1. On 31st May 2023, the court delivered judgment where it allowed the Petitioners’ petitions by issuing an interim liquidation order (“the Liquidation Order”) against the Respondent (“Tuskys”) and appointing, Mr. Kolluri Venkata Subbaraya Kamasastry as its provisional liquidator.
2. Tuskys is seeking to appeal this decision at the Court of Appeal and now seeks to stay the Liquidation Order through its Notice of Motion dated 9th June 2023 made under sections 699 and 700 of the Insolvency Act, 2015, Order 51 of the Civil Procedure Rules and sections 1A, 1B, 3, 3A and 63(e) of the Civil Procedure Act. The application is supported by the grounds on its face and the supporting affidavit sworn on 9th June 2023 by George Gashwe Kamau, Tuskys’ director. It is opposed by the 1st Petitioner through the replying affidavit of its director, Shailesh Kanani sworn on 13th June 2023. The parties through their advocates made brief oral submissions.
3. Tuskys has rightly cited sections 699 and 700 of the Insolvency Act which provide as follows:
699. Right of appeal to Court of Appeal
(1) Any person dissatisfied with a decision of the Court under this Act may appeal to the Court of Appeal against the decision.
(2) Except as otherwise expressly provided by this Act, a notice of appeal does not stay proceedings under the decision under appeal unless the Court or the Court of Appeal makes an order staying the proceedings.
700. Suspension of bankruptcy, liquidation or administration pending determination of appeal
(1) If an appeal has been lodged against a bankruptcy order or an order for the liquidation or administration of a company, any interested person may apply to the Court or the Court of Appeal for an order suspending the order until the appeal is decided.
(2) The Court or Court of Appeal may suspend the order on such terms as it considers appropriate, including terms as to anything done or decided, or that ought to have been done or decided, by any person in the period between the order and the order suspending it.
(3) The Court or the Court of Appeal may, at any time, make such order as it considers appropriate to deal with anything done, or any matter decided, or that should have been done or decided, by any person during the period between the commencement of the bankruptcy, liquidation or administration and the date when the appeal is decided if—
(a) the bankruptcy, liquidation or administration order has been suspended and the appeal fails; or
(b) the bankruptcy order, liquidation order or administration order has not been suspended and the appeal succeeds.
4. Essentially, the aforesaid provisions entitle a dissatisfied party to appeal against any decision of the Court to the Court of Appeal and that this court has the discretionary power to suspend a liquidation order on such terms as it considers appropriate. In exercising this discretion, the court will consider various factors bearing in mind that it is guided by the general policy of the Insolvency Act which provides at section 3(1)(e) that the objects of the Act are:
3(1)(e) in the case of insolvent companies and other bodies corporate whose financial position is irredeemable—to provide an orderly system for liquidating the affairs of those companies and bodies and for the efficient and optimal administration and distribution of their assets for the benefit of their creditors.
5. Against the above objective, the court must weigh Tuskys’ right to exercise its statutory right of appeal by ensuring that the appeal is not rendered nugatory on the one hand and on the other, the Petitioners and Creditors are entitled to the fruits of the judgment and liquidation order which in this case, gives them the opportunity to recover their debts in the best way possible. Tuskys, as the applicant, bears the onus of satisfying the court that unless stay is granted, the intended appeal would be rendered nugatory (see David Morton Silverstein v Atsango Chesoni NRB CA Civil Application No. 189 of 2001 [2002] eKLR).
6. Tuskys avers that the intended appeal has reasonable chances of success as demonstrated by the draft Memorandum of Appeal annexed to its deposition. That the interim liquidation order is prejudicial to it and negatively affects its efforts to operate as a going concern since it disables it from operating, thereby defeating the objects of the Insolvency Act. It further states that it is incurring and will continue to incur substantial loss if the orders sought are not granted and if the interim liquidation order is not suspended its intended appeal will be rendered nugatory. It contends that it has moved this Court in a timely manner and that it is in the interests of fairness and the administration of justice that the orders sought are granted.
7. On behalf of the Creditors, the 1st Petitioner opposes the application. It avers that the application is a gross abuse of the court process. That it is inconceivable that Tuskys would seek a suspension of the Interim Liquidation Order noting that it did not dispute a single debt, the total of which far exceeds the Kshs. 100,000.00 statutory threshold for insolvency. Further that Tuskys has expressly and repeatedly admitted its insolvency over the course of the proceedings.
8. The 1st Petitioner submits that Tuskys has failed to demonstrate any justiciable grounds for the grant of the orders sought and that it has failed to establish any facts and/or proffer any evidence which would demonstrate any substantial loss that would be suffered by it should the orders sought be refused as mere allegations of substantial loss would not be sufficient to warrant the grant of the orders sought. The 1st Petitioner states that Tuskys has had close to 3 years to carry out any necessary efforts to reverse its insolvent status but that it has only worsened over the course of this period leading the Court to make the liquidation order. That to the extent that Tuskys has not put forth any evidence of material change in circumstances since delivery of the Judgment, and in so far as it remains insolvent, then no cogent basis has been laid for the suspension of the Liquidation Order.
9. The 1st Petitioner contends that it would not be in the interests of justice, fairness or commercial morality for Tuskys, being indisputably and obviously insolvent, to reverse the Liquidation Order based on conjecture and supposition, all whilst the debts due to it and the other Creditors remain unsatisfied.
10. I am inclined to agree with the 1st Petitioner that Tuksys failed to demonstrate the prejudice it will suffer or incur if the stay orders are not issued. Indeed, there is no evidence of anything that it has done or will do Tuskys to positively alter its insolvent position from the time the court issued the Liquidation Order to the time of this application. As the Court of Appeal held in Coastal Bottlers Limited v Commissioner of Domestic Taxes NRB CA Civil Application No. 91 of 2008 [2009] eKLR an applicant ought to table evidence such as financial and accounting reports that may lead the court to empathize with their financial position and see whether indeed the applicant stands to suffer substantial loss. No such evidence is available for the court to conclude that Tuskys’ financial position become better than it was so that the court can positively state that staying the Liquidation Order would benefit the body of creditors bearing in mind that all creditors support its liquidation.
11. I find and hold that it would not be appropriate to stay the Liquidation Order and appointment of the provisional liquidator in the circumstances. Consequently, the Notice of Motion dated 9th June 2023 is dismissed.
SIGNED AT LONDON, ENGLAND
D.S. MAJANJA
JUDGE
DATED and DELIVERED at NAIROBI this 22ND day of JUNE 2023
F. MUGAMBI
JUDGE
2. Tuskys is seeking to appeal this decision at the Court of Appeal and now seeks to stay the Liquidation Order through its Notice of Motion dated 9th June 2023 made under sections 699 and 700 of the Insolvency Act, 2015, Order 51 of the Civil Procedure Rules and sections 1A, 1B, 3, 3A and 63(e) of the Civil Procedure Act. The application is supported by the grounds on its face and the supporting affidavit sworn on 9th June 2023 by George Gashwe Kamau, Tuskys’ director. It is opposed by the 1st Petitioner through the replying affidavit of its director, Shailesh Kanani sworn on 13th June 2023. The parties through their advocates made brief oral submissions.
3. Tuskys has rightly cited sections 699 and 700 of the Insolvency Act which provide as follows:
699. Right of appeal to Court of Appeal
(1) Any person dissatisfied with a decision of the Court under this Act may appeal to the Court of Appeal against the decision.
(2) Except as otherwise expressly provided by this Act, a notice of appeal does not stay proceedings under the decision under appeal unless the Court or the Court of Appeal makes an order staying the proceedings.
700. Suspension of bankruptcy, liquidation or administration pending determination of appeal
(1) If an appeal has been lodged against a bankruptcy order or an order for the liquidation or administration of a company, any interested person may apply to the Court or the Court of Appeal for an order suspending the order until the appeal is decided.
(2) The Court or Court of Appeal may suspend the order on such terms as it considers appropriate, including terms as to anything done or decided, or that ought to have been done or decided, by any person in the period between the order and the order suspending it.
(3) The Court or the Court of Appeal may, at any time, make such order as it considers appropriate to deal with anything done, or any matter decided, or that should have been done or decided, by any person during the period between the commencement of the bankruptcy, liquidation or administration and the date when the appeal is decided if—
(a) the bankruptcy, liquidation or administration order has been suspended and the appeal fails; or
(b) the bankruptcy order, liquidation order or administration order has not been suspended and the appeal succeeds.
4. Essentially, the aforesaid provisions entitle a dissatisfied party to appeal against any decision of the Court to the Court of Appeal and that this court has the discretionary power to suspend a liquidation order on such terms as it considers appropriate. In exercising this discretion, the court will consider various factors bearing in mind that it is guided by the general policy of the Insolvency Act which provides at section 3(1)(e) that the objects of the Act are:
3(1)(e) in the case of insolvent companies and other bodies corporate whose financial position is irredeemable—to provide an orderly system for liquidating the affairs of those companies and bodies and for the efficient and optimal administration and distribution of their assets for the benefit of their creditors.
5. Against the above objective, the court must weigh Tuskys’ right to exercise its statutory right of appeal by ensuring that the appeal is not rendered nugatory on the one hand and on the other, the Petitioners and Creditors are entitled to the fruits of the judgment and liquidation order which in this case, gives them the opportunity to recover their debts in the best way possible. Tuskys, as the applicant, bears the onus of satisfying the court that unless stay is granted, the intended appeal would be rendered nugatory (see David Morton Silverstein v Atsango Chesoni NRB CA Civil Application No. 189 of 2001 [2002] eKLR).
6. Tuskys avers that the intended appeal has reasonable chances of success as demonstrated by the draft Memorandum of Appeal annexed to its deposition. That the interim liquidation order is prejudicial to it and negatively affects its efforts to operate as a going concern since it disables it from operating, thereby defeating the objects of the Insolvency Act. It further states that it is incurring and will continue to incur substantial loss if the orders sought are not granted and if the interim liquidation order is not suspended its intended appeal will be rendered nugatory. It contends that it has moved this Court in a timely manner and that it is in the interests of fairness and the administration of justice that the orders sought are granted.
7. On behalf of the Creditors, the 1st Petitioner opposes the application. It avers that the application is a gross abuse of the court process. That it is inconceivable that Tuskys would seek a suspension of the Interim Liquidation Order noting that it did not dispute a single debt, the total of which far exceeds the Kshs. 100,000.00 statutory threshold for insolvency. Further that Tuskys has expressly and repeatedly admitted its insolvency over the course of the proceedings.
8. The 1st Petitioner submits that Tuskys has failed to demonstrate any justiciable grounds for the grant of the orders sought and that it has failed to establish any facts and/or proffer any evidence which would demonstrate any substantial loss that would be suffered by it should the orders sought be refused as mere allegations of substantial loss would not be sufficient to warrant the grant of the orders sought. The 1st Petitioner states that Tuskys has had close to 3 years to carry out any necessary efforts to reverse its insolvent status but that it has only worsened over the course of this period leading the Court to make the liquidation order. That to the extent that Tuskys has not put forth any evidence of material change in circumstances since delivery of the Judgment, and in so far as it remains insolvent, then no cogent basis has been laid for the suspension of the Liquidation Order.
9. The 1st Petitioner contends that it would not be in the interests of justice, fairness or commercial morality for Tuskys, being indisputably and obviously insolvent, to reverse the Liquidation Order based on conjecture and supposition, all whilst the debts due to it and the other Creditors remain unsatisfied.
10. I am inclined to agree with the 1st Petitioner that Tuksys failed to demonstrate the prejudice it will suffer or incur if the stay orders are not issued. Indeed, there is no evidence of anything that it has done or will do Tuskys to positively alter its insolvent position from the time the court issued the Liquidation Order to the time of this application. As the Court of Appeal held in Coastal Bottlers Limited v Commissioner of Domestic Taxes NRB CA Civil Application No. 91 of 2008 [2009] eKLR an applicant ought to table evidence such as financial and accounting reports that may lead the court to empathize with their financial position and see whether indeed the applicant stands to suffer substantial loss. No such evidence is available for the court to conclude that Tuskys’ financial position become better than it was so that the court can positively state that staying the Liquidation Order would benefit the body of creditors bearing in mind that all creditors support its liquidation.
11. I find and hold that it would not be appropriate to stay the Liquidation Order and appointment of the provisional liquidator in the circumstances. Consequently, the Notice of Motion dated 9th June 2023 is dismissed.
SIGNED AT LONDON, ENGLAND
D.S. MAJANJA
JUDGE
DATED and DELIVERED at NAIROBI this 22ND day of JUNE 2023
F. MUGAMBI
JUDGE