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(Insolvency Cause E006 of 2021) [2022] KEHC 636 (KLR) (Commercial and Tax) (10 June 2022) (Judgment)
Neutral citation:
[2022] KEHC 636 (KLR)
Republic of Kenya
Insolvency Cause E006 of 2021
DO Chepkwony, J
June 10, 2022
IN THE MATTER OF: YOUR DREAM CAR MOTORS LIMITED
AND
IN THE MATTER OF: THE INSOLVENCY ACT NO. 18 OF 2015
AND
IN THE MATTER OF : THE COMPANIES ACT NO. 17 OF 2015
AND
IN THE MATTER OF: AN APPLICATION FOR LIQUIDATION
Judgment
1.Before the court is a Liquidation Petition dated 10th March, 2021 in respect of Your Dream Car Motors Ltd (herein after “the Company”) which was incorporated on 20th November, 2017 under the Companies Act, 2015 to engage in the business of the sale of second-hand motor vehicles. The Petition is presented by the Company’s Director, Laban Karonji Ndirangu who has sworn an affidavit on 10th March, 2021 and a Supplementary Affidavit on 6th October, 2021 in support of the Petition.
2.In those affidavits, it is deponed that the Company was running its show room on property known as LR. No.76/392 until sometimes in the year 2020 when its business dwindled and was pulled down by ramifications brought along by Covid-19 Pandemic. Consequently, the Company ran into deep financial crisis and has been unable to pay its debts which according to the deponent added up to Kshs.48,261,291.00 as at 4th March, 2021. The deponent further stated that, not only has he been arrested on numerous occasions due to the said debts, but also that the Company has been listed with CRB and there is an unlikelihood that the Company will be resuscitated as a going concern. He therefore urged the court to grant the liquidation order and appoint a liquidator in the interest of justice to enable him to recoup from the loss of business without fear of prosecution.
3.In the Supplementary Affidavit, it is averred that the Petition is aimed at providing a platform for equitable and efficient distribution of the estate of the Insolvent Company as opposed to frustrating the creditors or swindling them. He conceded that he has never filed audited accounts of the Company but suggested that he is only required to file a statement of financial position under Regulation 77B after a Liquidation Order is granted. He also does not dispute the averments in the affidavit of Sammy Muthui Mwangi that they had instructions to sell the latter car Registration No.KCN 417Z but failed to remit the proceeds citing the financial crisis.
4.The 1st to 10th creditors opposed the Petition through the Replying Affidavit sworn by Isaac Mwatha Ngare, while Sammy Muthui Mwangi and Dr. Simon Njuguna Mburu filed Replying Affidavits in their capacity as creditors in opposition of the Petition. The grounds put forward in those affidavits are similar and in particular, that the Company has not disclosed its assets or delivered its audited accounts hence the Petition is a mischief meant to swindle the creditors. The Petitioner is accused of material non-disclosure and having approached the court with unclean hands seeking protection which should not be accorded at all. They urged the court not to grant the liquidation order being sought. For Sammy Muthui, he deponed that he is mistakenly listed as a creditor since he had rescinded the contract with the Petitioner for the sale of his motor vehicle. In his view, he is still the registered owner of the subject motor vehicle and the person alleged to have purchased it should be listed as the creditor instead.
5.Parties then filed submissions in canvassing the Petition and there is on record the Petitioner’s submissions dated 6th October, 2021, submissions by Muthui Sammy dated 17th November, 2021 and Simon Njuguna’s submissions dated 2nd March 2022. I have read through the said submissions and since they replicate the grounds summarized above, I wish not repeat the same here.
Analysis and Determination
6.Having summarized the parties’ respective perspectives as above, it is a common ground that the Petition is grounded on the allegation that the Company is Insolvent and unable to pay its debts.
7.Section 424(1) of the Insolvency Act, 2015 provides for instances under which a Company may be liquidated by the court. It states as follows;
8.Section 384 of the same Act provides on the definition of inability to pay debts as follows:-[384].The circumstances in which a Company is unable to pay its debts(1)For the purposes of this Part, a Company is unable to pay its debts—(a)-----------(b)-----------(c)c) If it is proved to the satisfaction of the Court that the Company is unable to pay its debts as they fall due.(2)2) A Company is also unable to pay its debts for the purposes of this Part if it is proved to the satisfaction of the Court that the value of the Company’s assets is less than the amount of its liabilities (including its contingent and prospective liabilities).(3)The insolvency regulations may increase or reduce the amount specified in subsection (1)(a).
9.Section 427 on the other hand provides that a court may at its discretion grant or dismiss a liquidation Petition as it may think fit. However, this -discretion is not unlimited and should be exercised judiciously. In that respect, I subscribe to the statement by Caney J as in the case of Rosenbach & Co (Pty) Ltd v Singh's Bazaar (Pty) Ltd, where he observed;
10.In this case, the pleadings presented before court show that the Company has a liability of about Kshs.48,261,291.00 owed to various debtors which the director state that it is unable to pay. While the creditors opposed the Petition on ground that the Company while owing the debts has never surrendered audited accounts, there is no evidence that has been advanced to show the Company’s solvent standing and I do not see this as reason not to grant an order of liquidation. The Creditors shall have an opportunity to present their claims during the liquidation process and for that reason I make the following orders:-a.An interim liquidation order be and is hereby issued in respect of the Company, Your Dream Car Motor Ltd.b.That the Official Receiver be and is hereby appointed as the Provisional Liquidator of Your Dream Car Motor Ltd.c.The Company’s Director is precluded from disposing any of assets or property of the Company.d.Cost of the Petition shall be borne out of the Company assets.
It is so ordered.
RULING DELIVERED VIRTUALLY, DATED AND SIGNED AT NAIROBI THIS 10TH DAY OF JUNE 2022D. O. CHEPKWONYJUDGE
