1. The petitioner filed a liquidation petition against the respondent dated 12/04/2023 pursuant to section 424 1(e) and 425 of the Insolvency Act.
2. The petitioner’s case is that it sued the Respondent in the Nairobi Chief Magistrate’s Commercial Court Case Number 201 of 2017 and obtained a decree for a total sum of Kenya Shillings Eleven Million Three Hundred and Two Thousand Eight Hundred and Thirty-Eight (Kshs. 11,302,838/-) as at 24th September 2021. That the said amount continues to accrue interest.
3. It is further the Petitioner’s case that all efforts to execute the judgment have been futile as the Respondent is no longer operational with no known assets, and that the directors of the company can’t be reached.
4. The petitioner asserted that the company is insolvent and unable to pay its debt and that the debt owed to the petitioner by the company/respondent is within the prescribed insolvency level in accordance with the Insolvency Act 2015.
5. Based on the foregoing, the petitioner prayed for the following orders: -
a) A declaration that the company is unable to pay debts.
b) That Martinisa Investments Limited be liquidated by the Court under the provisions of the Insolvency Act, 2015.
c) The court appoints the Official Receiver to act as the Liquidator.
d) The cost of this Petition be provided for in priority.
6. The petition was supported by the verifying affidavit sworn on 12/04/2023 by Haswin Devan Kara Shah, the petitioner herein.
7. The Respondent company did not file any pleadings in opposition to the petition despite proof of service of the hearing notices of the petition.
8. The Petition was canvassed by way of written submissions. The Petitioner filed his submissions dated 7th October 2024, whereas no submissions was filed by the Respondent.
Analysis and determination:
9. I have considered the petition, the affidavits in support, as well as the annexures thereto. The petition seeks to liquidate the company in line with the provisions of the Insolvency Act. Section 384(1) and (2) provide as follows:-
“(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;
(b) If execution or other process issued on a judgment, decree or order of any court in favour of a creditor of the company is returned unsatisfied in whole or in part; or
(c) If it is proved to the satisfaction of the court that the company is unable to pay its debts as they fall due.
2. A company is also unable to pay its debts for the purposes of this part if it is proved to the satisfaction of the court that the value of the company’s assets is less than the amount of its liabilities (including its contingent and prospective liabilities)."
10. Section 424(1) of the Act provides that:
“A company may be liquidated by the court if:
(a) the company has by special resolution resolved that the company be liquidated by the court;
(b) being a public company that was registered as such on its original incorporation:
(i) the company has not been issued with a trading certificate under the Companies Act, 2015; and
(ii) more than twelve months has elapsed since it was so registered;
(c) the company does not commence its business within twelve months from its incorporation or suspends its business for a whole year;
(d) except in the case of a private company limited by shares or by guarantee, the number of members is reduced below two;
(e) the company is unable to pay its debts;
(f) at the time at which a moratorium for the company ends under section 645—a voluntary arrangement made under part IX does not have effect in relation to the company; or
(g) the court is of the opinion that it is just and equitable that the company should be liquidated.”
11. In line with Section 425 (1) (b) of the Insolvency Act, the instant Petition has been filed by a qualified person, that is, Heswin Devan Shah, a creditor of the Respondent herein. That fact, of being a creditor, was not denied by the company, which did not file any response to the Petition.
12. It is clear from the foregoing that a creditor may apply for the liquidation of a company where the company is unable to pay its debts. These provisions ensure that creditors have legal avenues to seek redress when a company is insolvent, thereby promoting financial accountability and protecting the interests of creditors.
13. In this case, the petitioner sued the Respondent in the Nairobi CMCC No. 201 of 2017 and obtained a decree for a total sum of Kenya Shillings Eleven Million Three Hundred and Two Thousand Eight Hundred and Thirty-Eight (Kshs. 11,302,838/) as evidenced in the court decree dated 24th September 2021.
14. From the evidence contained in the affidavit in support of the Petition, it is clear that the company cannot meet its financial obligations.
15. In the case of re Hoggers Limited (In Administration) (Petition E003 of 2021) [2021] KEHC 117 (KLR) (Commercial and Tax) (7 October 2021) (Ruling), the court, when faced with a similar situation, stated as follows:
“The evidence contained in the supporting affidavit is overwhelming that the company cannot meet its financial obligations. A financial statement that was produced attests to that. I find and hold that the evidence warrants the appointment of an interim liquidator pending the determination of the liquidation petition. He shall be responsible for the preservation of the assets of the company which will be used for the repayment of the debts owed to all the creditors.”
Disposition
16. Accordingly, the application herein is allowed, and the Court makes the following orders: -
i. A declaration be and is hereby issued that Martinisa Investments Limited is insolvent and is placed under interim liquidator.
ii. The Official Receiver be and is hereby appointed as the liquidator to immediately take over the management of the company;
iii. That the costs of the application be provided to the petitioner out of the assets of the company;
17. It is so ordered.
SIGNED, DATED, and DELIVERED IN VIRTUAL COURT
THIS 13TH DAY OF MARCH 2025
2. The petitioner’s case is that it sued the Respondent in the Nairobi Chief Magistrate’s Commercial Court Case Number 201 of 2017 and obtained a decree for a total sum of Kenya Shillings Eleven Million Three Hundred and Two Thousand Eight Hundred and Thirty-Eight (Kshs. 11,302,838/-) as at 24th September 2021. That the said amount continues to accrue interest.
3. It is further the Petitioner’s case that all efforts to execute the judgment have been futile as the Respondent is no longer operational with no known assets, and that the directors of the company can’t be reached.
4. The petitioner asserted that the company is insolvent and unable to pay its debt and that the debt owed to the petitioner by the company/respondent is within the prescribed insolvency level in accordance with the Insolvency Act 2015.
5. Based on the foregoing, the petitioner prayed for the following orders: -
a) A declaration that the company is unable to pay debts.
b) That Martinisa Investments Limited be liquidated by the Court under the provisions of the Insolvency Act, 2015.
c) The court appoints the Official Receiver to act as the Liquidator.
d) The cost of this Petition be provided for in priority.
6. The petition was supported by the verifying affidavit sworn on 12/04/2023 by Haswin Devan Kara Shah, the petitioner herein.
7. The Respondent company did not file any pleadings in opposition to the petition despite proof of service of the hearing notices of the petition.
8. The Petition was canvassed by way of written submissions. The Petitioner filed his submissions dated 7th October 2024, whereas no submissions was filed by the Respondent.
Analysis and determination:
9. I have considered the petition, the affidavits in support, as well as the annexures thereto. The petition seeks to liquidate the company in line with the provisions of the Insolvency Act. Section 384(1) and (2) provide as follows:-
“(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;
(b) If execution or other process issued on a judgment, decree or order of any court in favour of a creditor of the company is returned unsatisfied in whole or in part; or
(c) If it is proved to the satisfaction of the court that the company is unable to pay its debts as they fall due.
2. A company is also unable to pay its debts for the purposes of this part if it is proved to the satisfaction of the court that the value of the company’s assets is less than the amount of its liabilities (including its contingent and prospective liabilities)."
10. Section 424(1) of the Act provides that:
“A company may be liquidated by the court if:
(a) the company has by special resolution resolved that the company be liquidated by the court;
(b) being a public company that was registered as such on its original incorporation:
(i) the company has not been issued with a trading certificate under the Companies Act, 2015; and
(ii) more than twelve months has elapsed since it was so registered;
(c) the company does not commence its business within twelve months from its incorporation or suspends its business for a whole year;
(d) except in the case of a private company limited by shares or by guarantee, the number of members is reduced below two;
(e) the company is unable to pay its debts;
(f) at the time at which a moratorium for the company ends under section 645—a voluntary arrangement made under part IX does not have effect in relation to the company; or
(g) the court is of the opinion that it is just and equitable that the company should be liquidated.”
11. In line with Section 425 (1) (b) of the Insolvency Act, the instant Petition has been filed by a qualified person, that is, Heswin Devan Shah, a creditor of the Respondent herein. That fact, of being a creditor, was not denied by the company, which did not file any response to the Petition.
12. It is clear from the foregoing that a creditor may apply for the liquidation of a company where the company is unable to pay its debts. These provisions ensure that creditors have legal avenues to seek redress when a company is insolvent, thereby promoting financial accountability and protecting the interests of creditors.
13. In this case, the petitioner sued the Respondent in the Nairobi CMCC No. 201 of 2017 and obtained a decree for a total sum of Kenya Shillings Eleven Million Three Hundred and Two Thousand Eight Hundred and Thirty-Eight (Kshs. 11,302,838/) as evidenced in the court decree dated 24th September 2021.
14. From the evidence contained in the affidavit in support of the Petition, it is clear that the company cannot meet its financial obligations.
15. In the case of re Hoggers Limited (In Administration) (Petition E003 of 2021) [2021] KEHC 117 (KLR) (Commercial and Tax) (7 October 2021) (Ruling), the court, when faced with a similar situation, stated as follows:
“The evidence contained in the supporting affidavit is overwhelming that the company cannot meet its financial obligations. A financial statement that was produced attests to that. I find and hold that the evidence warrants the appointment of an interim liquidator pending the determination of the liquidation petition. He shall be responsible for the preservation of the assets of the company which will be used for the repayment of the debts owed to all the creditors.”
Disposition
16. Accordingly, the application herein is allowed, and the Court makes the following orders: -
i. A declaration be and is hereby issued that Martinisa Investments Limited is insolvent and is placed under interim liquidator.
ii. The Official Receiver be and is hereby appointed as the liquidator to immediately take over the management of the company;
iii. That the costs of the application be provided to the petitioner out of the assets of the company;
17. It is so ordered.
SIGNED, DATED, and DELIVERED IN VIRTUAL COURT
THIS 13TH DAY OF MARCH 2025