[2022] KEHC 16264 (KLR)

Aseka v Mumias Sugar Company Limited (Miscellaneous Civil Application E056 of 2022) [2022] KEHC 16264 (KLR) (13 December 2022) (Judgment)

Neutral citation: [2022] KEHC 16264 (KLR)

Republic of Kenya

In the High Court at Kisumu

Miscellaneous Civil Application E056 of 2022

RE Aburili, J

December 13, 2022

Between

Nashon Aseka

Claimant

and

Mumias Sugar Company Limited

Respondent

Judgment

1. The applicant in this case is Nashon Aseka. He has brought these proceedings against the Respondent Mumias Sugar Company Limited (under Receivership) seeking leave of court to continue Kisumu ELRC Cause No 240 of 2018 against Mumias Sugar Company Limited, which is under receivership. He also prays for costs of the application.

2. The grounds upon which the application is predicated are on the face of the application, which grounds are also replicated in the Supporting Affidavit sworn by Nashon Aseka, theapplicant herein on February 15, 2022.

3. In the said grounds and supporting affidavit, the application asserts that he sued the respondent herein vide ELRC Cause No 240 of 2018 at Kisumu and that subsequently, therespondent was placed under receivership before the above suit was prosecuted and therefore the applicant could not prosecute the said suit without leave of court.

4. He deposes that he will be greatly prejudiced if the suit is not prosecuted and that he has brought this application without unreasonable delay. Further, that the application ought to be granted in the interest of equity and justice.

5. Therespondent despite service of the application upon it, there was no response filed to this application.

Analysis & Determination 6. I have considered the application, the grounds and supporting affidavit together with the annextures.

7. I find the issue to be determined to be whether this court should grant leave to the applicant who is the claimant in Kisumu ELRC Cause 240 of 2018 to continue the above suit before the Employment and Labour Relations Court.

8. The application is brought under the provisions of section 560(1) (d) of the Insolvency Act, Rule 10 of the Insolvency Regulations, 2016 and article 159(2) (b) of the Constitution.

9. Undersection 500 of the Insolvency Act:“(1)While a company is under administration­: -a.A resolution for the liquidation of the company may not be made; andb.The court may not make an order for the liquidation of the company.(2)Subsection (1) (b) does not prevent an application from being made for the liquidation of the company under section 425 or the court from making a liquidation order in respect of such an application.

10. Under section 560 (1) (b) of the Insolvency Act:(1)While a company is under administration: -c.a person may take steps to repossess goods in the company’s possession under a credit purchase transaction only with the consent of the administration or with the approval of the court; if the court gives approval subject to such conditions as the court may impose.d.a person may begin or continue legal proceedings (including execution and distress) against the company or the company’s property only with the consent of the administrator or with the approval of the court.(2)In giving approval for a transaction under subsection (1), the court may impose a condition on, or a requirement in connection with the transaction.

11. Section 560A of the Act thus sets out the considerations to take into account on applications for approval to lift moratorium. These include:a.The statutory purpose of the administration;b.The impact of the approval on the applicant particularly whether the applicant is likely to suffer significant loss;c.The legitimate interests of the applicant particularly and he legitimate interest of the creditors of the company giving the right of priority to the proprietary interest of the applicants;d.Whether the value of the secured creditor’s claim exceeds the value of the encumbered asset;e.Whether the secured creditor is not receiving protection for the diminution in the value of the encumbered asset;f.Whether the provision of protection may be feasible or overly burdensome to the estate;g.Whether the encumbered asset is not needed for the reorganization or sale of the company as a going concern;h.Whether relief is required to protect or preserve the value of assets such as perishable goods; ori.Whether in reorganization, a plan is not approved within six months.(3)An approval granted under subsection (1) shall be for a period of not more than twenty eight days.

12. In Owiti, Otieno & Ragot Advocates v Mumias Sugar Company Limited (Under Administration) [2020] eKLR, the court held that:-“When considering whether to grant approval under section 560, the court may in particular take into consideration: -a.The statutory purpose of the administration;b.The impact of the approval on the applicant particularly whether the applicant is likely to suffer significant loss;c.The legitimate interests of the applicant and the legitimate interests of the creditors of the company, giving the right of priority to the proprietary interests of the applicant; andd.The conduct of the parties.”

13. In the instant case, it is not disputed that the applicant is a former employee of the respondent and he had initiated proceedings vide Kisumu Employment and Labour Relations Court vide Claim No. 240 of 2018 against the Respondent before the latter was place under receivership and in the said claim before ELRC, the claimant seeks for declarations that his termination was unlawful and he further seeks for special damages of over Kshs 25,000,000.

14. In my humble view, theapplicant/claimant, subject to proof of his claim before the ELRC is a preferential creditor and therefore he has a legitimate interest which should not be overlooked once the company was placed under administration.

15. I am further persuaded that the dispute between the applicant and the respondent can only be resolved through a court process and if approval as sought is not granted, the applicant/claimant stands to suffer greater harm. Granting of leave will enable theapplicant continue prosecuting his suit to ascertain whether his claim for what appear to be his terminal dues is merited or not.

16. For the above reasons, I find this application to be merited. Theapplicant herein Nashon Aseka is hereby granted leave to continue with the legal proceedings against the respondent Mumias Sugar Company Limited (Under Receivership), to prosecute Kisumu ELRC No. 240 of 2018 to its conclusion.

17. I make no orders as to costs.

18. I so order.

Dated, Signed and Delivered at Kisumu this 13thDay of December 2022R. E. ABURILIJUDGE