1. The Debtor has filed a Bankruptcy Petition dated 10th May 2022 on the ground that he is unable to pay his debts following a judgment at the Milimani Magistrates Commercial Courts Civil Case No. 2 of 2015, Ibrahim Mwangi v Nairobi Bottlers Limited where he owes at least Kshs. 6,711,488.00 as at 26th April 2017 with interest accruing therefrom.
2. The Debtor has filed a Notice of Motion dated 14th November 2022 seeking a stay of execution of the court proceedings in the Subordinate Court pending determination of these proceedings. The Creditor has opposed the application through the replying affidavit of its Credit Controller, Priscilla Kimani, sworn on 30th November 2022. The Respondent claims that the Debtor operates a distributorship at Kariobangi from which he can settle the decretal sum hence the petition is an attempt to escape his liabilities. It adds that since no bankruptcy order has been issued, the court should not grant an order of stay.
3. A person who is in financial distress and is unable to pay his debt may apply to the court for a bankruptcy order under section 32 of the Insolvency Act, 2015 which provides as follows:
32 (1) A debtor may make an Application to the Court for an order adjudging the debtor only on grounds that the Debtor is unable to pay the Debtors’ debts”
(2) The Court may decline to deal with such an application if it is not accompanied by a statement of the debtor’s financial position containing-
(a) such particulars of the debtor’s creditors and of the debtor’s debts and other liabilities and assets as may be prescribed by the insolvency regulations; and
(b) such other information as may be so prescribed.
4. In an interim application such as the one before the court, the court ought to be satisfied that the debtor is unable to pay his debts. The court is not required to carry out a detailed inquiry but must be satisfied that there is sufficient evidence of indebtedness and that the application is not an abuse of the court process (see Rajendra Ratilal Sanghani v Schoon Ahmed Noorani ML COMM IC No. 033 of 2018 [2018] eKLR). It is for this reason that a debtor is required to give a full disclosure of his financial affairs including full particulars of his debtors and creditors. This requirement is underpinned by Regulation 18 of the Insolvency Regulations, 2016 which requires that the petition shall be accompanied by the following documents:
(a) an affidavit to the petition which shall be in Form 8 set out in the First Schedule;
(b) statement of debtors financial position, which shall be called a “statement of affairs”, and shall be in Form 11 set out in the First Schedule; and
(c) application for appointment of trustee which shall be in Form 9 of the First Schedule.
5. The Statement of Affairs shows that the Debtor has assets amounting to Kshs. 50,000.00 and liabilities of Kshs. 6,711,488.00. Prima facie, the Debtor is insolvent and unable to pay his debt. Although the matter was placed before the court to hear the application for stay of execution, there is no reason why the court should not deal with the Debtor’s Petition.
6. In the circumstances, I now make the following orders:
(a) A Bankruptcy Order be and is hereby issued against the Debtor, Ibrahim Mwangi.
(b) The Official Receiver is appointed Trustee of the Debtor’s estate.
(c) For the avoidance of doubt, there shall be a stay of execution and further proceedings in Milimani Commercial Magistrates Court Civil Case No. 2 of 2015, Ibrahim Mwangi v Nairobi Bottlers Limited pending determination of this cause
DATED and DELIVERED at NAIROBI this 9th day of DECEMBER 2022.
D. S. MAJANJA
JUDGE