RULING
1. The court is called upon to determine two applications that were heard together by agreement. The plaintiff’s (applicant) application seeking injunctive relief and the 3rd defendant’s application seeking referral of dispute between the parties to arbitration.
Plaintiff’s Application for injunction
2. The plaintiff/ applicant filed the notice of motion dated 30.4.2024 primarily under Order 40 Rules 1, 2, 4 and 8 of the Civil Procedure Rules.
3. The applicant seeks a temporary injunction restraining the respondents or their agents from interfering with its bank guarantee of Kshs. 61,987,387.60 held with the 4th respondent, SBM Bank Limited.
4. The application is supported by affidavits sworn by the applicant’s Group Head of Legal, Paul Mutegi on 30.4.2024 and 1.10.2024. The plaintiff also filed written submissions dated 6.10.2024.
Background
5. The applicant entered into a proposed joint venture agreement (JVA) dated 8.2.2023 followed by a binding Head of Terms dated 18.9.2023 with the 1st and 2nd respondents. It agreed to invest in and fund operations of the interested party, Spearhead Technologies Limited (Spearhead), a new Information Communication and Technology operating company.
6. The applicant agreed to offset the 1st and 2nd respondent’s outstanding liability of Kshs. 71,987,387.60/- with Industrial Resurgence Africa Limited through payment to the 3rd respondent’s bank account held with the 5th respondent, Diamond Trust Bank.
7. In consideration of the investment, the 1st and 2nd respondent agreed to transfer its relevant business assets including hardware and software assets to Spearhead.
8. On 2.3.2023, the applicant deposited Kshs. 10,000,000 into the 2nd respondent’s bank account for purposes of offsetting the liability to Industrial Resurgence. On 22.3.2024, it issued a bank guarantee of Kshs. 61,987,387.60 from Diamond Trust to SBM Bank.
Applicant’s case
9. The applicant faulted the 1st and 2nd respondents for fundamentally breaching the contract by failing to transfer the relevant business assets as agreed and calling up the bank guarantee demanding payment of the Kshs. 61,987,387.60.
10. The applicant contended that the actions of the 1st and 2nd respondents constitute fraudulent conduct and misrepresentation that would cause great prejudice if unchecked.
11. The applicant asserted that it has met the legal threshold for the grant of a temporary injunction in the circumstances of its case.
12. The applicant submitted that it has demonstrated a strong prima facie case. It also submitted that unless the court issues a temporary injunction, preventing encashment of the bank guarantee, it will suffer irreparable harm that cannot be adequately compensated through damages.
13. The applicant contended that the subject relevant business assets include intellectual property rights which cannot be adequately compensated through damages due to their intrinsic nature and character.
14. The applicant asserted that it is in the interest of justice and fairness that the application be allowed and prayers sought granted to prevent further dissipation of the subject matter of the suit.
15. The applicant relied on several authorities on the principles for grant of injunctions including Mrao Ltd v First American Bank of Kenya Ltd & 2 Others [2003] eKLR and Pius Kipchirchir Kogo v Frank Kimeli Tenai [2018] eKLR.
16. On unjust enrichment, it relied on Joel Mwangangi Kithure v Priscah Mukorimburi [2022] eKLR.
Responses
1st and 2nd respondents’ response
17. The 1st and 2nd respondents filed a replying affidavit sworn by Morris Mbetsa Mweru on 15.5.2024 and written submissions dated 3.11.2025.
18. The 1st and 2nd respondent argued that the applicant has not met the legal threshold to grant the injunctive orders since the applicant has not demonstrated a prima facie case and the matter can always be liquidated. He also argued that the application is frivolous, vexatious and an abuse of the court process.
19. The 2nd respondent contended that it is the applicants that have breached the agreement by failing to execute the share purchase agreement despite the draft being sent to them; failing to facilitate execution of the assets purchase agreement and failing to transfer 40% shares to the 1st and 2nd respondent.
20. The 2nd respondent asserted that the applicant had issued the bank guarantee to the 3rd respondent independently and upon being satisfied that the 1st and 2nd respondents had complied, hence cannot retract. He claimed that the applicant has come to court after its failed attempt to have the amount secured paid in installments. He also claimed that the applicant has entered another JVA and they want to use the court to terminate the current contract.
21. The 2nd respondent urged the court to compel the applicant to transfer 40% shareholding in Spearhead to the 1st and 2nd respondents as per the proposed JVA and addendum agreements. He also urged the court to issue interim orders restraining the applicant or Spearhead from entering into any agreement of similar nature with a third party in line with the non-compete clause of the agreement.
22. The 1st and 2nd respondents relied on several authorities concerning the principles for the grant of injunctions including Mrao Ltd v First American Bank of Kenya Ltd & 2 Others [2003] eKLR. They also relied on authorities affirming the principle that he who comes to equity must come with clean hands.
23. The 1st and 2nd respondents further relied on Kenindia Assurance Company Limited v First National Finance Bank Limited Civil Appeal No. 328 of 2002 to submit that a bank guarantee is separate from the underlying transaction and that the bank’s obligation to pay is independent of any disputes between the contracting parties.
3rd respondent’s response
24. The 3rd respondent filed a replying affidavit sworn by Rufus Maina on 20.9.2024 under protest. It also filed written submissions dated 20.9.2024.
25. The 3rd respondent submitted that the plaintiff has not shown that there is a dispute capable of lawfully preventing the 3rd defendant from lawfully calling the guarantee issued.
26. It asserted that the right to call up the guarantee crystallized evidenced by the CR12 showing that the transfer of shares as per the agreement dated 9.8.2023 was effected in favour of the 2nd respondent and subsequently transferred to the applicant.
27. It contended that the dispute before the court does not touch on breach of the terms of the guarantee or its right to call up the guarantee. It relied on Sinohydro Corporation Limited v GC Retail Limited & another [2016] eKLR and Paramount Bank Limited v First National Bank Limited & 2 Others [2023] KECA 1424 (KLR) where the court held that a guarantee is a separate and distinct contract.
28. It submitted that the applicant is not likely to suffer irreparable harm that cannot be compensated by damages. It added that the damages are ascertainable as the claim is for a liquidated sum of Kshs. 61,987,387.90/-.
4th respondent’s response
29. The 4th respondent, SBM Bank filed a replying affidavit sworn by its legal officer, Stephanie Kioko on 4.10.2024.
30. It was deposed that on 22.4.2024, the 4th respondent received a swift claim from the 5th respondent. However, it noted that the claim was not valid as the guarantee conditions had not been fulfilled. The 5th respondent had not confirmed that the transfer of shares had been effected and the original swift guarantee from the beneficiary has not been presented. On 29.4.2024, 30.4.2024 and 3.5.2024, the 4th respondent communicated to the 5th respondent to fulfill the above conditions and provide a valid CR12 to enable it proceed and honour the claim under the guarantee.
31. On 30.4.2024, the 4th respondent received a letter from the plaintiff requesting and requiring it not to pay out the guarantee as the parties had terminated their commercial negotiations and did not wish to proceed with the envisioned transaction.
32. On 6.5.2024, the 4th respondent received the requisite documents from the 5th respondent. However, it could not honour the claim as it had been served with a court order on the same day restraining it from paying or dealing with the applicant’s bank guarantee.
33. The 4th respondent concurred with the position that it is required to honour the guarantee unless there is fraud or otherwise directed by the court.
3rd respondent’s application for stay
34. The 3rd respondent filed the chamber summons dated 12.6.2024, seeking referral of the dispute to arbitration in accordance with clause 20 of the share purchase agreement dated 9.8.2023.
35. The application is supported by the affidavit sworn by Rufus Maina on 12.6.2024.
36. It is opposed by the applicant through the replying affidavit sworn by Paul Mutegi.
37. The parties filed submissions on this application together with their submissions in response to the plaintiff’s application for injunction.
Analysis and Determination
38. The issue that takes precedence is whether the matter ought to be referred to arbitration.
39. Section 6 of the Arbitration Act provides in part: -
“6 (1) A court before which proceedings are brought in a matter which is the subject of an arbitration agreement shall, if a party so applies no later than the time when that party enters appearance or files pleadings or takes any other step in the proceedings, stay the proceedings and refer the parties to arbitration
40. The 3rd respondent submitted that the parties clearly stipulated under clause 20 of the share purchase agreement that arbitration is their preferred mode of dispute resolution and that the court ought to uphold it.
41. The 1st and 2nd respondents supported the 3rd respondent’s application for referral of the dispute to arbitration as per the share purchase agreement.
42. On the other hand, the plaintiff argued that there was no arbitration agreement between it and the other parties as required under section 6. It asserted that there was only an arbitration agreement between the 1st and 2nd respondents and Industrial Resurgence Limited of which it had no privity.
43. The share purchase agreement exhibited by the 3rd respondent, contains an arbitration clause under clause 20. However, it is between the 1st and 2nd respondent and Industrial Resurgence Limited.
44. The plaintiff is not a party to that agreement.
45. Therefore, I find that there is no arbitration agreement between the plaintiff and the 1st, 2nd and 3rd respondents which would form the basis for a referral of the dispute to arbitration under section 6 of the Arbitration Act.
46. The next issue is whether the applicant has made a case for the injunctive relief sought.
47. The applicant seeks to restrain the respondents and their agents from paying, demanding or calling or dealing with its bank guarantee held with the 4th respondent. It contended that the 1st and 2nd respondents have not provided evidence of transfer of the relevant business assets to confirm all the relevant business assets that were listed in the agreement have been transferred.
48. On the other hand, the 2nd respondent asserted that the applicant had issued the bank guarantee to the 3rd respondent independently and upon being satisfied that the 1st and 2nd respondents had complied, hence cannot retract.
49. The 2nd, 3rd and 4th respondents contended that the guarantee is separate and distinct from the contract underlying it. They also submitted that the bank’s obligation to pay is independent of any disputes between the contracting parties.
50. In Kenindia Assurance Company Limited vs. First National Finance Bank Limited [supra], the Court of Appeal observed: -
“A bank, which gives a performance guarantee, must honour that guarantee according to its terms. It is not concerned in the least with the relations between the supplier and the customer, nor with the question whether the supplier has performed his contractual obligation or not; nor with the question whether the supplier is in default or not. The bank must pay according to its guarantee, on demand if so stipulated, without proof or conditions. The only exception is when there is clear fraud of which the bank has notice.......As to the fulfilment of the conditions incorporated in the guarantee the statement of the beneficiary shall be taken at its face value unless the contractor can establish that the beneficiary’s stand is motivated by fraud, misrepresentation, deliberate suppression of material facts or the like of which would give rise to special equities in favour of the contractor. In absence of such elements the bank guarantee has to be honoured by the bank and the beneficiary cannot be restrained from enforcement......”
51. The applicant contended that the actions of the 1st and 2nd respondents constitute fraudulent conduct and misrepresentation that would cause great prejudice if unchecked.
52. Though the applicant contended that the 1st and 2nd respondents’ actions constitute fraudulent conduct and misrepresentation, it did not claim fraud in the plaint. It has not specifically pleaded fraud with full particulars. It has not proved fraud as required in law.
53. The applicant claimed that the issuance of the bank guarantee was conditional upon the 1st and 2nd respondents transferring the relevant business assets.
54. However, according to the 4th respondent all the conditions for payment of the guarantee were met.
55. From a reading of the guarantee, I did not see a condition requiring transfer of business assets from the 1st and 2nd respondents to the applicant.
56. The condition for payment was the presentation of the original swift guarantee.
57. The 4th respondent bank also required the CR12 confirming the transfer of shares in the 1st respondent to the applicant which it received on 6.5.2024.
58. In the end, I am not persuaded that the applicant has shown prima facie evidence of fraud to warrant the injunction to restrain the respondents from calling up or paying the bank guarantee as the case may be.
Disposal
59. In the upshot, the applications dated 30.4.2024 and 12.6.2024 are both dismissed for want of merit with no orders as to costs.
Dated, signed and delivered through Microsoft Teams online application this 3th day of July, 2026
--------------------
F. Gikonyo M
Judge
In the presence of: -
Ms Gakure for Wairoto for Plaintiff
Ms Maina for Ms Adunga for 3rd defendant
Shah for 5th defendant
Mwangi for Kivuva for 4th defendant
CA- Ivan/Aggrey
1. The court is called upon to determine two applications that were heard together by agreement. The plaintiff’s (applicant) application seeking injunctive relief and the 3rd defendant’s application seeking referral of dispute between the parties to arbitration.
Plaintiff’s Application for injunction
2. The plaintiff/ applicant filed the notice of motion dated 30.4.2024 primarily under Order 40 Rules 1, 2, 4 and 8 of the Civil Procedure Rules.
3. The applicant seeks a temporary injunction restraining the respondents or their agents from interfering with its bank guarantee of Kshs. 61,987,387.60 held with the 4th respondent, SBM Bank Limited.
4. The application is supported by affidavits sworn by the applicant’s Group Head of Legal, Paul Mutegi on 30.4.2024 and 1.10.2024. The plaintiff also filed written submissions dated 6.10.2024.
Background
5. The applicant entered into a proposed joint venture agreement (JVA) dated 8.2.2023 followed by a binding Head of Terms dated 18.9.2023 with the 1st and 2nd respondents. It agreed to invest in and fund operations of the interested party, Spearhead Technologies Limited (Spearhead), a new Information Communication and Technology operating company.
6. The applicant agreed to offset the 1st and 2nd respondent’s outstanding liability of Kshs. 71,987,387.60/- with Industrial Resurgence Africa Limited through payment to the 3rd respondent’s bank account held with the 5th respondent, Diamond Trust Bank.
7. In consideration of the investment, the 1st and 2nd respondent agreed to transfer its relevant business assets including hardware and software assets to Spearhead.
8. On 2.3.2023, the applicant deposited Kshs. 10,000,000 into the 2nd respondent’s bank account for purposes of offsetting the liability to Industrial Resurgence. On 22.3.2024, it issued a bank guarantee of Kshs. 61,987,387.60 from Diamond Trust to SBM Bank.
Applicant’s case
9. The applicant faulted the 1st and 2nd respondents for fundamentally breaching the contract by failing to transfer the relevant business assets as agreed and calling up the bank guarantee demanding payment of the Kshs. 61,987,387.60.
10. The applicant contended that the actions of the 1st and 2nd respondents constitute fraudulent conduct and misrepresentation that would cause great prejudice if unchecked.
11. The applicant asserted that it has met the legal threshold for the grant of a temporary injunction in the circumstances of its case.
12. The applicant submitted that it has demonstrated a strong prima facie case. It also submitted that unless the court issues a temporary injunction, preventing encashment of the bank guarantee, it will suffer irreparable harm that cannot be adequately compensated through damages.
13. The applicant contended that the subject relevant business assets include intellectual property rights which cannot be adequately compensated through damages due to their intrinsic nature and character.
14. The applicant asserted that it is in the interest of justice and fairness that the application be allowed and prayers sought granted to prevent further dissipation of the subject matter of the suit.
15. The applicant relied on several authorities on the principles for grant of injunctions including Mrao Ltd v First American Bank of Kenya Ltd & 2 Others [2003] eKLR and Pius Kipchirchir Kogo v Frank Kimeli Tenai [2018] eKLR.
16. On unjust enrichment, it relied on Joel Mwangangi Kithure v Priscah Mukorimburi [2022] eKLR.
Responses
1st and 2nd respondents’ response
17. The 1st and 2nd respondents filed a replying affidavit sworn by Morris Mbetsa Mweru on 15.5.2024 and written submissions dated 3.11.2025.
18. The 1st and 2nd respondent argued that the applicant has not met the legal threshold to grant the injunctive orders since the applicant has not demonstrated a prima facie case and the matter can always be liquidated. He also argued that the application is frivolous, vexatious and an abuse of the court process.
19. The 2nd respondent contended that it is the applicants that have breached the agreement by failing to execute the share purchase agreement despite the draft being sent to them; failing to facilitate execution of the assets purchase agreement and failing to transfer 40% shares to the 1st and 2nd respondent.
20. The 2nd respondent asserted that the applicant had issued the bank guarantee to the 3rd respondent independently and upon being satisfied that the 1st and 2nd respondents had complied, hence cannot retract. He claimed that the applicant has come to court after its failed attempt to have the amount secured paid in installments. He also claimed that the applicant has entered another JVA and they want to use the court to terminate the current contract.
21. The 2nd respondent urged the court to compel the applicant to transfer 40% shareholding in Spearhead to the 1st and 2nd respondents as per the proposed JVA and addendum agreements. He also urged the court to issue interim orders restraining the applicant or Spearhead from entering into any agreement of similar nature with a third party in line with the non-compete clause of the agreement.
22. The 1st and 2nd respondents relied on several authorities concerning the principles for the grant of injunctions including Mrao Ltd v First American Bank of Kenya Ltd & 2 Others [2003] eKLR. They also relied on authorities affirming the principle that he who comes to equity must come with clean hands.
23. The 1st and 2nd respondents further relied on Kenindia Assurance Company Limited v First National Finance Bank Limited Civil Appeal No. 328 of 2002 to submit that a bank guarantee is separate from the underlying transaction and that the bank’s obligation to pay is independent of any disputes between the contracting parties.
3rd respondent’s response
24. The 3rd respondent filed a replying affidavit sworn by Rufus Maina on 20.9.2024 under protest. It also filed written submissions dated 20.9.2024.
25. The 3rd respondent submitted that the plaintiff has not shown that there is a dispute capable of lawfully preventing the 3rd defendant from lawfully calling the guarantee issued.
26. It asserted that the right to call up the guarantee crystallized evidenced by the CR12 showing that the transfer of shares as per the agreement dated 9.8.2023 was effected in favour of the 2nd respondent and subsequently transferred to the applicant.
27. It contended that the dispute before the court does not touch on breach of the terms of the guarantee or its right to call up the guarantee. It relied on Sinohydro Corporation Limited v GC Retail Limited & another [2016] eKLR and Paramount Bank Limited v First National Bank Limited & 2 Others [2023] KECA 1424 (KLR) where the court held that a guarantee is a separate and distinct contract.
28. It submitted that the applicant is not likely to suffer irreparable harm that cannot be compensated by damages. It added that the damages are ascertainable as the claim is for a liquidated sum of Kshs. 61,987,387.90/-.
4th respondent’s response
29. The 4th respondent, SBM Bank filed a replying affidavit sworn by its legal officer, Stephanie Kioko on 4.10.2024.
30. It was deposed that on 22.4.2024, the 4th respondent received a swift claim from the 5th respondent. However, it noted that the claim was not valid as the guarantee conditions had not been fulfilled. The 5th respondent had not confirmed that the transfer of shares had been effected and the original swift guarantee from the beneficiary has not been presented. On 29.4.2024, 30.4.2024 and 3.5.2024, the 4th respondent communicated to the 5th respondent to fulfill the above conditions and provide a valid CR12 to enable it proceed and honour the claim under the guarantee.
31. On 30.4.2024, the 4th respondent received a letter from the plaintiff requesting and requiring it not to pay out the guarantee as the parties had terminated their commercial negotiations and did not wish to proceed with the envisioned transaction.
32. On 6.5.2024, the 4th respondent received the requisite documents from the 5th respondent. However, it could not honour the claim as it had been served with a court order on the same day restraining it from paying or dealing with the applicant’s bank guarantee.
33. The 4th respondent concurred with the position that it is required to honour the guarantee unless there is fraud or otherwise directed by the court.
3rd respondent’s application for stay
34. The 3rd respondent filed the chamber summons dated 12.6.2024, seeking referral of the dispute to arbitration in accordance with clause 20 of the share purchase agreement dated 9.8.2023.
35. The application is supported by the affidavit sworn by Rufus Maina on 12.6.2024.
36. It is opposed by the applicant through the replying affidavit sworn by Paul Mutegi.
37. The parties filed submissions on this application together with their submissions in response to the plaintiff’s application for injunction.
Analysis and Determination
38. The issue that takes precedence is whether the matter ought to be referred to arbitration.
39. Section 6 of the Arbitration Act provides in part: -
“6 (1) A court before which proceedings are brought in a matter which is the subject of an arbitration agreement shall, if a party so applies no later than the time when that party enters appearance or files pleadings or takes any other step in the proceedings, stay the proceedings and refer the parties to arbitration
40. The 3rd respondent submitted that the parties clearly stipulated under clause 20 of the share purchase agreement that arbitration is their preferred mode of dispute resolution and that the court ought to uphold it.
41. The 1st and 2nd respondents supported the 3rd respondent’s application for referral of the dispute to arbitration as per the share purchase agreement.
42. On the other hand, the plaintiff argued that there was no arbitration agreement between it and the other parties as required under section 6. It asserted that there was only an arbitration agreement between the 1st and 2nd respondents and Industrial Resurgence Limited of which it had no privity.
43. The share purchase agreement exhibited by the 3rd respondent, contains an arbitration clause under clause 20. However, it is between the 1st and 2nd respondent and Industrial Resurgence Limited.
44. The plaintiff is not a party to that agreement.
45. Therefore, I find that there is no arbitration agreement between the plaintiff and the 1st, 2nd and 3rd respondents which would form the basis for a referral of the dispute to arbitration under section 6 of the Arbitration Act.
46. The next issue is whether the applicant has made a case for the injunctive relief sought.
47. The applicant seeks to restrain the respondents and their agents from paying, demanding or calling or dealing with its bank guarantee held with the 4th respondent. It contended that the 1st and 2nd respondents have not provided evidence of transfer of the relevant business assets to confirm all the relevant business assets that were listed in the agreement have been transferred.
48. On the other hand, the 2nd respondent asserted that the applicant had issued the bank guarantee to the 3rd respondent independently and upon being satisfied that the 1st and 2nd respondents had complied, hence cannot retract.
49. The 2nd, 3rd and 4th respondents contended that the guarantee is separate and distinct from the contract underlying it. They also submitted that the bank’s obligation to pay is independent of any disputes between the contracting parties.
50. In Kenindia Assurance Company Limited vs. First National Finance Bank Limited [supra], the Court of Appeal observed: -
“A bank, which gives a performance guarantee, must honour that guarantee according to its terms. It is not concerned in the least with the relations between the supplier and the customer, nor with the question whether the supplier has performed his contractual obligation or not; nor with the question whether the supplier is in default or not. The bank must pay according to its guarantee, on demand if so stipulated, without proof or conditions. The only exception is when there is clear fraud of which the bank has notice.......As to the fulfilment of the conditions incorporated in the guarantee the statement of the beneficiary shall be taken at its face value unless the contractor can establish that the beneficiary’s stand is motivated by fraud, misrepresentation, deliberate suppression of material facts or the like of which would give rise to special equities in favour of the contractor. In absence of such elements the bank guarantee has to be honoured by the bank and the beneficiary cannot be restrained from enforcement......”
51. The applicant contended that the actions of the 1st and 2nd respondents constitute fraudulent conduct and misrepresentation that would cause great prejudice if unchecked.
52. Though the applicant contended that the 1st and 2nd respondents’ actions constitute fraudulent conduct and misrepresentation, it did not claim fraud in the plaint. It has not specifically pleaded fraud with full particulars. It has not proved fraud as required in law.
53. The applicant claimed that the issuance of the bank guarantee was conditional upon the 1st and 2nd respondents transferring the relevant business assets.
54. However, according to the 4th respondent all the conditions for payment of the guarantee were met.
55. From a reading of the guarantee, I did not see a condition requiring transfer of business assets from the 1st and 2nd respondents to the applicant.
56. The condition for payment was the presentation of the original swift guarantee.
57. The 4th respondent bank also required the CR12 confirming the transfer of shares in the 1st respondent to the applicant which it received on 6.5.2024.
58. In the end, I am not persuaded that the applicant has shown prima facie evidence of fraud to warrant the injunction to restrain the respondents from calling up or paying the bank guarantee as the case may be.
Disposal
59. In the upshot, the applications dated 30.4.2024 and 12.6.2024 are both dismissed for want of merit with no orders as to costs.
Dated, signed and delivered through Microsoft Teams online application this 3th day of July, 2026
--------------------
F. Gikonyo M
Judge
In the presence of: -
Ms Gakure for Wairoto for Plaintiff
Ms Maina for Ms Adunga for 3rd defendant
Shah for 5th defendant
Mwangi for Kivuva for 4th defendant
CA- Ivan/Aggrey