' Introduction and Background
1. This matter arises from an amended Cross-Petition dated 13th February 2025, filed by the Cross-Petitioner (Vishnu), in response to proceedings instituted and later withdrawn by the 1st respondent (Yuvuraj), who was also the petitioner in the primary suit.
2. The dispute centers on the affairs of G.V. Water Drilling Limited (the Company), a private limited liability company incorporated on 31st May 2022. According to Vishnu, Yuvuraj approached him with a proposal to jointly establish a water drilling enterprise. Pursuant to this engagement, the parties entered into a Partnership Agreement, which contemplated a joint capital contribution of KES 13,300,000.00, with Vishnu contributing KES 5,800,000.00 and Yuvuraj KES 7,500,000.00.
3. The Agreement provided for the acquisition of a mobile drilling rig that would be mounted on motor vehicle registration number KCH 491N (the rig). It was going to be sourced from Wotech Kenya Limited under a Sale Agreement dated 7th February 2022. Given that the Company was yet to be incorporated, the rig was going to be registered in the name of Enkare Drilling Limited, a separate entity wherein Vishnu is a director.
4. Vishnu contends that Yuvuraj failed to honour his financial obligations under the Agreement, compelling him to solely finance the acquisition of the rig through personal funds and a loan facility secured by Enkare from ASL Credit Limited. It is his case that he further incurred substantial costs in repairing the rig post-acquisition.
5. Vishnu contends that the rig was released to Yuvuraj on 2nd March 2022 during his absence abroad, and has since remained under Yuvuraj’s custody. Upon his return, he discovered that Yuvuraj had been operating the rig and diverting proceeds from its use without remitting the same to the Company’s designated bank accounts. It is further alleged that Yuvuraj engaged in fraudulent dealings with third parties under the guise of Enkare, thereby depriving the Company of its rightful earnings.
6. Vishnu states that in response to his inquiries into the Company’s affairs, Yuvuraj initiated proceedings in Milimani HCCOMM Petition No. 15 of 2023, seeking to remove him from the Company. Yuvuraj is also alleged to have removed the vehicle tracking device from the rig, thereby obscuring its location.
7. Despite a Consent Order issued on 20th December 2023 regulating the operation of the Company’s assets, Vishnu contends that Yuvuraj continued to operate the rig and collect earnings to his exclusion. During mediation proceedings, the Company’s shareholding structure was allegedly altered to reflect Yuvuraj as the sole shareholder and director, without Vishnu’s consent or consideration.
8. Vishnu contends that the affairs of the Company are being conducted in a manner oppressive to him and contrary to the provisions of the Companies Act and common law duties incumbent upon directors.
9. He seeks several prayers, principal of which is a declaration affirming his lawful ownership of 500 ordinary shares in the Company, and a declaration that the purported transfer of those shares is null, void, and of no legal effect. He invites the Court to declare that the conduct of Yuvuraj, in his capacity as director, is in breach of statutory and fiduciary duties under the Companies Act and that such conduct is oppressive, unfair, and prejudicial to him.
10. In addition, Vishnu seeks permanent injunctive relief restraining Yuvuraj from operating the rig or otherwise interfering with the affairs of the Company and from any dealings in the Company’s shares. He prays for orders directing the Registrar of Companies to rectify the register by cancelling the impugned transfer of shares and restoring his name as the lawful holder of 500 ordinary shares in the Company.
11. He seeks to have Yuvuraj ordered to account for all income derived from the use of the Company vehicles including the rig, and to ensure that the vehicles are retained or re-registered in the name of the Company. He further seeks the appointment of an inspector to conduct a forensic audit of the Company’s affairs, the removal of Yuvuraj as director, and an order for indemnification of the Company against any loss, liability, or breach occasioned by Yuvuraj’s conduct since incorporation.
12. The Petition is opposed by way of a replying affidavit sworn by Yuvuraj, on 10th October 2024. He denies having willingly and freely entered into the consent of 20th December 2023 and contends that the said consent was entered into without his understanding and instructions.
13. Yuvuraj contends that Vishnu ceased to hold office as a director of the Company following a resolution passed on 28th August 2023. He further asserts that the Company’s motor vehicles are currently impounded due to insufficient funds for their repair, a situation he attributes to Vishnu’s conduct. Specifically, Yuvuraj accuses Vishnu of failing to fulfill his financial obligations, including non-payment of his share capital, and of unilaterally securing financial facilities without Yuvuraj’s knowledge or consent. According to Yuvuraj, these actions have resulted in significant indebtedness and have severely hampered the Company’s ability to operate effectively.
14. Yuvuraj does not deny the transfer of the shares but states that the same was done owing to the resolution to have Vishnu removed as a director of the Company and also because he had not paid up his share capital.
Analysis and Determination
15. Pursuant to directions issued by this Court, the cross-petition was to be determined through written submissions to expedite its resolution. Upon careful consideration of the pleadings, affidavits, and submissions on record, the following three issues arise for determination:
i. Whether Vishnu is still a bona fide director of the Company
ii. Whether he is entitled to the prayers sought and
iii. Who should pay the costs of this suit.
i. Whether Vishnu is still a bona fide director of the Company?
16. It is common ground that Vishnu was a founding director and shareholder of G.V. Water Drilling Limited. However, a CR12 dated 25th July 2024 now reflects Yuvuraj as the sole director and shareholder, holding all 1,000 shares. Form CR9 indicates that Vishnu ceased to be a director on 14th June 2024. On his part, Vishnu maintains that he never executed any instrument of transfer in favour of Yuvuraj or any other party.
17. The pivotal question is whether the process leading to his removal and the transfer of his shares was lawful, procedurally sound, and supported by credible evidence.
18. In support of the alleged removal, Yuvuraj relies on a Company resolution dated 30th October 2023, which purports to record the presence of both directors, Vishnu and Yuvuraj, alongside the Company Secretary, CPA/S Obaigwa Ezekiel. This resolution is central to the dispute. However, it bears only Yuvuraj’s signature. If Vishnu had indeed attended and participated in a meeting of such consequence, culminating in his removal and the transfer of his shares, his absence from the signatory line is not only conspicuous but deeply suspicious especially since the omission is unexplained. This casts doubt on the authenticity of the resolution.
19. Furthermore, Yuvaraj, who relies heavily on the assertion that Vishnu was present, has not produced any corroborative evidence from the Company Secretary, Mr. Obaigwa Ezekiel, whose independent testimony could have substantiated the claim. The failure to call upon Mr. Obaigwa, or to present any affidavit or testimony from him, significantly undermines the credibility of Yuvuraj’s position.
20. In the absence of such proof, the resolution stands as a self-serving document, signed solely by the party seeking to benefit from its contents. This omission strikes at the heart of the evidentiary burden required to validate such a consequential corporate action.
21. This Court is therefore called upon to assess whether Yuvuraj’s uncorroborated assertions meet the threshold of proof on a balance of probabilities. It is trite that a company, being a legal construct, acts only through its agents, its directors and officers. The legitimacy of its decisions is thus wholly dependent on the integrity and transparency of those who act on its behalf.
22. Where such conduct is shrouded in ambiguity and unsupported by verifiable evidence, the Court must exercise caution before endorsing actions that purport to alter the Company’s governance structure.
23. In conclusion, the absence of Vishnu’s signature, the lack of testimony from the Company Secretary, and the failure to file any independent evidence confirming Vishnu’s attendance collectively render Yuvaraj’s claim tenuous. The burden of proof lies with him, and on the current record, that burden has not been discharged. I therefore find that Vishnu remains a bona fide director and shareholder of the Company.
24. I now move on to the other substantive prayer for the appointment of an inspector to investigate the affairs of the Company. Under Section 786(1)(a)(ii), a member holding not less than one-tenth of the nominal value of the Company’s share capital has locus to apply for such an order. Vishnu satisfies this threshold.
25. The legal standard under Section 786 requires an applicant to demonstrate that there is “sufficient cause” to warrant an investigation. This includes, but is not limited to mismanagement of the Company’s affairs, breach of fiduciary duties by directors, fraud or misfeasance, concealment of material information from shareholders and conduct that is oppressive or prejudicial to members or the public interest.
26. In TRT Investments Limited V Mwalo & 3 Others, [2025] KEHC 1822 (KLR), Gikonyo, J affirmed that the jurisdiction under Section 786 is designed for purposes of:
a) preventing and or unearthing formation of companies for unlawful of illegal purposes;
b) unearthing or preventing fraud or misfeasance-and identifying the persons involved-to creditors and other persons, and take legal or administrative action;
c) preventing oppressive conduct to members;
d) obtaining information concealed by the company; and
e) in public interest.
27. Similarly, in Mokoosio & Another V Vadera & 3 Others, [2021] KEHC 56 (KLR), Odunga, J (as he then was) emphasized with reference to this jurisdiction that while internal company disputes should ordinarily be resolved through internal mechanisms, the Court retains jurisdiction to intervene where the Company acts contrary to its own constitution.
28. This principle was echoed in Tanui & 4 Others V Birech & 11 Others, [1991] KECA 6 (KLR), where the Court noted that while some disputes may be resolved through general meetings, judicial intervention is warranted where internal remedies are unavailable or ineffective. That in my view is the essence of a Section 786 remedy.
29. The evidence before me reveals serious concerns that go to the heart of the Company’s wellbeing. These include disputes over capital contributions and shareholding, unilateral operation of the Company’s assets, particularly the rig and motor vehicles, allegations of income diversion and concealment of financial records, unexplained loans and liabilities incurred without consensus and a general lack of transparency in the Company’s financial reporting.
30. Importantly, no objection has been raised by the Company or Yuvuraj against the prayer for appointment of an inspector. I am satisfied that the Company is not operating in a manner consistent with sound corporate governance. It is not business as usual. Accordingly, I find it just and equitable to allow the prayer for the appointment of an inspector to conduct a forensic audit into the affairs of the Company. The remaining prayers save for those that relate to the removal of Vishnu as director and shareholder, shall be held in abeyance pending the outcome of the investigation.
Disposition and Final Orders
31. Accordingly, the following final orders do hereby issue:
i. A declaration is hereby issued that the Cross-Petitioner, Vishnu, is the lawful owner of 500 ordinary shares in G.V. Water Drilling Limited, as evidenced by the CR-12 Form Reference No. PVTQ7U78E36 issued by the Registrar of Companies on 31st May 2022.
ii. A declaration is hereby issued that the purported transfer of the Cross-Petitioner’s 500 ordinary shares in G.V. Water Drilling Limited is null, void, and of no legal effect.
iii. An order is hereby issued directing the Registrar of Companies to rectify the register of G.V. Water Drilling Limited by cancelling the impugned transfer of the Cross-Petitioner’s shares in favour of the Petitioner.
iv. An order is further issued directing the Registrar of Companies to restore the name of the Cross-Petitioner, Vishnu, as the lawfully registered owner of 500 ordinary shares in G.V. Water Drilling Limited.
v. Both directors of the 2nd respondent shall undertake a forensic audit of the 2nd respondent’s books of accounts for the years 2022 to 2025 by instructing a reputable and independent audit firm to be agreed by the parties within 14 days and in default the audit firm shall be appointed by the court.
vi. Costs follow the event but bearing in mind the relationship that exists between the parties, I find this to be an appropriate case where each party shall bear their own costs.
'
1. This matter arises from an amended Cross-Petition dated 13th February 2025, filed by the Cross-Petitioner (Vishnu), in response to proceedings instituted and later withdrawn by the 1st respondent (Yuvuraj), who was also the petitioner in the primary suit.
2. The dispute centers on the affairs of G.V. Water Drilling Limited (the Company), a private limited liability company incorporated on 31st May 2022. According to Vishnu, Yuvuraj approached him with a proposal to jointly establish a water drilling enterprise. Pursuant to this engagement, the parties entered into a Partnership Agreement, which contemplated a joint capital contribution of KES 13,300,000.00, with Vishnu contributing KES 5,800,000.00 and Yuvuraj KES 7,500,000.00.
3. The Agreement provided for the acquisition of a mobile drilling rig that would be mounted on motor vehicle registration number KCH 491N (the rig). It was going to be sourced from Wotech Kenya Limited under a Sale Agreement dated 7th February 2022. Given that the Company was yet to be incorporated, the rig was going to be registered in the name of Enkare Drilling Limited, a separate entity wherein Vishnu is a director.
4. Vishnu contends that Yuvuraj failed to honour his financial obligations under the Agreement, compelling him to solely finance the acquisition of the rig through personal funds and a loan facility secured by Enkare from ASL Credit Limited. It is his case that he further incurred substantial costs in repairing the rig post-acquisition.
5. Vishnu contends that the rig was released to Yuvuraj on 2nd March 2022 during his absence abroad, and has since remained under Yuvuraj’s custody. Upon his return, he discovered that Yuvuraj had been operating the rig and diverting proceeds from its use without remitting the same to the Company’s designated bank accounts. It is further alleged that Yuvuraj engaged in fraudulent dealings with third parties under the guise of Enkare, thereby depriving the Company of its rightful earnings.
6. Vishnu states that in response to his inquiries into the Company’s affairs, Yuvuraj initiated proceedings in Milimani HCCOMM Petition No. 15 of 2023, seeking to remove him from the Company. Yuvuraj is also alleged to have removed the vehicle tracking device from the rig, thereby obscuring its location.
7. Despite a Consent Order issued on 20th December 2023 regulating the operation of the Company’s assets, Vishnu contends that Yuvuraj continued to operate the rig and collect earnings to his exclusion. During mediation proceedings, the Company’s shareholding structure was allegedly altered to reflect Yuvuraj as the sole shareholder and director, without Vishnu’s consent or consideration.
8. Vishnu contends that the affairs of the Company are being conducted in a manner oppressive to him and contrary to the provisions of the Companies Act and common law duties incumbent upon directors.
9. He seeks several prayers, principal of which is a declaration affirming his lawful ownership of 500 ordinary shares in the Company, and a declaration that the purported transfer of those shares is null, void, and of no legal effect. He invites the Court to declare that the conduct of Yuvuraj, in his capacity as director, is in breach of statutory and fiduciary duties under the Companies Act and that such conduct is oppressive, unfair, and prejudicial to him.
10. In addition, Vishnu seeks permanent injunctive relief restraining Yuvuraj from operating the rig or otherwise interfering with the affairs of the Company and from any dealings in the Company’s shares. He prays for orders directing the Registrar of Companies to rectify the register by cancelling the impugned transfer of shares and restoring his name as the lawful holder of 500 ordinary shares in the Company.
11. He seeks to have Yuvuraj ordered to account for all income derived from the use of the Company vehicles including the rig, and to ensure that the vehicles are retained or re-registered in the name of the Company. He further seeks the appointment of an inspector to conduct a forensic audit of the Company’s affairs, the removal of Yuvuraj as director, and an order for indemnification of the Company against any loss, liability, or breach occasioned by Yuvuraj’s conduct since incorporation.
12. The Petition is opposed by way of a replying affidavit sworn by Yuvuraj, on 10th October 2024. He denies having willingly and freely entered into the consent of 20th December 2023 and contends that the said consent was entered into without his understanding and instructions.
13. Yuvuraj contends that Vishnu ceased to hold office as a director of the Company following a resolution passed on 28th August 2023. He further asserts that the Company’s motor vehicles are currently impounded due to insufficient funds for their repair, a situation he attributes to Vishnu’s conduct. Specifically, Yuvuraj accuses Vishnu of failing to fulfill his financial obligations, including non-payment of his share capital, and of unilaterally securing financial facilities without Yuvuraj’s knowledge or consent. According to Yuvuraj, these actions have resulted in significant indebtedness and have severely hampered the Company’s ability to operate effectively.
14. Yuvuraj does not deny the transfer of the shares but states that the same was done owing to the resolution to have Vishnu removed as a director of the Company and also because he had not paid up his share capital.
Analysis and Determination
15. Pursuant to directions issued by this Court, the cross-petition was to be determined through written submissions to expedite its resolution. Upon careful consideration of the pleadings, affidavits, and submissions on record, the following three issues arise for determination:
i. Whether Vishnu is still a bona fide director of the Company
ii. Whether he is entitled to the prayers sought and
iii. Who should pay the costs of this suit.
i. Whether Vishnu is still a bona fide director of the Company?
16. It is common ground that Vishnu was a founding director and shareholder of G.V. Water Drilling Limited. However, a CR12 dated 25th July 2024 now reflects Yuvuraj as the sole director and shareholder, holding all 1,000 shares. Form CR9 indicates that Vishnu ceased to be a director on 14th June 2024. On his part, Vishnu maintains that he never executed any instrument of transfer in favour of Yuvuraj or any other party.
17. The pivotal question is whether the process leading to his removal and the transfer of his shares was lawful, procedurally sound, and supported by credible evidence.
18. In support of the alleged removal, Yuvuraj relies on a Company resolution dated 30th October 2023, which purports to record the presence of both directors, Vishnu and Yuvuraj, alongside the Company Secretary, CPA/S Obaigwa Ezekiel. This resolution is central to the dispute. However, it bears only Yuvuraj’s signature. If Vishnu had indeed attended and participated in a meeting of such consequence, culminating in his removal and the transfer of his shares, his absence from the signatory line is not only conspicuous but deeply suspicious especially since the omission is unexplained. This casts doubt on the authenticity of the resolution.
19. Furthermore, Yuvaraj, who relies heavily on the assertion that Vishnu was present, has not produced any corroborative evidence from the Company Secretary, Mr. Obaigwa Ezekiel, whose independent testimony could have substantiated the claim. The failure to call upon Mr. Obaigwa, or to present any affidavit or testimony from him, significantly undermines the credibility of Yuvuraj’s position.
20. In the absence of such proof, the resolution stands as a self-serving document, signed solely by the party seeking to benefit from its contents. This omission strikes at the heart of the evidentiary burden required to validate such a consequential corporate action.
21. This Court is therefore called upon to assess whether Yuvuraj’s uncorroborated assertions meet the threshold of proof on a balance of probabilities. It is trite that a company, being a legal construct, acts only through its agents, its directors and officers. The legitimacy of its decisions is thus wholly dependent on the integrity and transparency of those who act on its behalf.
22. Where such conduct is shrouded in ambiguity and unsupported by verifiable evidence, the Court must exercise caution before endorsing actions that purport to alter the Company’s governance structure.
23. In conclusion, the absence of Vishnu’s signature, the lack of testimony from the Company Secretary, and the failure to file any independent evidence confirming Vishnu’s attendance collectively render Yuvaraj’s claim tenuous. The burden of proof lies with him, and on the current record, that burden has not been discharged. I therefore find that Vishnu remains a bona fide director and shareholder of the Company.
24. I now move on to the other substantive prayer for the appointment of an inspector to investigate the affairs of the Company. Under Section 786(1)(a)(ii), a member holding not less than one-tenth of the nominal value of the Company’s share capital has locus to apply for such an order. Vishnu satisfies this threshold.
25. The legal standard under Section 786 requires an applicant to demonstrate that there is “sufficient cause” to warrant an investigation. This includes, but is not limited to mismanagement of the Company’s affairs, breach of fiduciary duties by directors, fraud or misfeasance, concealment of material information from shareholders and conduct that is oppressive or prejudicial to members or the public interest.
26. In TRT Investments Limited V Mwalo & 3 Others, [2025] KEHC 1822 (KLR), Gikonyo, J affirmed that the jurisdiction under Section 786 is designed for purposes of:
a) preventing and or unearthing formation of companies for unlawful of illegal purposes;
b) unearthing or preventing fraud or misfeasance-and identifying the persons involved-to creditors and other persons, and take legal or administrative action;
c) preventing oppressive conduct to members;
d) obtaining information concealed by the company; and
e) in public interest.
27. Similarly, in Mokoosio & Another V Vadera & 3 Others, [2021] KEHC 56 (KLR), Odunga, J (as he then was) emphasized with reference to this jurisdiction that while internal company disputes should ordinarily be resolved through internal mechanisms, the Court retains jurisdiction to intervene where the Company acts contrary to its own constitution.
28. This principle was echoed in Tanui & 4 Others V Birech & 11 Others, [1991] KECA 6 (KLR), where the Court noted that while some disputes may be resolved through general meetings, judicial intervention is warranted where internal remedies are unavailable or ineffective. That in my view is the essence of a Section 786 remedy.
29. The evidence before me reveals serious concerns that go to the heart of the Company’s wellbeing. These include disputes over capital contributions and shareholding, unilateral operation of the Company’s assets, particularly the rig and motor vehicles, allegations of income diversion and concealment of financial records, unexplained loans and liabilities incurred without consensus and a general lack of transparency in the Company’s financial reporting.
30. Importantly, no objection has been raised by the Company or Yuvuraj against the prayer for appointment of an inspector. I am satisfied that the Company is not operating in a manner consistent with sound corporate governance. It is not business as usual. Accordingly, I find it just and equitable to allow the prayer for the appointment of an inspector to conduct a forensic audit into the affairs of the Company. The remaining prayers save for those that relate to the removal of Vishnu as director and shareholder, shall be held in abeyance pending the outcome of the investigation.
Disposition and Final Orders
31. Accordingly, the following final orders do hereby issue:
i. A declaration is hereby issued that the Cross-Petitioner, Vishnu, is the lawful owner of 500 ordinary shares in G.V. Water Drilling Limited, as evidenced by the CR-12 Form Reference No. PVTQ7U78E36 issued by the Registrar of Companies on 31st May 2022.
ii. A declaration is hereby issued that the purported transfer of the Cross-Petitioner’s 500 ordinary shares in G.V. Water Drilling Limited is null, void, and of no legal effect.
iii. An order is hereby issued directing the Registrar of Companies to rectify the register of G.V. Water Drilling Limited by cancelling the impugned transfer of the Cross-Petitioner’s shares in favour of the Petitioner.
iv. An order is further issued directing the Registrar of Companies to restore the name of the Cross-Petitioner, Vishnu, as the lawfully registered owner of 500 ordinary shares in G.V. Water Drilling Limited.
v. Both directors of the 2nd respondent shall undertake a forensic audit of the 2nd respondent’s books of accounts for the years 2022 to 2025 by instructing a reputable and independent audit firm to be agreed by the parties within 14 days and in default the audit firm shall be appointed by the court.
vi. Costs follow the event but bearing in mind the relationship that exists between the parties, I find this to be an appropriate case where each party shall bear their own costs.
'