as the Chairperson of the interim board despite being ineligible to serve as a member of the Board for contravening by law 29(t) of KUSCCO by-laws by having legal suits against KUSCCO.
That by letters dated 17 th December 2024, similar in substance but addressed to the 2 nd to 14 th Respondents separately, the 1 st Respondent took a unilateral decision to bar the Ex parte Applicants from holding office as officials in the 2 nd to 14 th Respondents respectively and any other co-operative forthwith.
The Ex parte Applicants state that notably, this directive had been applied selectively with the Chairperson of the interim Board and Director Philip Rilei, who were part of the former Board members of KUSCCO being exempted from the findings and being placed in the interim Board which spearheaded the forensic audit.
They further state that the 1 st Respondent, in violation of its statutory mandate has now opted to further persecute them by directing that they be removed from the offices they hold in their primary saccos and any other cooperatives forthwith purportedly acting on the recommendation of the interim Board.
The Ex parte Applicants further state that the said decision barring them from holding offices in their primary Saccos and any other co-operative forthwith offends the specific procedure on election and removal of officials in the respective primary Saccos and was pursued without following the due process.
According to the exparte applicants, the decision has been undertaken in violation of the 4 th Schedule of the Constitution which confers County Governments with the function of trade development and specifically regulation of co-operative societies and as such that the 1 st Respondent has arrogated to himself a function contrary to the supreme law of the land.
They also state that the 1 st Respondent purports to have relied on Section 93A(d) of the Cooperative Societies Act yet this provision does not grant overarching powers to be applied as the 1 st Respondent pleases and definitely does not provide any powers that contravene the Constitution.
That in an attempt to remedy this apparent illegality, the 1 st Respondent has enlisted County Directors for Cooperative Societies. It is the Ex parte Applicants’ case that the Constitution does not envisage a duty bearer taking instructions from any party who is not constitutionally mandated to perform a constitutional duty.
They assert that they have not been furnished with the alleged incriminating report, have not been accorded a hearing, the ‘specific culpability of each of them has not established and as such ‘the reason for the bar to hold office in their primary Saccos and any other co-operative forthwith is not established in total violation of their right to fair administrative action as guaranteed under Article 47(2) of the Constitution.
That the 2 nd to 14 th Respondents have proceeded to act on the 1 st Respondent’s recommendation and the only bar to this has been the stay orders granted by this Court, nonetheless the 7 th and 13 th Respondents have opted to disobey the Court orders necessitating the urgency in removing the 1 st Respondent’s decision to avert a miscarriage of justice.
The Exparte Applicant’s Further Affidavit
The Ex parte Applicants also filed a Further Affidavit sworn 26 th March 2025 by Andrew Okwach Ayarah. In the said affidavit, it is deposed that despite KUSCCO being an umbrella union of SACCOs, it is not governed by Sacco Societies Regulatory Authority as averred by the 1 st Respondent. Further that under KUSCCO By-laws and the Co-operative Societies Act Cap. 490, KUSCCO is defined as a Cooperative Union of Primary SACCOs and not a SACCO, that it is an umbrella union of primary SACCOs regulated by the Co-operative Societies Act Cap. 490 and its membership is restricted to primary SACCOs and that it is only primary SACCOs that are governed by SASRA.
The Applicants state that whilst the books of accounts and By laws of primary SACCOs are approved by SASRA, those of KUSCCO are approved by the 1 st Respondent himself and that despite being assigned the above mandate, the 1 st Respondent's allegations on acts of illegality are a mere afterthought as he signed and approved the by-laws and books of accounts which act of signing only alludes to a conclusion that the 1 st Respondent admits the business of KUSCCO.
The Ex parte Applicants also aver that in the said by laws, paragraph 3(h) provides that one of the objects of KUSCCO is to establish a Central Finance facility for inter-lending among its members and provide money remittance services which acts the 1 st Respondent claim to be illegal despite approving the said by laws.
They state that at no point of the approvals did the 1 st Respondent make a determination that KUSCCO is dealing in fraudulent and illegal actions and the subsequent claims are only afterthoughts to pursue political interests as against them.
It is their case that in disregard to the rules of natural justice, the 1 st Respondent who has a permanent representative in the Board of KUSSCO, not only approved the books of account, that are now being challenged but that he is also the prosecutor, the investigator and judge in this matter in a clear violation of the said rules. They urge that without a doubt, justice is not even faintly seen to be done as against them.
According to the applicants, paragraph 3(u) of the bylaws provides for the objective of creating KUSCCO subsidiaries in Insurance, ICT, Housing Cooperative Foundation save for the fact that the 1 st Respondent approved the bylaws of KUSCCO which clearly delineate and outline the said objectives.
It is stated that the spirit of the drafters of the Constitution was to place Co-operative Societies under the County Governments for avoidance of political interference from the national government thus the Cabinet Secretary has no powers and mandate to regulate co-operative societies and his actions on the Ex parte Applicants’ removal from their primary SACCOs is unconstitutional.
They also urge that the instant suit does not in fact contest their removal from the Board of Directors of KUSCCO as claimed by the 1 st Respondent but contests their removal from the primary SACCOs which actions of the 1 st Respondent on the same is in total violation of Schedule 4 of the Constitution.
They also state that while the 1 st Respondent claims that the accounts were doctored one Mr. Javel M. Murira, an auditor for the 1 st Respondent approved and signed the books of accounts to reflect the true financial position of the institution. In addition, that it is the 1 st Respondent who provides for the list of approved auditors who verify the books of accounts.
The Ex parte Applicant’s further assertion is that routine inspections were conducted on 11 th January 2024 which exonerated the Board as there were no acts of illegality. Further, that the recommendations of the inspection was to re-organize the entire Board and not for removal of the Directors as performed by the 1 st Respondent. According to them, the Board had commenced the re-organization as recommended by the inspection report.
They state that Section 93 of the Co-operatives Societies Act which mandates the Cabinet Secretary to direct the 1 st Respondent to exercise his powers and duties is in total violation of Schedule 4 of the Constitution which powers are accorded to the County Governments and that the decision taken by the 1 st Respondent was thus taken in his own capacity and was not inclusive of the County Government mandated with the same tasks.
The Applicants also state that with respect to KUSCCO financial irregularities, the 1 st Respondent is put to strict proof as KUSCCO was operating as per the bylaws and the audited accounts approved by the 1 st Respondent confirmed that KUSCCO was making profits.
It is the Ex parte Applicants’ case that the said audit was conducted by Omenye & Associates duly approved by the 1 st Respondent to conduct the audit.
The Ex parte Applicants state that the 1 st Respondent attends the annual delegates meeting and has never raised any issue as to actions of illegality and the need to obtain requisite licenses. Also, that it is in contravention of the law to state that KUSCCO ought to have obtained license from SASRA yet in reality it is governed by the Co-operative Societies Act and not under SASRA. They urge that it is known to the 1 st Respondent, that KUSCCO is under the supervision of the Ministry of Cooperatives.
According to the applicants, the Inspection Report given on 11 th January 2024 only recommended the reconstitution of the Board and by no chance, did it recommend removal of the Board of Directors. Additionally, that the Board's role is to formulate policies and is not responsible for the day-to-day management of KUSCCO.
The exparte applicants state that the 1 st Respondent had a personal representative who acts as a technical advisor to the Board in the process of conducting its business and that upon approval of a report by the Board, the report is taken to the 1 st Respondent for approval and subject to the 1 st Respondent's approval, a subsequent approval is later done in the Annual Delegates Meeting. It is urged that the entire process is conducted with the aid of an internal auditor.
It is the Ex parte Applicants’ case that the appointment of Mr. David Mategwa whom some of the Ex Parte Applicants passed a vote of no-confidence has created vilification and hatred against them contrary to the spirit of Article 33(2)(d) of the Constitution. The 1 st Respondent’s actions are said to be discriminatory.
That the effect of culpability being taken only on immediate former members leaving out long-term serving members of the Board is in total violation of the Constitution and impairs the right not to be discriminated under Article 27 of the Constitution in that; five members who were appointed to the Board on 29 th May 2021 are being blamed for alleged systemic long-term mismanagement yet members who have been serving in the Board from 2010 are excluded from culpability and are in fact appointed to the interim Board.
The Ex parte Applicants argue that despite a consultative meeting being held on 25 th April 2024, from the onset, the Board was not aware of the existence of the meeting and were only invited on the day of its occurrence.
Consequently, that the membership of the organization comprises of 3500 members as noted in Paragraph 4 which members were not properly represented as majority attendances represented SACCOs from Nairobi Region being 120, Rift Valley 11, Mt. Kenya 61 and Coast Region 21. Notably, that there was no representation from the Western Kenya Region in totality.
Their case is that the meeting for the removal of the Board was not properly constituted and was in contravention of paragraph 24 (c) (ii) of the bylaws which provides for the constituting of a Special Delegates meeting with at least one half of the delegates. Further, that the 1 st Respondent ought to have constituted a delegates meeting and not a general meeting, worse off, composed of some few and carefully handpicked SACCOs.
It is their case that insolvency is not an out of court structure, and therefore a company can only be declared insolvent upon a court's determination of its inability to pay debts and the mere fact that there exists a need to restructure the organization does not declare a company insolvent.
According to the Ex parte Applicants, in the said minutes of the meeting, misappropriation of funds is not mentioned anywhere and consequently non-regulation of the Central Finance Fund is not a ground for removal from the Board of the Organization
They also argue that in utter surprise, the Interim Board appointed constitutes a team of 14 members despite the resolutions suggesting a team of 7 members. That the selective reliance on the recommendations is a clear demonstration of bad faith on the part of the 1 st Respondent and vested interest. The Ex parte Applicants deny knowledge of any forensic audit report.
That there being no forensic report or audit produced in their unprocedural removal undermines their right to fair hearing under Article 50 and Freedom of Association guaranteed under Article 35 as it secludes them from joining other associations. They also urge that their respective primary SACCOs have nothing whatsoever against them and that if existent, channels for removal in the respective bylaws can be explored.
Responses
1 st Respondent’s Replying Affidavit
The 1 st Respondent filed grounds of opposition dated 31 st January 2025 and a Replying Affidavit sworn on even date by David Obonyo, the 1 st Respondent’s Office holder.
The 1 st Respondent contends that the instant application as filed offends the provision of Section 9 (2) of the Fair Administrative Action Act and sections 76 and 77 of the Co-operative Society Act.
It is also urged that the former employer of the Ex parte Applicants, Kenya Union of Savings and Credit Co-operatives Limited (KUSCCO) is a Cooperative Society registered on 19 th September 1973, registration number CS/2171, under the Co-operative Societies Act Cap. 490 and the subsidiary legislation thereunder.
Further, that KUSCCO is the umbrella Union of Savings and Credit Cooperative Societies (Saccos) in the country, governed by the Sacco Societies Act and the attendant Regulations, including the Sacco Societies (Deposit-Taking Sacco Business) Regulations, 2010 and the Sacco Societies (Non-Deposit-Taking Business) Regulations, 2020. Also, that it is governed by the Sacco Societies Regulatory Authority (SASRA).
The 1 st Respondent urges that the main objective of KUSCCO includes, the promotion of Saccos (both internationally and locally), spokesman ship and advocacy; representation; risk management services; Central Finance Fund; education and training and corporate affairs and marketing.
According to him, the common bond of KUSCCO was expanded to admit individual members. In addition, that the Union diversified its activities to include housing, mortgage, insurance and registered subsidiaries, namely, KUSCCO Housing Co-operative Society Limited and KUSCCO Mutual Assurance Limited.
That KUSCCO has a share capital of Kes. 3.3 billion, Kes. 15.3 billion deposits and savings both amounting to Kes. 18.6 billion and loans to members of Kes. 14 billion. The 1 st Respondent states that t he State Department for Co-operatives is responsible for among other functions, growth and development of co-operatives including formulation, adoption and implementation of policy and legal framework for the development and growth of all cooperatives in keeping with the overall national development policies and priorities.
He argues that the Co-operatives Act under Section 3(1) establishes the office of the Commissioner for Co-operative Development and Section 3(3) of the Act provides for the role of the Commissioner. Section 60A of the Act is said to empower the Commissioner to carry out routine inspection. Section 93 is said to provide that the Minister may at any time and on any matter direct the Commissioner as to the exercise of his powers and duties under the Act.
It is argued that concerns by various quarters were raised to the Ministry responsible for co-operatives in respect to KUSCCO’s financial irregularities, operational inefficiencies, failure to adhere to regulatory requirements among other issues. The said concerns were met with consternation and rightly so, as the impact to the members, economy and the society at large would be dire.
According to the 1 st Respondent, the member SACCOS would incur financial loses running into billions of shillings inevitably leading to their collapse, reduced trust and credibility and operational disruptions.
That in addressing the concerns, the Cabinet Secretary responsible for Cooperatives and Micro, Small and Medium Enterprises (MSMEs) Development provided policy and strategic guidance on the matter and the Commissioner undertook various interventions in accordance with the requisite law.
The 1 st Respondent’s further contention is that it is the mandate of the Cabinet Secretary and Commissioner to address concerns and complaints raised in respect to cooperative societies including KUSCCOs, expeditiously and in accordance with the requisite law, failure to which would be tantamount to disregarding duty.
As such, that it was agreed that a review of the financial status of KUSSCO be carried out to inform any further necessary action. Consequently, the Commissioner undertook a review of the accounts for KUSCCO, with a view to establishing its financial status and the authenticity of the financial statements presented to members.
That the inspection is said to have revealed that despite the financial statements of KUSCCO obtaining unqualified auditors’ opinion in 2022, the value of the assets and liabilities materially differed from available primary documents. This rendered the audit opinion questionable.
The 1 st Respondent asserts in deposition that the inspection also revealed that KUSCCO did not meet the required prudential standards as contained in the Sacco Societies Act, Cap 490B and Sacco Societies (Deposit-Taking Sacco Business) Regulations as it had a material asset deficiency of Kes. 12.5 billion and an even larger liquidity deficit of approximately Kes. 14.9 billion.
That despite holding substantial amounts of members deposits and operating Deposit-Taking Business, KUSCCO had failed to obtain the requisite licenses from SASRA to operate Deposit-Taking Business pursuant to Regulation 4 of the Sacco Societies (Deposit-Taking Sacco Business) Regulations, 2010 and the requisite approval to operate as a Non-Withdrawable Deposit-Taking Business in accordance with Regulation 5 of the Sacco Societies (Non-Deposit-Taking Business) Regulations, 2020. Thus, KUSCCO was operating in contravention of the law.
The aforesaid preliminary findings were discussed during subsequent meetings held with the then Board of Directors (Ex parte Applicants) of KUSCCO on 8 th and 15 th December 2023.
That taking into account Section 28(5) and (6) of the Act and Clause 30 and 31 of the KUSCCO By laws Eleventh Edition (amended) 2020, the then board members (Exparte Applicants) cannot delegate responsibility and accountability so as to absolve themselves from the losses KUSCCO suffered. The 1 st Respondent states that they failed to carry out the business of the Union with the prudence and diligence of ordinary businessmen as is required by the Act and the By-laws.
It is the 1 st Respondent’s case that it is only after carrying out investigations and appointing the Auditors Firm of Grant Thornton that the Commissioner discovered systematic deficiencies in the management of resources, including creative and unreliable financial records. Further, that it’s worth noting that the interim Board is properly constituted.
The 1 st Respondent states that a consultative meeting with KUSCCO and its affiliates was held on 25 th April 2024 at All Saints Cathedral, Nairobi, convened by the Commissioner pursuant to Section 27(8) of the Act and that the only way to pursue a restructure of KUSCCO obligations was through consensual out of court restructure (corporate restructuring), company voluntary insolvency arrangement or through administration as per the Insolvency Act.
The attendees of the said meeting are said to have included the then Board of Directors (Ex parte Applicants) and Management of KUSCCO, Chairpersons and Executive Officers of member SACCOs of KUSCCO, the Cabinet Secretary in charge of cooperatives and the Commissioner of Cooperatives.
The 1 st Respondent’s case is that members were informed of the financial mismanagement and irregularities which were so acute that they severely hindered KUSCCO’s ability to operate efficiently. These included inter alia:- challenges in respect to the Central Finance Fund (CFF) including; Rapid and panic withdrawals of deposits by members critically affecting liquidity; On regulation of Central Finance Fund; Acute liquidity crunch; Inability to meet loan demands; Long term/ slow maturing investments; Mismatch of investments and reduced market confidence
That the CFF is a platform used by all deposit-taking SACCOs affiliated to KUSCCO which operates on the same principles as the inter-bank lending facility used by banks. The financial capital for KUSCCO’s CFF is sourced from regular deposits by deposit-taking SACCOs with KUSCCO paying interest on the deposits, which are then disbursed quarterly to its member Societies. Consequently, any loss of funds of the CFF means that the deposits of the deposit taking SACCOs are essentially lost.
The 1 st Respondent argues that cooperatives in this regard KUSCCO is autonomous and operates on democratic member control. Section 27(1) of the Act which refers to the supreme authority of a co-operative as being vested in the general meeting is referred to.
That accordingly, during the meeting held on 25 th April 2024, the officials of the members of KUSCCO aired their grievances, with the apprehension of the loss of their deposits and demanded the refund of their deposits and following lengthy deliberations by the members of KUSCCO, the members unanimously agreed and resolved on a recovery plan for KUSCCO.
This plan included; A moratorium of one-year interest of funds held at CFF; The appointment of an interim Board; The appointment of an interim Board in tandem with the one-year moratorium on interest of funds; The membership of the interim Board to comprise of seven members drawn from small SACCOs and one big SACCO and the five KUSCCO regions according to shareholding and the Commissioner to appoint the interim board.
According to the 1 st Respondent, the Ex parte Applicants were removed from being in the Board as a result of the findings of the forensic audit conducted on the affairs of KUSCCO that revealed mismanagement, outright theft and falsification of accounts to conceal the losses of Kes. 12.5 billion by the Union.
It is the 1 st Respondent’s case that the fraudulent aspect(s) revealed by the said forensic audit has led it to be in the custody of investigative agencies and subject of investigation by these agencies.
The Commissioner, it is argued, appointed the interim Board and took remedial measures as provided for under Section 93A of the Co-operatives Act and Rule 54 of the Co-operative Societies Rules. The interim Board is said to have had the following Terms of Reference:-Develop and implement a recovery strategy of the Union; Cause the reconstruction of the books of accounts to reflect the true and fair view of the Union affairs; Oversee the completion and implementation of the statutory audit; Amend the Union by laws to accommodate the recommendations of the recovery strategy and plan, oversee and facilitate the election of the delegates and the Board.
The 1 st Respondent states that one of the ways the interim Board will attain the recovery strategy of the Union was by carrying out a forensic audit, for this would reflect the true and fair state of KUSSCOs affairs. Further that there was need for the Ex parte Applicants to be removed from their positions as Board members to facilitate a comprehensive audit of the Union’s operations and financial records.
That after the investigations and forensic audit there was need to stop the Ex parte Applicants from holding positions in their primary cooperatives because they had acted contrary to Section 28(6) of the Act and this is a preventative measure to ensure they do not mismanage the funds in their primary co-operatives.
According to the 1 st Respondent, in dismissing the Ex parte Applicants from being officials in their respective primary cooperatives, he acted within his mandate as provided for under Sections 3(3) and 93A(d) of the Act and Rule 54 of the Co-operative Societies Rules 2004.
That the 1 st Respondent appreciates cooperatives is a devolved function under the Constitution and therefore he had to inform the respective County Directors for Cooperatives of his decision. Therefore, in no way did his actions contravene the Constitution.
The 4 th Respondent’s Replying Affidavit
The 4 th Respondent filed a Replying Affidavit sworn by Francis Murithi Rimberia who introduces himself as the Chairman of the Board of Directors of the 4 th Respondent. The Affidavit was sworn on 20 th March 2025.
Mr. Murithi in his affidavit states that the 4 th Respondent, Solution Sacco, is a Savings and Credit Co-operative Society registered under the Co-operative Societies Act Cap 490 whose mandate amongst others includes receiving deposits from members and issuing loans for the growth of member’s welfare.
He depones that the 4 th Respondent aligns itself with the averments of the Commissioner for Co-operative Development in the Ministry of Cooperatives and Micro, Small and Medium Enterprises, State Departments for Cooperatives.
The 4 th Respondent’s case is that as a result of the actions of KUSSCO’S management, the 4 th Respondent, entrusted to hold its member’s deposits was at the risk of losing a substantive amount of the said deposits.
It is deposed that the 4 th Respondent is still at risk of losing Kshs. 294,402,915 as at 20 th March 2025 which is invested in various products at KUSCCO, hence keen to have KUSCCO recover in order to avert the loss of members funds invested therein.
The deponent. Mr. Murithi states that it was imperative that the Commissioner appointed an Interim Board in compliance with the Co-operative Societies Act Cap 490 in order to oversee the recovery of KUSCCO which holds a substantive amount of money belonging to the 4 th Respondent’s members.
According to him, the Ex parte Applicants have failed to demonstrate a prima facie case to warrant court to grant the orders sought as the 1 st Respondent acted within his mandate as provided in law and the orders sought seek to unlawfully curtail the constitutional and statutory mandate of the 1 st Respondent.
The 13 th Respondent’s Replying Affidavit
The 13 th Respondent filed a Replying Affidavit sworn on 6 th February 2025 by Elizabeth Wambui Njoroge who introduces herself as the Chief Executive Officer of the 13 th Respondent.
In the affidavit Ms. Wambui states that the instant application offends the legal doctrine of exhaustion as the Ex parte Applicants have not exhausted internal mechanisms for appeal or review as provided for under section 76 and 77 of the Co-operative Society Act and section 9 (2) of the Fair Administrative Action Act.
It is also the 13 th Respondent’s case that the Ex parte Applicants ought to have served a notice of intention to sue upon the 13 th Respondent as mandatorily required hence the application offends the provision of rule 5 of Fair Administrative Action Rules.
It is the deponent’s case that on 20 th December, 2
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