REPUBLIC OF KENYA
IN THE HIGH COURT OF KENYA AT NAIROBI
COMMERCIAL & TAX DIVISION
IN THE MATTER OF THE INSOLVENCY ACT
INSOLVENCY PETITION NO. E011 OF 2022
KENJORO ENTERPRISES LIMITED
VERSUS
UAP INSURANCE
RULING
1. The applicant, Kenjoro Enterprises Ltd, filed a Notice of Motion dated 29th June, 2022 brought under the provisions of Section 3A of the Civil Procedure Act, Cap 21 Laws of Kenya, Sections 3(1)(c), 384(1) and (2), 423, 424, 427(1)(a), (b) and (d), Section 428(1)(a) of the Insolvency Act, 2015 (the Act) and Regulation 10 of the Insolvency Regulations, 2019 and all other enabling provisions of the law.
2. The applicant seeks the following orders-
(i) Spent;
(ii) Spent;
(iii) That the Petition dated 12th April, 2022 be dismissed with costs;
(iv) That in the alternative to prayer (iii) above, the Court be pleased to adjourn the hearing of liquidation Petition for 12 months or for such period as the Court may deem fit;
(v) That this Hon. Court be pleased to issue a temporary injunction restraining the Petitioner jointly and severally by itself and/or through his (sic) agents, servants and/or employees or otherwise whatsoever from advertising the petition in the Kenya Gazette and/or in any newspaper and/or howsoever pending the hearing and determination of the application herein; and
(vi) That the costs of this application be provided for.
3. The application is supported by an affidavit sworn by John Mburu Kiarie, one of the Directors of Kenjoro Enterprises Limited on 29th June, 2022. The petitioner/respondent filed grounds of opposition on 17th May, 2023.
4. In the affidavit filed by the applicant it admitted that it owes the petitioner Kshs.2,948,938.23 but not the sum of Kshs.5,948,933.73 being claimed by the petitioner. The applicant deposed that it paid Kshs.500,000/- on 10th May, 2022 and another sum of Kshs.500,000/- on 29th June, 2022 and other amounts during the pendency of the petition, thereby reducing the amount owing to Kshs.2,948,938.23.
5. In the applicant’s affidavit, it was deposed that it was in the process of disposing of property L.R. No. Kajiado/Kaputie/North/23325 and that it already had some suitable proposals.
6. In written submissions that were highlighted by the Advocates for the parties, Mr. Karuga for the applicant stated that there was no gazettment of the petition and he was praying that none be done because the respondent has been paying the debt and the amount outstanding is Kshs.2.9 Million. He indicated that the applicant is committed to clearing the debt. He relied on the decision in Insolvency Petition No. 10 of 2022 Synergy Industrial Credit Limited v Multiple Hauliers (EA) Ltd, where the High Court held that it has repository powers to supervise insolvency proceedings and that insolvency law is not meant to kill but to preserve companies that are capable of paying debts.
7. Mr. Karuga submitted that the interest of the creditors, the contributories of the company and the company itself need to be protected. He stated that the applicant herein made a proposal for payment and prayed for the insolvency proceedings to be adjourned for 12 months as once a gazettement is published, it will be a notice to all and sundry that the company is in financial problems and it will be shunned by many including financiers, suppliers and others.
8. On his part, Mr. Mueke stated that the applicant’s application was filed over a year ago and that the company has had more than one year to pay the debt and in its affidavit, the company alluded to having been in the process of selling a property, but a year later, the sale process seems not to have taken place. He also stated that the company started paying the debt after the petition was filed.
9. Counsel referred to the case of Kenya Artisans Limited v Chemical & Allied Workers Union [2021] eKLR, where it was held that once it has been established that a company has been unable to pay its debt, a creditor is entitled as a matter of right to a winding up order. He stated that although the applicant is praying for dismissal of the petition, the petitioner has not yet been heard on his petition. He relied on Flowers City Limited v PolyTanks & Containers Kenya Limited [2021] KEHC (KLR), a case in which the Court determined that the test to be applied is whether there is a true dispute on the debt, but in the instant case, the company does not dispute the debt.
10. In regard to reputational damage that may be occasioned on the applicant, Mr. Mueke stated that reputational damage is a natural and legal consequence of a legal remedy, and it can be avoided by payment of the debt.
11. He also stated that the instant application is not anchored on any provisions of the law as the ones cited in the introductory part of the application are not relevant.
ANALYSIS & DETERMINATION.
12. I have read the application filed by the applicant and its supporting affidavit. I have also read the grounds of opposition filed by the petitioner and the submissions filed in support of rival submissions. The issue for determination is if the applicant should be given time to settle its debt.
13. The petitioner did not file a replying affidavit to rebut the assertion made by the applicant that it is indebted to the petitioner in the sum of Kshs.2,948,938.23 and not Kshs.948,933.73 as claimed by the said petitioner. Due to the silence on the part of the respondent in that regard, the inference to be drawn is that the amount owing is Kshs.2,948,938.23. The said amount is therefore not disputed.
14. My understanding of the applicant’s application is that it has made efforts to pay off the debt but needs more time clear the outstanding amount. The petitioner on the other hand states that the applicant only started paying the respondent after the petition herein was filed.
15. The application before me does not seek to set aside the statutory demand because the amount on the said demand is disputed but seeks several orders, including an order for a temporary injunction restraining the petitioner jointly and severally by itself and/or through its agents, servants and/or employees or otherwise whatsoever from advertising the petition in the Kenya Gazette and/or in any newspaper and/or howsoever pending the hearing and determination of the application herein. Having considered the said prayer, and the case of Giella v Cassman Brown, (1973) EA 358, it is my finding that the applicant has not established a prima facie case with a probability of success as it has admitted owing the petitioner Kshs.2,948,938.23. Having so admitted, and not having applied for the setting aside the statutory demand, I am not convinced that the applicant will suffer irreparable injury that cannot be compensated by an award of damages. An advertisement of an insolvency petition is procedural law that must be complied with before the hearing of an insolvency petition. Given the said circumstances, the balance of convenience tilts in favour of the petitioner and not the applicant herein. It must also be noted that Courts ordinarily direct insolvency petitions to be advertised only after ascertaining that no applications for the setting aside statutory demands have been made.
16. I have read the decision in Insolvency Petition No. E010 of 2020 Synergy Industrial Credit Limited v Multiple Hauliers (EA) Ltd (supra) relied on by Counsel for the applicant and I do agree that interlocutory applications can be made in insolvency proceedings.
17. I also agree with Counsel for the petitioner than an apprehension of reputational damage arising from advertisement of an insolvency petition should not hold back the petitioner from doing that which it is required to do in law.
18. In this matter, as I have already stated, the amount owing as of now is less than that reflected on the statutory demand as the applicant has during the pendency of these insolvency proceedings made some payments to offset the debt. That is an act of good faith. I therefore exercise my discretion and I hereby give the applicant 60 days with effect from 11th December, 2023 to pay the sum of Kshs.2,948,938.23 in full to the petitioner. If the applicant fails to comply with the said order, the petitioner will proceed to advertise the insolvency petition in a Newspaper with a wide circulation, within 14 days of the elapse of the 60 days’ grace period granted to the applicant. I make no order as to costs.
It is so ordered.
DATED, SIGNED and DELIVERED at NAIROBI on this 8th day of December, 2023. Ruling delivered through Microsoft Teams Online Platform.
NJOKI MWANGI
JUDGE
In the presence of:
Ms Kiarie h/b for Mr. Karuga for the respondent/applicant
Ms Muriithi h/b for the petitioner/respondent
Ms B. Wokabi – Court Assistant.
IN THE HIGH COURT OF KENYA AT NAIROBI
COMMERCIAL & TAX DIVISION
IN THE MATTER OF THE INSOLVENCY ACT
INSOLVENCY PETITION NO. E011 OF 2022
KENJORO ENTERPRISES LIMITED
VERSUS
UAP INSURANCE
RULING
1. The applicant, Kenjoro Enterprises Ltd, filed a Notice of Motion dated 29th June, 2022 brought under the provisions of Section 3A of the Civil Procedure Act, Cap 21 Laws of Kenya, Sections 3(1)(c), 384(1) and (2), 423, 424, 427(1)(a), (b) and (d), Section 428(1)(a) of the Insolvency Act, 2015 (the Act) and Regulation 10 of the Insolvency Regulations, 2019 and all other enabling provisions of the law.
2. The applicant seeks the following orders-
(i) Spent;
(ii) Spent;
(iii) That the Petition dated 12th April, 2022 be dismissed with costs;
(iv) That in the alternative to prayer (iii) above, the Court be pleased to adjourn the hearing of liquidation Petition for 12 months or for such period as the Court may deem fit;
(v) That this Hon. Court be pleased to issue a temporary injunction restraining the Petitioner jointly and severally by itself and/or through his (sic) agents, servants and/or employees or otherwise whatsoever from advertising the petition in the Kenya Gazette and/or in any newspaper and/or howsoever pending the hearing and determination of the application herein; and
(vi) That the costs of this application be provided for.
3. The application is supported by an affidavit sworn by John Mburu Kiarie, one of the Directors of Kenjoro Enterprises Limited on 29th June, 2022. The petitioner/respondent filed grounds of opposition on 17th May, 2023.
4. In the affidavit filed by the applicant it admitted that it owes the petitioner Kshs.2,948,938.23 but not the sum of Kshs.5,948,933.73 being claimed by the petitioner. The applicant deposed that it paid Kshs.500,000/- on 10th May, 2022 and another sum of Kshs.500,000/- on 29th June, 2022 and other amounts during the pendency of the petition, thereby reducing the amount owing to Kshs.2,948,938.23.
5. In the applicant’s affidavit, it was deposed that it was in the process of disposing of property L.R. No. Kajiado/Kaputie/North/23325 and that it already had some suitable proposals.
6. In written submissions that were highlighted by the Advocates for the parties, Mr. Karuga for the applicant stated that there was no gazettment of the petition and he was praying that none be done because the respondent has been paying the debt and the amount outstanding is Kshs.2.9 Million. He indicated that the applicant is committed to clearing the debt. He relied on the decision in Insolvency Petition No. 10 of 2022 Synergy Industrial Credit Limited v Multiple Hauliers (EA) Ltd, where the High Court held that it has repository powers to supervise insolvency proceedings and that insolvency law is not meant to kill but to preserve companies that are capable of paying debts.
7. Mr. Karuga submitted that the interest of the creditors, the contributories of the company and the company itself need to be protected. He stated that the applicant herein made a proposal for payment and prayed for the insolvency proceedings to be adjourned for 12 months as once a gazettement is published, it will be a notice to all and sundry that the company is in financial problems and it will be shunned by many including financiers, suppliers and others.
8. On his part, Mr. Mueke stated that the applicant’s application was filed over a year ago and that the company has had more than one year to pay the debt and in its affidavit, the company alluded to having been in the process of selling a property, but a year later, the sale process seems not to have taken place. He also stated that the company started paying the debt after the petition was filed.
9. Counsel referred to the case of Kenya Artisans Limited v Chemical & Allied Workers Union [2021] eKLR, where it was held that once it has been established that a company has been unable to pay its debt, a creditor is entitled as a matter of right to a winding up order. He stated that although the applicant is praying for dismissal of the petition, the petitioner has not yet been heard on his petition. He relied on Flowers City Limited v PolyTanks & Containers Kenya Limited [2021] KEHC (KLR), a case in which the Court determined that the test to be applied is whether there is a true dispute on the debt, but in the instant case, the company does not dispute the debt.
10. In regard to reputational damage that may be occasioned on the applicant, Mr. Mueke stated that reputational damage is a natural and legal consequence of a legal remedy, and it can be avoided by payment of the debt.
11. He also stated that the instant application is not anchored on any provisions of the law as the ones cited in the introductory part of the application are not relevant.
ANALYSIS & DETERMINATION.
12. I have read the application filed by the applicant and its supporting affidavit. I have also read the grounds of opposition filed by the petitioner and the submissions filed in support of rival submissions. The issue for determination is if the applicant should be given time to settle its debt.
13. The petitioner did not file a replying affidavit to rebut the assertion made by the applicant that it is indebted to the petitioner in the sum of Kshs.2,948,938.23 and not Kshs.948,933.73 as claimed by the said petitioner. Due to the silence on the part of the respondent in that regard, the inference to be drawn is that the amount owing is Kshs.2,948,938.23. The said amount is therefore not disputed.
14. My understanding of the applicant’s application is that it has made efforts to pay off the debt but needs more time clear the outstanding amount. The petitioner on the other hand states that the applicant only started paying the respondent after the petition herein was filed.
15. The application before me does not seek to set aside the statutory demand because the amount on the said demand is disputed but seeks several orders, including an order for a temporary injunction restraining the petitioner jointly and severally by itself and/or through its agents, servants and/or employees or otherwise whatsoever from advertising the petition in the Kenya Gazette and/or in any newspaper and/or howsoever pending the hearing and determination of the application herein. Having considered the said prayer, and the case of Giella v Cassman Brown, (1973) EA 358, it is my finding that the applicant has not established a prima facie case with a probability of success as it has admitted owing the petitioner Kshs.2,948,938.23. Having so admitted, and not having applied for the setting aside the statutory demand, I am not convinced that the applicant will suffer irreparable injury that cannot be compensated by an award of damages. An advertisement of an insolvency petition is procedural law that must be complied with before the hearing of an insolvency petition. Given the said circumstances, the balance of convenience tilts in favour of the petitioner and not the applicant herein. It must also be noted that Courts ordinarily direct insolvency petitions to be advertised only after ascertaining that no applications for the setting aside statutory demands have been made.
16. I have read the decision in Insolvency Petition No. E010 of 2020 Synergy Industrial Credit Limited v Multiple Hauliers (EA) Ltd (supra) relied on by Counsel for the applicant and I do agree that interlocutory applications can be made in insolvency proceedings.
17. I also agree with Counsel for the petitioner than an apprehension of reputational damage arising from advertisement of an insolvency petition should not hold back the petitioner from doing that which it is required to do in law.
18. In this matter, as I have already stated, the amount owing as of now is less than that reflected on the statutory demand as the applicant has during the pendency of these insolvency proceedings made some payments to offset the debt. That is an act of good faith. I therefore exercise my discretion and I hereby give the applicant 60 days with effect from 11th December, 2023 to pay the sum of Kshs.2,948,938.23 in full to the petitioner. If the applicant fails to comply with the said order, the petitioner will proceed to advertise the insolvency petition in a Newspaper with a wide circulation, within 14 days of the elapse of the 60 days’ grace period granted to the applicant. I make no order as to costs.
It is so ordered.
DATED, SIGNED and DELIVERED at NAIROBI on this 8th day of December, 2023. Ruling delivered through Microsoft Teams Online Platform.
NJOKI MWANGI
JUDGE
In the presence of:
Ms Kiarie h/b for Mr. Karuga for the respondent/applicant
Ms Muriithi h/b for the petitioner/respondent
Ms B. Wokabi – Court Assistant.