JAMES HEHO MBIRU AND ESTHER WAIRIMU THUMBI VS ENCASA WEST LIMITED AND SUSAN WACHEKE MURAYA AND 2 Others

1. What is before the court for determination is the 4^th Defendant’s  Notice of Motion dated 29^th August 2022 made under section 534, 546, 560(d) and 561(3) and (4) of the Insolvency Act and Order 5 Rule 1(2) and (6) of the Civil Procedure Rules seeking the striking out of the Plaintiff’s suit dated 30^th July 2019 for want of issuance of original summons to enter appearance and that there be a stay of proceedings in this suit pending the completion of the administration proceedings in Insolvency Cause No. IP E030 of 2022: In the Matter of Encasa West Limited. The application is supported by the grounds on its face and the supporting affidavit of Swaroop Rao Ponangipalli, the Administrator of the 1^st Defendant, sworn on 29^th August 2022.
2. The application is opposed by the Plaintiffs through the replying affidavit of the 1^st Plaintiff sworn on 25^th September 2023. Counsel for the other Defendants expressed that they did not oppose the application. The court directed that the application be disposed by way of written submissions which are on record.
3. The 4^th Defendant (hereinafter the Bank) averred that by the Letters of Offer dated 3^rd May 2013 and 3^rd June 2013, it advanced to the 1^st Defendant various Credit Facilities for the maximum principal amount of Kshs. 360,000,000.00. The 1^st Defendant executed the said Letters of Offer and duly accepted the terms and conditions therein and that in consideration executed and perfected with the Bank an All Asset Debenture dated 15^th July 2013 for its indebtedness. The Bank claims that the 1^st Defendant has breached and dishonored the terms of the said Letters of Offer and Debenture thereby necessitated the Bank to exercise its rights under the Debenture.
4. On 4^th August 2022, the Bank appointed Mr. Ponangipalli as the Administrator of the 1^st Defendant and states that under section 560(d), 561(3), (4) and (f) of the Insolvency Act, once an Administrator has been appointed as is the case herein, there ought to be a moratorium on all legal processes pending the completion of the administration process. It is for these reasons that the Bank prays for a stay of proceedings in this case pending the completion of the administration process.
5. The Bank further avers that Order 5 Rule 1(2) of the Civil Procedure Rules provides that every Summons shall be signed by the judge or an officer appointed by the judge and shall be sealed with the seal of the court without delay and in any event not more than thirty days from the date of filing suit. Further that under Rule 1(6) thereof every Summons, except where the court is to effect service, shall be collected for service within thirty days of issue or notification, whichever is later, failing which the suit shall abate.
6. The Bank claims that since the filing of this suit on 1^st July 2019, the Plaintiffs have never bothered to extract and serve Summons to Enter Appearance upon the Defendants and in the circumstances, this suit has abated. It is for these reasons that the Bank seeks that the suit be struck out.
7. In response, the Plaintiffs depone that once a suit is filed, it is the duty of the court to issue summons to enter appearance which must be dated, signed by the judge or officer appointed by the judge, and sealed with the seal of the court. They state that the Court did not issue summons for onward service to the Bank for purposes of Order 5 Rule 1(6) but that in any event, Order 5 Rule 1 thereof provides that the function of the Summons to enter Appearance is to order the defendant to appear within a specified time. That where the defendant gets notice of a suit against him through other means other than summons and participates in the subsequent proceedings no prejudice would be occasioned by the delay in the issue and service of summons that would warrant the dismissal of a suit.
8. The Plaintiffs state that the Bank did not only file a Notice of Appointment of Advocates but also participated in multiple interlocutory proceedings, including the appointment of the Administrator Mr. Ponangipalli vide the letter dated 1^st August 2022 and that the Bank was aware of the existence of this suit. The Plaintiffs urge that the Constitution under Article 159 has urged courts to do justice without undue regard to procedural technicality and that striking out of this suit will be detrimental to the Plaintiffs as the same would amount to the determination of this suit without the benefit of hearing the Plaintiffs. That it is desirable, fair, and just that this court disposes of the prayer for striking out of this suit as dismissed.

Analysis and determination

1. From the pleadings and submissions, the court is being called upon to determine whether the Plaintiff’s suit should be struck out for want of issuance of summons to enter appearance and whether these proceedings should be stayed pending completion of the administration proceedings in Insolvency Cause No. E030 of 2022.
2. On the issuance of summons, the parties agree that under Order 5 Rule 1 of the Civil Procedure Rules, the same ought to have been issued to the Defendants together with a copy of the Plaint and that a suit abates once a summons is not collected for service within 30 days of issue or notification.
3. The question is thus whether failure to issue the said summons to a defendant is fatal to a plaintiff’s suit? The answer to this question lies on the definition and purpose of the said summons. This court in Abdulbasit Mohamed Ahmed Dahman & Safiyya Mohamed Said v Fidelity Commercial Bank Limited [2016] KEHC 975 (KLR) held as follows:

“The Black’s Law Dictionary defines ‘summons’ as a writ or process commencing the plaintiff’s action and requiring the defendant to appear and answer or a notice requiring a person to appear in court.

From the civil dispute perspectives, it is clear that without being served with the summons, one need not enter appearance or file a defence.  That is why Order 5 rule 3 provides that every summons shall be accompanied by a copy of the plaint.  It is the summons which calls upon the defendant or defendants to enter appearance and not the plaint.  The plaint simply states a party’s case.  The summons calls upon the cited party to enter appearance within the period stated in the summons.  If summons are not served within thirty (30) days of issue or notification, the suit stands abated.  The Collins English Dictionary indicate that if a writ abates, it is null and void.”

1. Whereas it is true that the wordings of Order 5 Rule 1  are couched in mandatory terms and that in normal circumstances the court shall give it a strict interpretation, I agree with the Plaintiffs that the Court of Appeal has been calling for flexibility and has urged courts to examine the circumstances of each case to determine if any prejudice was occasioned by any irregularity (see Industrial and Commercial Development Corporation v Sum Model Industries Limited [2007] KECA 320 (KLR) and Equatorial Commercial Bank Limited v Mohansons (K) Limited [2012] KECA 165 (KLR) ].
2. In the circumstances of this case, it is my finding that since the Bank filed an unconditional memorandum of appearance and has participated in this matter by filing various pleadings since 2019 and has not objected to the suit on account of the lack of summons until this point, no prejudice has been occasioned on it. The Bank is aware of the suit and has entered appearance and is actively participating in defending its position. While I appreciate the importance of parties following procedural requirements, I find that it would be an affront to Article 159 of the Constitution to strike out a suit on the ground of an irregularity in procedural law when no prejudice has been occasioned on the offended party. I therefor decline the invitation to strike out the Plaintiffs’ suit for want of summons.
3. Turning to whether these proceedings ought to be stayed pending the insolvency proceedings in Insolvency Cause No. E030 of 2022, the Plaintiffs have not denied that the 1^st Defendant is in administration and that Mr. Ponangipalli was appointed as its Administrator on 4^th August 2022. Under section 560 (1) (d) of the Insolvency Act;

“While a company is under administration - a person may begin or continue legal proceedings (including execution and distress) against the company or the company's property only with the consent of the administrator or with the approval of the Court.”

1. I am in agreement with the Bank that the Plaintiffs have not responded to the prayer to stay the proceedings pending the completion of the administration. In any event, I am persuaded that a stay of these proceedings is necessary and that the Plaintiffs ought to first seek the consent of the administrator or leave of the Insolvency Court in Insolvency Cause No. E030 of 2022, if they are to proceed with this matter. I am bound by the Court of Appeal’s decision in Nakumatt Holdings Limited & Atul Shah v Ideal Locations Limited [2019] KECA 153 (KLR) cited by the Bank that:

“The administration of an insolvent company is for the benefit all creditors of such company and a situation where creditors separately attack or take assets of a company would defeat the overall objective of the administration.”

Final disposition

1. It is my finding that the Bank’s application dated 29^th August 2022 partially succeeds to the extent that any further proceedings herein be and are hereby stayed until the consent of the Administrator or approval of the Insolvency Court in Insolvency Cause No. E030 of 2022 is obtained. Costs shall be in the cause.

RULING delivered virtually, dated and signed at NAIROBI

This 7^th day of November 2024.

P. MULWA

JUDGE

In the presence of:

Mr. Ndambiri for plaintiff/respondent

Mr. Nadio for 4^th defendant/applicant

Court Assistant: Carlos