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Popatlal Madhavji & Bros Limited & another v Purushotam Enterfprises Limited & another (Miscellaneous Application 419 & 383 of 2016 (Consolidated)) [2022] KEHC 14858 (KLR) (Commercial and Tax) (4 November 2022) (Ruling)
Neutral citation:
[2022] KEHC 14858 (KLR)
Republic of Kenya
Miscellaneous Application 419 & 383 of 2016 (Consolidated)
EC Mwita, J
November 4, 2022
Between
Popatlal Madhavji & Bros Limited
Applicant
and
Purushotam Enterfprises Limited
Respondent
As consolidated with
Miscellaneous Application 383 of 2016
Between
Purushotam Enterfprises Limited
Claimant
and
Popatlal Madhavji & Bros Limited
Respondent
Ruling
1.This is a notice of motion dated 26th July 2021 brought by Popatlal Madhavji & Bros Limited the applicant seeking an order confirming that the arbitrator’s fee of Kshs. 3,738,205 plus interest at 18% for the period from 1st August 2016 to 2nd July 2021 whose interest is Kshs 3,308,311.43, constitutes the decretal mount for purposes of this application; an order that the shortfall in the sum of Kshs. 54,212.20 by the applicant in the money earlier deposited in court do attract interest at 18% from 21st December 2021 until the date of the determination of this application (order to pay by instalment is made) and that the applicant be allowed to pay the decretal sum by monthly instalments of Kshs. 300,000.
2.The applicant further seeks an order suspending payment of interest from the date of the order to pay by instalment until the entire decretal sum is paid in full, as well as costs of the supplication.
3.The application is stated to be premised under Order 21 rule 12(2) of the Civil Procedure Rules. The application is based on the grounds on its face, the supporting affidavit sworn on the same date with the application, further affidavit sworn on 4th March 2022 and written submissions dated 30th May 2022.
4.The respondent filed a replying affidavit worn on 25th January 2022 by Ramji Kerai, the respondent’s director. The respondent states that the applicant has been filing a myriad of applications with the intention of not complying with the award and that this is the essence of the present application.
5.According to the respondent, the arbitral fees of Kshs. 3,738,205 was to be paid by the applicant with interest at 18% from the date the award was taken up. The applicant filed an application alleging that the fees was high as a way of delaying the matter further but the application was dismissed.
6.The respondent asserts that the award was taken up on 27th July when they paid their share of the arbitrator’s fees (Kshs. 1,511,102.50.) The respondent maintained that the arbitrator’s fees with interest at 18% is payable from the date of taking up the award (27th July 2016 to 2nd June 2021 is Kshs. 3,315,787,.82.
7.The respondent further asserted that there was no agreement between counsel for the parties on payment of the money by instalments. The respondent also stated that the applicant was aware of the arbitrator’s fees from 15th May 2016 when parties were notified that the award was ready for collection.
Determination
8.I have considered the application and response and submissions. I have also considered the decisions relied on by parties. The issues that arise for determination are; when the award was taken up, when interest on arbitrator’s fee is payable up to and whether the applicant should be allowed to pay the decretal amount by instalment. Before dealing with the issues, a brief background to this application is necessary.
9.The application and response reveal that parties entered into a building agreement on 25th August 2010 which contained an arbitration clause. A dispute arose and was referred to Stenly Kebathi the sole arbitrator. The sole arbitrator published an arbitral award in favour of the respondent on 15th May 2016, awarding the respondent Kshs. 11,586,351.75 for delayed payment for certificate No.15. This amount was to attract simple interest at 18% from 30th August 20013 to 6th May 2016 which the arbitrator calculated to be Kshs. 5,604,897.66, bringing the total award to Kshs. 17,191,249.41. The respondent was also awarded costs of the arbitral proceedings.
10.The applicant was to pay the arbitrator’s fees of Kshs. 4, 354,205. However, a deposit of Kshs. 1,232,000 had been made leaving of Kshs. 3,738,205 which the respondent paid to enable them get the award. The arbitrator’s fees, plus 18% interest was to be recovered for the applicant. The 18% interest was to apply from the date the award was taken up until payment in full.
11.The applicant filed an application to set aside the arbitral award while the respondent applied for recognition of the award for purposes of enforcement. The two applications were consolidated and heard together. In a ruling delivered on 15th November 2018, the applicant’s application to set aside the award was dismissed with costs while the respondent’s application for recognition and enforcement was allowed.
12.The respondent moved to execute, forcing the applicant to file an application for stay of execution dated 11th December 2018. The court gave a conditional stay at exparte stage directing the applicant deposit Kshs. 22,524,960.50 in court within 10 days which was done. The application for stay was however compromised by parties and the money deposited in court released to the respondent. The applicant also paid auctioneers charges.
13.On 16th April 2019, the respondent sent to the arbitrator their bill of costs for Kshs. 5, 553,268 for assessment which was allowed though the applicant had opposed it for being excessive. On 3rd December 2019, the respondent filed an application to amend the decree issued on 4th December 2018 to include the balance of arbitral fees and interest. The application was allowed in a ruling delivered on 18th March 2021 so that the decree was amended to include the arbitral fees with interest at 18% from the date of the award until payment in full.
14.The contestation in this application is on when the award was taken up; when interest on arbitral fee is payable up to and whether payment by instalment should be allowed.
When award was taken up
15.The applicant argued that according to the award, interest on the arbitral fees would run from the date the award was taken up until payment in full. The applicant took the view that the award is deemed to have been taken up on the day it is received by parties. However, the applicant relied on National Housing Corporation v Custom General Construction Ltd [2021] eKLR which held that the date of receipt of the award is the date parties are notified that the award is ready for collection. In this case, the applicant posited, parties were notified of the award on 12th May 2016 and conceded that that was the date the award was taken up.
16.On whether interest on the arbitrator’s fee should run from the date the award was taken up to 2nd July 2021, the applicant argued in the affirmative. According to the applicant, parties met on 2nd July 2021 to agree on the terms of payment and in order to avoid unjust enrichment, interest should run up to that date.
17.Regarding payment by instalment, the applicant argued that Order 21 rule 22 confers on the court discretion to order a judgment debtor to pay the decretal sum by instalment where sufficient cause is shown. The applicant maintained that it was not in a position to pay the whole decretal amount at once due to hardship caused by Covid 19 pandemic. For that reason, the applicant urged that it should be allowed to pay by instalments. The applicant relied on A Rajabali Alidina v Remtulla Alidina & another [1961] EA 565; Freight Forwarders Ltd v Elsek (K) Ltd [2012] eKLR and Keshvaji Jethabhai & Bros Ltd v Saleh Abdulla [1959] EA 260.
18.The respondent took the position that the was taken up on the date when parties were notified that the award was ready, that is, 12th May 2016. The respondent also relied on National Housing Corporation v Custom General Construction Ltd [2021] eKLR for that proposition.
19.According to the respondent, when parties held a meeting on 2nd July 2021, the applicant’s counsel took the position that the award was taken up on the date the award was received which should be 1st August 2021. The respondent however noted, that the applicant had admitted in their submissions that the date the award was taken up was 12th May 2016, thus settling this aspect of the application.
20.On whether the applicant should be allowed to pay by instalment, the respondent posited that a decree holder is entitled to prompt enjoyment of the fruits of the judgment, and an applicant seeking to pay by instalment should demonstrate good faith in settling the decretal sum. The respondent relied on Zlatko Rostocil v James Samuelt Kinyanjui [2013] eKLR; Hildegrad Ndalu v Lelkina Dairies Limited & another [2005] eKLR and Wilsom Mwaura Ngigi v Nature expeditions Africa Limited [2021] eKLR.
21.The respondent maintained that the applicant had not demonstrated good faith given the time it had taken to pay the decretal amount. The respondent argued that even the monthly instalment of Kshs. 300,000 proposed will take a long time to settle the decretal sum.
22.The issue of when the award was taken up seems to have been settled by parties. The applicant changed from its earlier position on when the award was taken up and stated in its submissions that the award was taken up was on the date parties were notified that the award was ready for collection, that is, 12th May 2016. That was the position taken by the respondent. That being the case, this issue has been resolved by parties themselves. I will say no more.
Interest on arbitral fees
23.The next issue is when interest on arbitral fees should stop running. The applicant argued that the interest of 18% on the arbitral fees was to run from the date the award was taken up(12th May 2016 to 2nd July 2021 when parties met to agree on the terms of settlement. According to the applicant, this would avoid unjust enrichment. The respondent did not address this issue.
24.The directions by the arbitrator were clear that the arbitral fees was to be paid with simple interest of 18% from the date the award was taken up until payment in full. The application before court is not challenging that part of the arbitral decision. Moreover, the arbitral award was recognized and adopted for purposes of enforcement. This court cannot therefore be called upon to surreptitiously change the arbitrator’s decision regarding payment of arbitral fees ans interest in the manner the applicant has suggested. I decline this invitation.
Payment by instalment
25.The applicant urged the court to allow them pay the decretal sum by instalment. The argument put forward in support of the application is that the business was hit hard by Covid 19 Pandemic and for that reason paying the whole sum at once is not possible. The respondent opposed the application arguing that the applicant has not demonstrated good faith in making the application.
26.Order 21 rule 12 confers on the court discretion to allow a judgment debtor pay the decretal amount by instalment if sufficient cause is shown.
27.In Keshvaji Jethabhai & Bros Ltd v Saleh Abdulla (supra), it was held that whilst the courts must be zealous of the creditor’s rights, they must consider each case on its merit in exercising the discretion. The mere fact that the debtor is hard pressed or is unable to pay in full at once, is not sufficient reason. He should be required to show bonafides by arranging prompt payment of a fair proportion of the debt.
28.In A Rajabali Alidina v Remtulla Alidina & another (supra), the court held that a debtor must show sufficient reason for indulgence and the matters to be taken into consideration by the court are the circumstances in which the debt was incurred and the financial position, conduct and bonafides of the debtor. The court stated at Page 566:
29.I have considered the applicant’s grounds for seeking an order to pay by instalment. The only reason the applicant has advanced is that it is economically hard pressed due to the difficulties presented by Covid 19. The applicant has offered to pay Kshs, 300,000 per month towards clearing the outstanding amount.
30.Considering the circumstances of the case, the award was made and taken up in May of 2016. Only part of the decretal amount was paid after numerous applications by the applicant were dismissed. This application was made on 26th July 2021 with the applicant proposing to pay Kshs 300,000 per month. When the application was heard on 29th September 2022, more than one year after its filing, the applicant did not demonstrate to court that it had been paying the amount proposed as a sign of good faith. That is, the applicant did not demonstrate bonafides in making this application and the proposal.
31.Both the rule and authorities on the point, are clear that in making an order for payment by instalment, the court exercises judicial discretion. That discretion must however be exercised judicially and not arbitrarily.
32.Taking into account the circumstances of this case, when the award was made, when the decree was amended and when this application was made, and bearing in mind the numerous other applications the applicant has made in this matter, the view I take is that no bonafides has been shown to persuade this court to exercise the discretion in favour of the applicant to pay by instalments.
33.On the small issue of when interest on the shortfall of Kshs. 54, 212.20 should attract interest from, I reiterate what I stated with regard to when interest on the arbitrator’s fees should stop. This is because the issue of interest was made by the arbitrator and not this court. This court cannot therefor step in to vary a decision that was made by the arbitrator and the court’s mandate ended when the award was recognized and adopted for enforcement.
34.Having considered the application response and submissions, the conclusion I come to is that the application has no merit. It is declined and dismissed with costs.
DATED, SIGNED AND DELIVERED AT NAIROBI THIS 4TH DAY OF NOVEMBER 2022E C MWITAJUDGE
