Introduction
1. Before the Court is the Notice of Motion dated 11th April 2025 by Ravasam Development Company Limited (hereinafter "the Applicant") seeking to quash a Statutory Demand, issued by China Young Tai Engineering Company Limited (hereinafter "the Respondent"). The Statutory Demand claims payment of KES 817,341,744.50 based on an Arbitral Award.
2. The Applicant contends that the demand is defective, premature, issued in bad faith, based on a bona fide disputed debt, and was not served as required by law.
3. The application is based on the grounds on the face of the application, the supporting affidavit dated 11th April 025, and a Supplementary Affidavit sworn on 20th May 2025 by KEVIN ODHIAMBO, the Applicant Director’s Personal Representative.
4. The Respondent opposes the application vide the Replying Affidavit sworn on 25th April 2025 by Qian Guo Jun, a Director of the Respondent. According to the Respondent, the demand is compliant, the debt is undisputed and crystallized, and the application is an abuse of process aimed at frustrating legitimate debt recovery.
5. The background of the matter is that on 9 November 2015, QS John Mwai Mathenge issued a Final Arbitration Award in favour of the Respondent, China Young, against the Applicant, Ravasam, for KES 242,267,111.40 plus costs. This award was subsequently adopted as a decree of the High Court on 16 February 2016.
6. On 21 March 2025, the Respondent served the Applicant with a Statutory Demand dated 27 February 2025, claiming KES 817,341,744.50, which includes accrued interest at 21% per annum since the award. The Respondent intends to file a Liquidation Petition if the demand is not satisfied within 21 days. It is this Statutory demand that has ignited the instant application.
7. The application proceeded by way of written submissions. The Applicant filed its submissions dated 26th May 2025, whilst the Respondents filed theirs dated 3rd June 2025.
The Appellant’s submissions
8. The Applicant, in its submissions, raised several grounds against the Statutory Demand. It is the Applicant’s position that the Demand is defective in form and substance for having been issued by the Respondent’s Advocates instead of the Creditor itself, contrary to Section 384(1)(a) of the Insolvency Act. Further, the demand was not served at Ravasam's registered office but on third parties via email, which is not compliant with Section 384(1)(a).
9. The Respondent further submitted that the debt is not "due and payable" as it is based on an arbitral award that requires formal recognition and enforcement by the High Court under Section 36 of the Arbitration Act to be crystallized. That in any event, the debt in the demand is grossly overstated (Kshs. 817,341,744.50), bearing in mind that the original award was only Kshs. 242,267,111.40. This, according to the Applicant, invalidates the demand under Section 17(5) of the Insolvency Act, as Ravasam had notified the Respondent of the dispute.
10. The Applicant further submitted that the Demand is premature since there exists a bona fide dispute regarding the debt, as evidenced by the ongoing Commercial Suit (HCCC No. 450 of 2011) where Ravasam's accounts are being reconciled following a partial judgment by Justice Tuiyott on 20 January 2020.
11. The Applicant maintained that it has a cross-claim against Eric Agbeko and Philip Nyambok in the Commercial Suit, which, upon reconciliation, is expected to exceed the Respondent's alleged debt, thereby passing the solvency test as per Flower City Limited v Polytanks & Containers Kenya Limited [2021] KEHC 34 (KLR).
12. According to the Applicant, the Statutory Demand is not a genuine attempt to recover an undisputed debt but a "calculated, deliberate and sustained campaign" to pressure Ravasam, given the Respondent's previous unsuccessful applications in the Commercial Suit.
13. Citing among others, the case of Prideinn Hotels & Investments Ltd v Tropicana Hotels Ltd [2018] KECA 651 (KLR, the Applicant submitted that Insolvency proceedings cannot be used as a debt collection tool or to resolve bona fide disputes.
14. The Applicant concluded by urging this Court to allow the application, bearing in mind that liquidation, being a draconian step akin to a death sentence for a company, should only be taken after strict compliance with all procedural and substantive requirements.
Respondents Submissions
15. The Respondent opposes the application on the grounds that the statutory demand is valid and the Applicant’s objections are merely calculated to delay payment of a long-standing and undisputed debt.
16. The Respondent argues that the demand was issued in strict compliance with Form 32E of the Insolvency Regulations 2016, and that the debt in question is not disputed but constitutes a crystallized judgment debt arising from an arbitral award dated 9 November 2015, which was adopted as a High Court decree on 16 February 2016 and has never been challenged or appealed.
17. According to the Respondent, the claimed amount of KES 817,341,744.50 includes interest at the contractual rate of 21% per annum, which was reaffirmed in both the award and decree, and the accumulation of this interest is a natural consequence of the Applicant’s nearly decade-long default.
18. On the question of service, the Respondent submitted that the demand was validly served via the company’s registered email address, as listed in the CR12, a mode of service recognized as acceptable in modern litigation, and it was issued by duly authorized advocates in accordance with Section 384(1)(a) of the Insolvency Act, which permits service by agents or assignees.
19. The Respondent denies any abuse of process or bad faith, contending that liquidation is a legitimate statutory remedy invoked after exhausting other enforcement mechanisms over the years, and that it is in fact the Applicant who has abused the court process by repeatedly obstructing enforcement.
20. The Respondent further submits that there is no bona fide dispute over the debt, as the Applicant has merely raised speculative and unquantified claims without substance or merit, including reliance on a Commercial Suit (HCCC No. 450 of 2011) which concerns entirely different issues, namely banking fraud and internal reconciliation, and in which the Respondent is not a party. As such, the res sub judice doctrine does not apply, and the alleged cross-claim is neither ripe nor relevant.
21. The Respondent emphasizes that ongoing reconciliation in the said Commercial Suit does not affect the debt owed, particularly given the Applicant’s failure to operationalize the partial judgment by appointing a joint accountant.
22. In conclusion, the Respondent argues that insolvency proceedings are not meant to test the general financial position of a debtor who concedes the debt but fails to pay, and that having incurred legal costs exceeding KES 60 million due to the Applicant’s persistent delay tactics, the Respondent is entitled to pursue liquidation, which the law does not require to be a last resort.
Analysis and Determination
23. Having carefully analyzed the parties’ respective submissions, I find the following as requiring determination: -
i. Whether the Statutory Demand dated 27 February 2025 is incurably defective.
ii. Whether there exists a bona fide and substantial dispute as to the debt claimed in the Statutory Demand.
iii. Whether the issuance of the Statutory Demand constitutes an abuse of court process or an act of bad faith.
Whether the Statutory Demand is Defective
24. The Applicant contends that the Statutory Demand is defective because it was issued by the Respondent's advocates and not the creditor, and was not served at the registered office. The Applicant cites the wording of section 384(1)(a) of the Insolvency Act and the case of Global Truck Limited v Borderless Tracking Limited [2020] KEHC 9650 (KLR) and asserts that a creditor does not include an agent.
25. Conversely, the Respondent posits that a demand may be signed by a person authorized to make the demand on the creditor's behalf, and cited the case of Re: F.M. Macharia (K) Ltd [2017] eKLR in support of this argument. The Respondent further highlights the phrase "by assignment or otherwise" in Section 384(1)(a) as permitting agents.
26. Section 384(1)(a) of the Insolvency Act provides as follows: -
“384. The circumstances in which a company is unable to pay its debts
(1) For the purposes of this Part, a company is unable to pay its debts—
(a) if a creditor (by assignment or otherwise) to whom the company is indebted for hundred thousand shillings or more has served on the company, by leaving it at the company's registered office, a written demand requiring the company to pay the debt and the company has for twenty—one days afterwards failed to pay the debt or to secure or compound for it to the reasonable satisfaction of the creditor;” [emphasis added].
27. From the above provisions of the law, it is evident that a creditor must issue a valid statutory demand to the debtor before instituting a liquidation petition.
28. In Re F.M. Macharia (K) Ltd [2017] eKLR, the court cited Halsbury’s Laws of England 4th Ed Vol 7(2) para 1446 on the ingredients of a valid statutory demand, stating that:
“The statutory demand must be dated and be signed by the creditor himself or by a person authorized to make the demand on the creditor’s behalf. The statutory demand must state the amount of the debt and consideration for it or if no consideration the way if (debt) arises…The statutory demand must include an explanation to the Company of the following matters: (a) Purpose of demand and fact that if demand is not complied with, proceedings may be initiated for winding up; (b) time for compliance with notice if consequential is to be avoided and (c) methods of compliance open to the company.”
29. The Court aligns itself with the interpretation in Re: F.M. Macharia, and finds that it is reasonable to conclude that a demand issued by a duly authorized advocate, being ‘a person authorized to make the demand on the creditor’s behalf’, complies with the requirement of the law. It is the position of this Court that the literal interpretation sought by the Applicant would create an impractical barrier to justice for creditors.
30. Regarding service at Registered Office, Section 384(1)(a) explicitly states service "by leaving it at the company's registered office." The Applicant asserts that service was via email to third parties, not the company or its directors.
31. The Respondent claims service was to the company's registered email listed on its CR12. While modern litigation increasingly embraces electronic service, the specific wording of Section 384(1)(a) is prescriptive.
32. In Zan Steel Limited v Jumbo Steel Mills Limited [2022] KEHC 14655 (KLR), the Court had the following to say on the issue of service: -
“Section 384 is clear that the creditor must serve the written demand by leaving it at the debtor’s registered office. The written demand should require the debtor to pay the debt within twenty-one days. It is after failure to comply with the demand that the creditor can take further steps, including instituting an insolvency application………Jumbo could only dislodge the claim of non-service if there was a demonstration through empirical evidence that the statutory demand was indeed served as required by the law……..Where service is not proved, like in this case, any action taken in furtherance of the statutory demand is premature, against the law and therefore unlawful.” [emphasis added]
33. From the above, it must be demonstrated by empirical evidence of proper service, and that where service is not proved, action taken in furtherance of the statutory demand is premature, against the law and therefore unlawful.
34. Bearing in mind the "draconian" nature of insolvency proceedings, the Court is of the view that service in this case did not meet the threshold set in law. The Respondent's reliance on email service, without clear statutory backing for this specific type of demand, in my view, raises a significant procedural defect.
35. As prescribed under Section 384 of the Act, service of the Demand must be “by leaving it at the debtor’s registered office.” Consequently, the application succeeds on this basis.
Whether There Exists a Substantial Dispute on the Debt
36. The Applicant contends that there is a bona fide dispute due to the ongoing Commercial Suit (HCCC No. 450 of 2011) and a potential cross-claim. The Respondent denies any genuine dispute.
37. In Flower City Limited V Polytanks & Containers Kenya Limited, (Insolvency Cause 033 of 2020) [2021] KEHC 34 (KLR) (Commercial and Tax) (22 February 2021) the Court, Mativo J (as he then was) while acknowledging that it may not be possible to provide a closed list of the elements of a genuine dispute, the Judge observed that an applicant must: -
i. Show a plausible contention requiring investigation;
ii. Be bona fide, genuine and real;
iii. Be in good faith and show a prima facie plausibility;
iv. Truly exist in fact, and contain a serious question to be tried;
v. Be something more than mere bluster or mere assertion;
vi. Be a claim that may have some substance;
vii. Have a sufficient degree of cogency to be arguable;
viii. Have objective existence; and
ix. Have sufficient factual particularity.
38. Having in mind the above conditions, the Court finds that there is no bona fide and substantial dispute regarding the existence and quantum of the underlying debt, as it is based on a High Court decree. The Commercial Suit (HCCC No. 450 of 2011) and the alleged cross-claim do not directly relate to or offset this specific judgment debt, nor do they provide a concrete basis to dispute the Respondent's claim.
39. For sub judice to apply under Section 6 of the Civil Procedure Act, the matter in issue and the parties must be substantially the same. Based on the evidence on record, I agree with the Respondent’s argument that the subject matter of the Commercial Suit (which basically involves internal financial dealings of Ravasam and the Bank) is different from the enforcement of a judgment debt arising from an arbitral award. Consequently, the argument of subjudice is not sound enough.
40. Further, on the Applicant’s argument that its cross-claim against Eric Agbeko and Philip Nyambok would exceed the Respondent's debt, I agree with the Respondent’s position that the claim by the Applicant is unquantified and hypothetical. In the case of Flower City Limited v Polytanks & Containers Kenya Limited, a debtor can only pass the test of solvency if it is proved that there is a “genuine cross-demand with a value equal to or greater than that of the value of the statutory demand debt.”
41. In the present case, what we have is a mere assertion of a cross-claim without it being quantified, formally pleaded against the creditor. This ground, therefore, fails as it does not meet the threshold required in law, as confirmed by various judicial pronouncements.
Whether there is an abuse of process and bad faith on the part of the Respondent
42. The Applicant argued that the demand is a debt collection tool and an attempt to pressure it into payment of a bona fide disputed debt, and cites cases like Kitmin Holding Limited v Noble Resources International Pte Limited and Prideinn Hotels & Investments Ltd v Tropicana Hotels Ltd in support of the argument.
43. The Respondent, on the other hand, asserts that the debt is a High Court decree and the that the insolvency proceedings have been necessitated by the Applicant’s consistent refusal to pay a the debt, for over a decade now. The Respondent cites Purity Gathoni Githae Ocean & Another v Freight Transport Company Ltd [2012] KEHC 5683 (KLR), and submits that the that courts should not exercise discretion in favor of an applicant where the process is being abused to frustrate the execution of a valid and undisputed decree.
44. The Court of Appeal in Muchanga Investments Limited v Safaris Unlimited (Africa) Ltd & 2 others Civil Appeal No. 25 of 2002 (2009) eKLR 229, in dealing with the principle of abuse of Court process, stated as follows: -
“The term abuse of Court process has the same meaning as abuse of judicial process. The employment of judicial process is regarded as an abuse when a party uses the judicial process to the irritation and annoyance of his opponent and the efficient and effective administration of justice. It is a term generally applied to a proceeding, which is wanting in bona-fides and frivolous, vexatious or oppressive.”
45. In Bore v Spire Bank Limited & another (Civil Case 8 of 2020) [2024] KEHC 1034 (KLR) (8 February 2024) (Ruling), the Court stated as follows on the principle: -
“Abuse of the Court process is a settled legal principle applicable on two fronts. First, from a public interest perspective, duplication of proceedings is a waste of precious Court time and resources. That is in addition to the risk of inconsistent findings which threaten to bring the administration of justice into disrepute. Second, from a private interest perspective, it is highly vexatious and oppressive to the opposite parties not only in terms of time and costs, but also in that the “dry-run” of the claim in the prior proceedings affords the Plaintiff an opportunity to refine its case and work around any defence, evidence or explanation that the opposite party in the subsequent action put forward
46. Applying the above principles in the instant case, I note from the parties' submissions, there is no dispute that the debt arises from a decree of the court. Given that the debt is a High Court decree and has been outstanding for a significant period, this Court finds that the Respondent's resort to a statutory demand, a lawful enforcement mechanism, is not inherently an abuse of process. On the contrary, the Applicant's actions of delaying payment and raising objections that lack substantial merit could be construed as an abuse.
47. In the circumstances, the Court does not find sufficient evidence to conclude that the Respondent's issuance of the Statutory Demand constitutes an abuse of process or bad faith. The Respondent has a legitimate claim based on a judgment debt that has remained unpaid for a significant period. The Applicant's history of frustrating enforcement, as highlighted by the Respondent, suggests that the Applicant's application may be a further attempt to delay legitimate recovery.
Conclusion and Final Orders
48. Despite the lack of a bona fide dispute over the debt itself, the procedural requirement for service of a statutory demand is fundamental. The strict wording of Section 384(1)(a) regarding service at the registered office is a safeguard for the debtor, taking into account the nature and effect of insolvency proceedings.
49. The Respondent's failure to strictly adhere to this mandatory provision, opting for email service without clear legal backing for this specific type of demand, renders the Statutory Demand procedurally defective.
50. Consequently, while the Court acknowledges the Respondent's long-standing efforts to recover a legitimate debt and the Applicant's history of non-payment, the procedural defect in service of the Statutory Demand cannot be overlooked. The gravity of liquidation proceedings demands strict compliance with all preliminary steps. The Court therefore issues the following orders: -
i. The Applicant's application dated 11 April 2025 to quash the Statutory Demand dated 27 February 2025 is hereby granted, and the Demand accordingly quashed, on the sole ground of defective service.
ii. This ruling does not extinguish the underlying judgment debt owed by the Applicant to the Respondent.
iii. The Respondent is at liberty to issue and serve a fresh Statutory Demand in strict compliance with all the provisions of the Insolvency Act.
iv. Each party shall bear its own costs for this application.
51. It is so ordered.
SIGNED, DATED, and DELIVERED IN VIRTUAL COURT THIS
31ST DAY OF JULY 2025
ADO MOSES
JUDGE
In the presence of: -
Moses……….C/A
...................for Applicant
..................for Respondent
1. Before the Court is the Notice of Motion dated 11th April 2025 by Ravasam Development Company Limited (hereinafter "the Applicant") seeking to quash a Statutory Demand, issued by China Young Tai Engineering Company Limited (hereinafter "the Respondent"). The Statutory Demand claims payment of KES 817,341,744.50 based on an Arbitral Award.
2. The Applicant contends that the demand is defective, premature, issued in bad faith, based on a bona fide disputed debt, and was not served as required by law.
3. The application is based on the grounds on the face of the application, the supporting affidavit dated 11th April 025, and a Supplementary Affidavit sworn on 20th May 2025 by KEVIN ODHIAMBO, the Applicant Director’s Personal Representative.
4. The Respondent opposes the application vide the Replying Affidavit sworn on 25th April 2025 by Qian Guo Jun, a Director of the Respondent. According to the Respondent, the demand is compliant, the debt is undisputed and crystallized, and the application is an abuse of process aimed at frustrating legitimate debt recovery.
5. The background of the matter is that on 9 November 2015, QS John Mwai Mathenge issued a Final Arbitration Award in favour of the Respondent, China Young, against the Applicant, Ravasam, for KES 242,267,111.40 plus costs. This award was subsequently adopted as a decree of the High Court on 16 February 2016.
6. On 21 March 2025, the Respondent served the Applicant with a Statutory Demand dated 27 February 2025, claiming KES 817,341,744.50, which includes accrued interest at 21% per annum since the award. The Respondent intends to file a Liquidation Petition if the demand is not satisfied within 21 days. It is this Statutory demand that has ignited the instant application.
7. The application proceeded by way of written submissions. The Applicant filed its submissions dated 26th May 2025, whilst the Respondents filed theirs dated 3rd June 2025.
The Appellant’s submissions
8. The Applicant, in its submissions, raised several grounds against the Statutory Demand. It is the Applicant’s position that the Demand is defective in form and substance for having been issued by the Respondent’s Advocates instead of the Creditor itself, contrary to Section 384(1)(a) of the Insolvency Act. Further, the demand was not served at Ravasam's registered office but on third parties via email, which is not compliant with Section 384(1)(a).
9. The Respondent further submitted that the debt is not "due and payable" as it is based on an arbitral award that requires formal recognition and enforcement by the High Court under Section 36 of the Arbitration Act to be crystallized. That in any event, the debt in the demand is grossly overstated (Kshs. 817,341,744.50), bearing in mind that the original award was only Kshs. 242,267,111.40. This, according to the Applicant, invalidates the demand under Section 17(5) of the Insolvency Act, as Ravasam had notified the Respondent of the dispute.
10. The Applicant further submitted that the Demand is premature since there exists a bona fide dispute regarding the debt, as evidenced by the ongoing Commercial Suit (HCCC No. 450 of 2011) where Ravasam's accounts are being reconciled following a partial judgment by Justice Tuiyott on 20 January 2020.
11. The Applicant maintained that it has a cross-claim against Eric Agbeko and Philip Nyambok in the Commercial Suit, which, upon reconciliation, is expected to exceed the Respondent's alleged debt, thereby passing the solvency test as per Flower City Limited v Polytanks & Containers Kenya Limited [2021] KEHC 34 (KLR).
12. According to the Applicant, the Statutory Demand is not a genuine attempt to recover an undisputed debt but a "calculated, deliberate and sustained campaign" to pressure Ravasam, given the Respondent's previous unsuccessful applications in the Commercial Suit.
13. Citing among others, the case of Prideinn Hotels & Investments Ltd v Tropicana Hotels Ltd [2018] KECA 651 (KLR, the Applicant submitted that Insolvency proceedings cannot be used as a debt collection tool or to resolve bona fide disputes.
14. The Applicant concluded by urging this Court to allow the application, bearing in mind that liquidation, being a draconian step akin to a death sentence for a company, should only be taken after strict compliance with all procedural and substantive requirements.
Respondents Submissions
15. The Respondent opposes the application on the grounds that the statutory demand is valid and the Applicant’s objections are merely calculated to delay payment of a long-standing and undisputed debt.
16. The Respondent argues that the demand was issued in strict compliance with Form 32E of the Insolvency Regulations 2016, and that the debt in question is not disputed but constitutes a crystallized judgment debt arising from an arbitral award dated 9 November 2015, which was adopted as a High Court decree on 16 February 2016 and has never been challenged or appealed.
17. According to the Respondent, the claimed amount of KES 817,341,744.50 includes interest at the contractual rate of 21% per annum, which was reaffirmed in both the award and decree, and the accumulation of this interest is a natural consequence of the Applicant’s nearly decade-long default.
18. On the question of service, the Respondent submitted that the demand was validly served via the company’s registered email address, as listed in the CR12, a mode of service recognized as acceptable in modern litigation, and it was issued by duly authorized advocates in accordance with Section 384(1)(a) of the Insolvency Act, which permits service by agents or assignees.
19. The Respondent denies any abuse of process or bad faith, contending that liquidation is a legitimate statutory remedy invoked after exhausting other enforcement mechanisms over the years, and that it is in fact the Applicant who has abused the court process by repeatedly obstructing enforcement.
20. The Respondent further submits that there is no bona fide dispute over the debt, as the Applicant has merely raised speculative and unquantified claims without substance or merit, including reliance on a Commercial Suit (HCCC No. 450 of 2011) which concerns entirely different issues, namely banking fraud and internal reconciliation, and in which the Respondent is not a party. As such, the res sub judice doctrine does not apply, and the alleged cross-claim is neither ripe nor relevant.
21. The Respondent emphasizes that ongoing reconciliation in the said Commercial Suit does not affect the debt owed, particularly given the Applicant’s failure to operationalize the partial judgment by appointing a joint accountant.
22. In conclusion, the Respondent argues that insolvency proceedings are not meant to test the general financial position of a debtor who concedes the debt but fails to pay, and that having incurred legal costs exceeding KES 60 million due to the Applicant’s persistent delay tactics, the Respondent is entitled to pursue liquidation, which the law does not require to be a last resort.
Analysis and Determination
23. Having carefully analyzed the parties’ respective submissions, I find the following as requiring determination: -
i. Whether the Statutory Demand dated 27 February 2025 is incurably defective.
ii. Whether there exists a bona fide and substantial dispute as to the debt claimed in the Statutory Demand.
iii. Whether the issuance of the Statutory Demand constitutes an abuse of court process or an act of bad faith.
Whether the Statutory Demand is Defective
24. The Applicant contends that the Statutory Demand is defective because it was issued by the Respondent's advocates and not the creditor, and was not served at the registered office. The Applicant cites the wording of section 384(1)(a) of the Insolvency Act and the case of Global Truck Limited v Borderless Tracking Limited [2020] KEHC 9650 (KLR) and asserts that a creditor does not include an agent.
25. Conversely, the Respondent posits that a demand may be signed by a person authorized to make the demand on the creditor's behalf, and cited the case of Re: F.M. Macharia (K) Ltd [2017] eKLR in support of this argument. The Respondent further highlights the phrase "by assignment or otherwise" in Section 384(1)(a) as permitting agents.
26. Section 384(1)(a) of the Insolvency Act provides as follows: -
“384. The circumstances in which a company is unable to pay its debts
(1) For the purposes of this Part, a company is unable to pay its debts—
(a) if a creditor (by assignment or otherwise) to whom the company is indebted for hundred thousand shillings or more has served on the company, by leaving it at the company's registered office, a written demand requiring the company to pay the debt and the company has for twenty—one days afterwards failed to pay the debt or to secure or compound for it to the reasonable satisfaction of the creditor;” [emphasis added].
27. From the above provisions of the law, it is evident that a creditor must issue a valid statutory demand to the debtor before instituting a liquidation petition.
28. In Re F.M. Macharia (K) Ltd [2017] eKLR, the court cited Halsbury’s Laws of England 4th Ed Vol 7(2) para 1446 on the ingredients of a valid statutory demand, stating that:
“The statutory demand must be dated and be signed by the creditor himself or by a person authorized to make the demand on the creditor’s behalf. The statutory demand must state the amount of the debt and consideration for it or if no consideration the way if (debt) arises…The statutory demand must include an explanation to the Company of the following matters: (a) Purpose of demand and fact that if demand is not complied with, proceedings may be initiated for winding up; (b) time for compliance with notice if consequential is to be avoided and (c) methods of compliance open to the company.”
29. The Court aligns itself with the interpretation in Re: F.M. Macharia, and finds that it is reasonable to conclude that a demand issued by a duly authorized advocate, being ‘a person authorized to make the demand on the creditor’s behalf’, complies with the requirement of the law. It is the position of this Court that the literal interpretation sought by the Applicant would create an impractical barrier to justice for creditors.
30. Regarding service at Registered Office, Section 384(1)(a) explicitly states service "by leaving it at the company's registered office." The Applicant asserts that service was via email to third parties, not the company or its directors.
31. The Respondent claims service was to the company's registered email listed on its CR12. While modern litigation increasingly embraces electronic service, the specific wording of Section 384(1)(a) is prescriptive.
32. In Zan Steel Limited v Jumbo Steel Mills Limited [2022] KEHC 14655 (KLR), the Court had the following to say on the issue of service: -
“Section 384 is clear that the creditor must serve the written demand by leaving it at the debtor’s registered office. The written demand should require the debtor to pay the debt within twenty-one days. It is after failure to comply with the demand that the creditor can take further steps, including instituting an insolvency application………Jumbo could only dislodge the claim of non-service if there was a demonstration through empirical evidence that the statutory demand was indeed served as required by the law……..Where service is not proved, like in this case, any action taken in furtherance of the statutory demand is premature, against the law and therefore unlawful.” [emphasis added]
33. From the above, it must be demonstrated by empirical evidence of proper service, and that where service is not proved, action taken in furtherance of the statutory demand is premature, against the law and therefore unlawful.
34. Bearing in mind the "draconian" nature of insolvency proceedings, the Court is of the view that service in this case did not meet the threshold set in law. The Respondent's reliance on email service, without clear statutory backing for this specific type of demand, in my view, raises a significant procedural defect.
35. As prescribed under Section 384 of the Act, service of the Demand must be “by leaving it at the debtor’s registered office.” Consequently, the application succeeds on this basis.
Whether There Exists a Substantial Dispute on the Debt
36. The Applicant contends that there is a bona fide dispute due to the ongoing Commercial Suit (HCCC No. 450 of 2011) and a potential cross-claim. The Respondent denies any genuine dispute.
37. In Flower City Limited V Polytanks & Containers Kenya Limited, (Insolvency Cause 033 of 2020) [2021] KEHC 34 (KLR) (Commercial and Tax) (22 February 2021) the Court, Mativo J (as he then was) while acknowledging that it may not be possible to provide a closed list of the elements of a genuine dispute, the Judge observed that an applicant must: -
i. Show a plausible contention requiring investigation;
ii. Be bona fide, genuine and real;
iii. Be in good faith and show a prima facie plausibility;
iv. Truly exist in fact, and contain a serious question to be tried;
v. Be something more than mere bluster or mere assertion;
vi. Be a claim that may have some substance;
vii. Have a sufficient degree of cogency to be arguable;
viii. Have objective existence; and
ix. Have sufficient factual particularity.
38. Having in mind the above conditions, the Court finds that there is no bona fide and substantial dispute regarding the existence and quantum of the underlying debt, as it is based on a High Court decree. The Commercial Suit (HCCC No. 450 of 2011) and the alleged cross-claim do not directly relate to or offset this specific judgment debt, nor do they provide a concrete basis to dispute the Respondent's claim.
39. For sub judice to apply under Section 6 of the Civil Procedure Act, the matter in issue and the parties must be substantially the same. Based on the evidence on record, I agree with the Respondent’s argument that the subject matter of the Commercial Suit (which basically involves internal financial dealings of Ravasam and the Bank) is different from the enforcement of a judgment debt arising from an arbitral award. Consequently, the argument of subjudice is not sound enough.
40. Further, on the Applicant’s argument that its cross-claim against Eric Agbeko and Philip Nyambok would exceed the Respondent's debt, I agree with the Respondent’s position that the claim by the Applicant is unquantified and hypothetical. In the case of Flower City Limited v Polytanks & Containers Kenya Limited, a debtor can only pass the test of solvency if it is proved that there is a “genuine cross-demand with a value equal to or greater than that of the value of the statutory demand debt.”
41. In the present case, what we have is a mere assertion of a cross-claim without it being quantified, formally pleaded against the creditor. This ground, therefore, fails as it does not meet the threshold required in law, as confirmed by various judicial pronouncements.
Whether there is an abuse of process and bad faith on the part of the Respondent
42. The Applicant argued that the demand is a debt collection tool and an attempt to pressure it into payment of a bona fide disputed debt, and cites cases like Kitmin Holding Limited v Noble Resources International Pte Limited and Prideinn Hotels & Investments Ltd v Tropicana Hotels Ltd in support of the argument.
43. The Respondent, on the other hand, asserts that the debt is a High Court decree and the that the insolvency proceedings have been necessitated by the Applicant’s consistent refusal to pay a the debt, for over a decade now. The Respondent cites Purity Gathoni Githae Ocean & Another v Freight Transport Company Ltd [2012] KEHC 5683 (KLR), and submits that the that courts should not exercise discretion in favor of an applicant where the process is being abused to frustrate the execution of a valid and undisputed decree.
44. The Court of Appeal in Muchanga Investments Limited v Safaris Unlimited (Africa) Ltd & 2 others Civil Appeal No. 25 of 2002 (2009) eKLR 229, in dealing with the principle of abuse of Court process, stated as follows: -
“The term abuse of Court process has the same meaning as abuse of judicial process. The employment of judicial process is regarded as an abuse when a party uses the judicial process to the irritation and annoyance of his opponent and the efficient and effective administration of justice. It is a term generally applied to a proceeding, which is wanting in bona-fides and frivolous, vexatious or oppressive.”
45. In Bore v Spire Bank Limited & another (Civil Case 8 of 2020) [2024] KEHC 1034 (KLR) (8 February 2024) (Ruling), the Court stated as follows on the principle: -
“Abuse of the Court process is a settled legal principle applicable on two fronts. First, from a public interest perspective, duplication of proceedings is a waste of precious Court time and resources. That is in addition to the risk of inconsistent findings which threaten to bring the administration of justice into disrepute. Second, from a private interest perspective, it is highly vexatious and oppressive to the opposite parties not only in terms of time and costs, but also in that the “dry-run” of the claim in the prior proceedings affords the Plaintiff an opportunity to refine its case and work around any defence, evidence or explanation that the opposite party in the subsequent action put forward
46. Applying the above principles in the instant case, I note from the parties' submissions, there is no dispute that the debt arises from a decree of the court. Given that the debt is a High Court decree and has been outstanding for a significant period, this Court finds that the Respondent's resort to a statutory demand, a lawful enforcement mechanism, is not inherently an abuse of process. On the contrary, the Applicant's actions of delaying payment and raising objections that lack substantial merit could be construed as an abuse.
47. In the circumstances, the Court does not find sufficient evidence to conclude that the Respondent's issuance of the Statutory Demand constitutes an abuse of process or bad faith. The Respondent has a legitimate claim based on a judgment debt that has remained unpaid for a significant period. The Applicant's history of frustrating enforcement, as highlighted by the Respondent, suggests that the Applicant's application may be a further attempt to delay legitimate recovery.
Conclusion and Final Orders
48. Despite the lack of a bona fide dispute over the debt itself, the procedural requirement for service of a statutory demand is fundamental. The strict wording of Section 384(1)(a) regarding service at the registered office is a safeguard for the debtor, taking into account the nature and effect of insolvency proceedings.
49. The Respondent's failure to strictly adhere to this mandatory provision, opting for email service without clear legal backing for this specific type of demand, renders the Statutory Demand procedurally defective.
50. Consequently, while the Court acknowledges the Respondent's long-standing efforts to recover a legitimate debt and the Applicant's history of non-payment, the procedural defect in service of the Statutory Demand cannot be overlooked. The gravity of liquidation proceedings demands strict compliance with all preliminary steps. The Court therefore issues the following orders: -
i. The Applicant's application dated 11 April 2025 to quash the Statutory Demand dated 27 February 2025 is hereby granted, and the Demand accordingly quashed, on the sole ground of defective service.
ii. This ruling does not extinguish the underlying judgment debt owed by the Applicant to the Respondent.
iii. The Respondent is at liberty to issue and serve a fresh Statutory Demand in strict compliance with all the provisions of the Insolvency Act.
iv. Each party shall bear its own costs for this application.
51. It is so ordered.
SIGNED, DATED, and DELIVERED IN VIRTUAL COURT THIS
31ST DAY OF JULY 2025
ADO MOSES
JUDGE
In the presence of: -
Moses……….C/A
...................for Applicant
..................for Respondent