https://new.kenyalaw.org/akn/ke/judgment/keca/2026/909

Central Bank of Kenya & another v Doshi & 3 others (Civil Appeal E008 & E010 of 2023 (Consolidated)) [2026] KECA 909 (KLR) (15 May 2026) (Judgment) Neutral citation: [2026] KECA 909 (KLR) Republic of Kenya In the Court of Appeal at Mombasa Civil Appeal E008 & E010 of 2023 (Consolidated) F Tuiyott, KI Laibuta & GW Ngenye-Macharia, JJA May 15, 2026 Between Central Bank of Kenya Appellant and Ashok L. Doshi 1st Respondent Amit L. Doshi 2nd Respondent Imperial Bank Ltd (II) 3rd Respondent As consolidated with Civil Appeal E010 of 2023 Between Imperial Bank Ltd (II) Appellant and Ashok L. Doshi 1st Respondent Amit L. Doshi 2nd Respondent Central Bank of Kenya 3rd Respondent (Being appeals against the Ruling and Orders of the High Court of Kenya at Mombasa (Njoki Mwangi, J.) dated 25th November 2022 in HCCC No. 36 of 2016 Commercial Case 36 of 2016 ) Judgment 1.The two consolidated appeals before us are against the ruling and orders of the High Court (Njoki Mwangi, J.) dated 25th November 2022 in Mombasa HCCC No. 36 of 2016. As a matter of convenience, we will hereinafter refer to the parties to the two appeals as follows: the Central Bank of Kenya – 1st appellant; Imperial Bank Ltd (IL) – 2nd appellant; Ashok L. Doshi – 1st respondent; and Amit L. Doshi – 2nd respondent. 2.The genesis of the two appeals was the suit by the 1st and 2nd respondents (Ashok L. Doshi and Amit A. Doshi) filed against the 1st and 2nd appellants (Central Bank of Kenya and Imperial Bank Ltd (In Receivership)) in Mombasa HCCC No. 36 of 2016 vide a plaint dated 19th April 2016 and amended on 28th April 2016. 3.The respondents claimed that they were depositors in the 2nd appellant bank with which they jointly maintained dollar and local currency accounts comprising fixed deposits amounting to USD 8,715,000.01 and Kshs. 49,163,359.59, which deposits were due to mature in December 2015; that they deposited the sums aforesaid in the legitimate belief that the 1st appellant was properly discharging its constitutional, statutory and fiduciary mandate of licensing, regulating and supervising the 2nd appellant; and that the 1st appellant abdicated and breached their duty for over a period of thirteen years thereby permitting a sustained and large-scale fraud by the 2nd appellant’s senior management, which only came to light following the death of the Managing Director and subsequent disclosures by a newly constituted board. 4.The respondents further alleged that the 1st appellant either knew of, colluded in, or deliberately turned a blind eye to, the apparent fraud; that the 1st appellant unlawfully facilitated the transfer or handling of depositors’ funds through third-party banks without their consent or involvement; and that the 1st appellant failed to formulate a transparent and lawful resolution framework for the 2nd appellant so as to safeguard its depositors’ interests. 5.In addition to the foregoing, the respondents challenged the legality of the 1st appellant’s decision to place the 2nd appellant under receivership, alleging that the 2nd appellant bank was not insolvent at the material time; that the 1st appellant acted unlawfully, recklessly and in excess of its statutory mandate, without the requisite approvals and contrary to the statutory framework governing statutory management and receivership; that the receivership process was opaque and conflicted; that the 1st appellant unlawfully dealt with depositors’ funds through third- party banks without their consent; and that the 1st appellant concealed material information, including the forensic report by FTI Consulting LLP as well as the findings of its own investigations while selectively shielding its own officials from accountability. 6.By reason of the matters aforesaid, the respondents contended that the appellants were jointly and severally liable for their loss, and that they were obligated to pay their deposits forthwith as protected sums guaranteed by law. They sought orders compelling disclosure of the forensic and investigative reports; orders suspending the payment and resolution scheme then implemented through third-party banks; disclosure of the true financial status of the 2nd appellant at closure; payment of their deposits with interest at contractual terms; and suspension of all implicated officials of the 1st and 2nd appellants from holding public office or in any bank or company. They also prayed for costs of the suit with interest thereon. 7.In addition to their plaint, the 1st and 2nd respondents contemporaneously filed an application dated 19th April 2016 seeking injunctive orders pending the hearing and determination of the suit. The High Court (P. J. O. Otieno, J.) certified the application urgent and granted interim orders pending the hearing and determination of the application. 8.The 1st and 2nd appellants filed their Statements of Defence dated 20th May 2016 and 19th May 2016 in response to which the respondents filed their respective Replies to Defence dated 23rd May 2016. 9.The respondents’ interlocutory application dated 19th April 2016 came up for hearing on 15th July 2016. Counsel for the 2nd appellant opposed the application and contended that the interim orders granted on 19th April 2016 went beyond the scope of the application, which was intended to secure the respondents’ deposits, in that the orders had the effect of suspending the implementation of the payment scheme intended to benefit thousands of depositors. 10.The High Court (P. J. O. Otieno, J.) proposed that counsel for the parties “discuss a middle ground” and adjourned the proceedings to later in the afternoon. When the proceedings resumed, counsel for the 2nd appellant informed the court that they had “…agreed on the way forward”. Accordingly, the learned Judge recorded a consent order in the following terms:“It is hereby ordered by consent:- 1.That without prejudice to the pleadings filed and respective claims, the counsel for the 2nd defendant, on behalf of the 2nd defendant, gives an undertaking to court that after full adjudication and determination of this suit, the said defendant shall, subject to the right of appeal, pay any sums adjudged due and payable to the plaintiffs. 2.That interim orders granted on 19.4.2016 and extended to date are hereby discharged to allow the schemes of payment to be implemented by the 2nd defendant. 3.That the date set for earlier hearing of the application dated 19.4.2016 shall be retained for purpose of case conference on the 15.8.2016. 4.That the application dated 19.4.2016 is marked as compromised on the foregoing terms to enable fast track the hearing of the suit on priority basis. 5.That hearing of the suit shall be on the 1st and 2nd November 2016. 6.That costs in the cause.” 11.On 7th December 2021 while the suit was pending, the 1st appellant received a report from the 2nd appellant’s receiver, the Kenya Deposit Insurance Corporation (KDIC), which recommended that the 2nd appellant be liquidated in view of its weak financial position. The 1st appellant assessed and approved the recommendation by KDIC for the liquidation of the 2nd appellant in order to “facilitate the orderly resolution of [Imperial Bank] in accordance with the Laws of Kenya” and “to protect the interest of [Imperial Bank’s] depositors, its creditors, and the wider public interest.” Accordingly, on 8th December 2021, the 1st appellant appointed KDIC as liquidator of the 2nd appellant in accordance with sections 53(2) and 54(1) (a) of the Kenya Deposit Insurance Act (the Act). The 1st appellant announced its decision vide a Press Release dated 9th December 2021. 12.In response, the respondents filed a Notice of Motion dated 20th December 2021, and which was supported by the 1st respondent’s affidavit sworn on even date, seeking the following orders:“ 1.Spent; 2.Spent; 2.Spent; 2.That the Honourable Court be pleased to grant leave for the orders sought herein; 3.That the Defendants herein be and are hereby ordered to deposit USD 7,277,314.91 in a joint interest earning account in the names of the advocates on record within 30 days of this order as security for any decree that may ultimately be passed by the Court; 4.In the alternative to order (4) (sic) above, the Defendants be and are hereby ordered to jointly and severally give a binding undertaking to pay any sums adjudged due and payable to the Plaintiffs after full adjudication and determination of this suit; and 5.That the costs of this application be borne by the Defendants jointly and severally.” 13.The grounds on which the respondents’ Motion was anchored were, inter alia: that, on 15th July 2016, a consent order was recorded in terms of which the 2nd appellant gave an undertaking to pay any sums adjudged due and payable to them after full adjudication and determination of the suit; that the consent aforesaid was still binding and had never been reviewed, varied and/or set aside; that, while the consent was still binding, the 1st appellant appointed KDIC as liquidator of the 2nd appellant Bank; that the appointment of KDIC as liquidator had the effect of defeating the said consent since the 2nd appellant’s legal status had now changed from being in receivership to being in liquidation and that, therefore, the consent order was no longer binding thereon; that, after its appointment as liquidator, KDIC was likely to start paying out depositors; that the payment of depositors would defeat the respondents’ respective claims since there would be nothing left to pay out to them should their claim succeed; and that the orders sought ought to be granted so that the respondents would be assured that their claim, which was filed before the appointment of a liquidator, was not defeated by the process of liquidation. 14.By ex-parte orders issued on 22nd December 2021, the High Court (J. Onyiego, J.) certified the respondents’ Motion urgent and granted interim orders staying the 1st appellant’s decision to appoint KDIC as the 2nd appellant’s liquidator; and interim orders restraining the appellants from paying out deposits in execution and implementation of the 1st appellant’s decision to place the 2nd appellant under liquidation, pending the hearing and determination of the respondents’ Motion. 15.Opposing the application, the 1st appellant filed a replying affidavit followed by a further affidavit both of which were sworn by Kennedy Kaunda Abuga, the 1st appellant’s General Counsel, on 29th December 2021 and 23rd May 2022 respectively. The learned General Counsel deponed, inter alia: that the 1st appellant’s decision to place the 2nd appellant under liquidation was within its constitutional and statutory mandate; that, upon receipt of KDIC’s recommendation on 7th December 2021 following a prolonged receivership process, it was under a mandatory statutory duty to approve liquidation and appoint KDIC as liquidator; that the revocation of the 2nd appellant’s licence and the appointment of KDIC as its liquidator were lawfully gazetted on 8th December 2021 vice Gazette Notices Nos. 13994 and 13995; that this decision could not be suspended, reversed or reverted to receivership under the governing statute; that the consent recorded on 15th July 2016 did not bind it as it was not party thereto; that the consent merely reflected an undertaking by the 2nd appellant, without prejudice to its right of appeal, to pay sums adjudged due after determination of the suit; that the consent could not override or oust the statutory powers conferred upon the 1st appellant and KDIC under the Act, and neither could private parties contract out of the statutory liquidation framework; and that the consent had been intended to allow payment schemes to proceed for tens of thousands of depositors, and could not be relied upon to justify preferential treatment of the respondents or either of them. 16.The learned General Counsel further deponed that that the ex- parte interim orders granted on 22nd December 2021 improperly restrained the 1st appellant from exercising its statutory mandate and had the effect of halting the liquidation process and creating legal uncertainty; that, once liquidation had commenced, the legal regime under section 56 of the Act applied, thereby barring continuation of all proceedings, injunctive relief or enforcement actions against the institution or its assets without leave of the court, which the 1st and 2nd respondents had neither sought nor obtained; that the respondents had not demonstrated the legal nexus between the 1st appellant and their claim; that, in any event, the respondents’ deposits could not take priority over the other deposits in view of the fact that section 50(2) (b) of the Act provides a moratorium on payment of deposits to be applied equally and without discrimination of any depositors; that it was impossible and impractical to comply with the orders sought, including the provision of security or undertakings, as the events complained of had been overtaken by the lawful liquidation of the 2nd appellant and the extinguishment of its licence; that courts ought not to micromanage or substitute their judgment for that of statutory regulators, such as the 1st appellant and KDIC; that injunctive reliefs interfering with liquidation would go beyond the court’s proper remit where the regulators were acting within their statutory mandate; and that the 1st and 2nd respondents had failed to make full and frank disclosure of material facts and were therefore undeserving of equitable relief. The 1st appellant urged that the respondents’ application be dismissed with costs. 17.Likewise, the 2nd appellant (now in liquidation) opposed the respondents’ Motion and filed a replying affidavit as well as a supplementary affidavit sworn by Andrew Rutto, its Liquidation Agent, on 4th January 2022 and 20th May 2022 respectively. The Liquidation Agent deponed that the reliefs sought by the 1st and 2nd respondents were untenable following the commencement of the process of liquidation; that the 2nd appellant was at all material times subject to the statutory regime under the Banking Act and the Kenya Deposit Insurance Act; that, upon the 1st appellant’s lawful decision to place the 2nd appellant under liquidation and to appoint KDIC as liquidator, its (the 2nd appellant’s) legal status fundamentally changed, thereby bringing into operation the statutory provisions governing liquidation; that, once liquidation commenced, section 56 of the Act applied so as to bar continuation of suits, enforcement proceedings or injunctive relief against the bank or its assets without leave of the court; and that the 1st and 2nd respondents neither sought nor obtained such leave and that, as a result, their application and the interim orders previously granted were incompetent, irregular and contrary to statute law. 18.The Liquidation Agent further deponed that the liquidation process was a collective and statutory process intended to protect all depositors and creditors in equal measure, and that it could not be halted or restructured to secure claims by individual litigants; that the consent recorded on 15th July 2016 did not confer upon the 1st and 2nd respondents any preferential rights over other depositors and creditors, and could not override the mandatory provisions of the Act; that the consent merely preserved the respondents’ right to pursue their claim through adjudication, subject to the applicable statutory framework, but did not amount to a guarantee of payment outside or in priority to the liquidation process; that the orders sought would unlawfully elevate the respondents above other depositors and creditors and disrupt the orderly liquidation process; that all depositors’ claims were subject to a statutory moratorium and ranking provisions, and that any payments could only be made by the liquidator in accordance with the law and on an equal, non- discriminatory basis; that the sum claimed by the 1st and 2nd respondents formed part of the general pool of depositor liabilities and could not be ring-fenced through interlocutory court orders; and that the application by the 1st and 2nd respondents was overtaken by events, misconceived in law and an abuse of the court process. The Liquidation Agent urged the court to discharge the interim orders and dismiss the application with costs. 19.In addition to its affidavits in reply to the respondents’ Motion, the 1st appellant filed Grounds of Opposition and a Notice of Preliminary Objection to the 1st and 2nd respondents’ application, both of which were dated 29th December 2021. On its part, the 2nd appellant also filed a Notice of Preliminary Objection dated 4th January 2022 challenging the respondents’ interlocutory application. The two preliminary objections were heard and dismissed by the High Court vide a ruling dated 6th May 2022 to pave way for the hearing of the Motion, which was canvassed by way of written submissions. 20.In its ruling dated 25th November 2022, the High Court (Njoki Mwangi, J.) first addressed the contention that the application was fatally defective for want of sanction under section 56(2) of the Act. The court held that, although it would have been more prudent for the 1st and 2nd respondents to seek sanction before filing the substantive application, the Act did not prescribe the timing or form of such sanction; that the prayer in the application seeking leave of the court was sufficient to amount to a request for sanction; and that combining that prayer with substantive reliefs was not a fatal defect, and was curable under Article 159(2) (d) of the Constitution. 21.On the substantive reliefs sought, the court held that ordering the deposit of USD 7,277,314.91 would amount to granting preferential treatment to the 1st and 2nd respondents over other depositors and creditors, thereby usurping the powers of the Liquidator and pre-empting the outcome of the main suit. However, the court also held that it could not ignore the fact that the consent recorded on 15th July 2016 with the full knowledge and approval of KDIC and CBK had not been set aside, and was entered into when Imperial Bank was under receivership; and that the consent bound not only Imperial Bank, but also had a “ripple effect” binding the Central Bank as well. 22.In view of the foregoing, the trial court held that the 1st and 2nd respondents’ application was merited and deserving of the alternative orders sought at prayer 6 of the application, which was aimed at protecting their interest and at upholding the intended purpose of the consent. Accordingly, the court allowed the application in the following terms:“(i)That leave is hereby granted to the plaintiffs to have this application, any subsequent applications and main suit heard when the 2nd defendant is in liquidation;ii.That within 30 days of this ruling, the defendants shall jointly and severally give a binding undertaking to pay any sums adjudged due and payable to the plaintiffs after full adjudication and determination of the main suit; andiii.That the exparte orders granted on 22.12.2021 staying the 1st defendant’s decision to appoint Kenya Deposit Insurance Deposit Corporation as Liquidator of the 2nd defendant shall stand discharged upon execution of the order made in paragraph (ii) above;iv.That the costs of this application shall abide the outcome of the main suit.” 23.Aggrieved by the trial court’s ruling, the 1st appellant filed Civil Appeal No. E008 of 2023 vide a Memorandum of Appeal dated 24th January 2023 on the following 8 grounds:“ 1.The learned Judge erred in law and in fact in holding that the consent entered into between the [1st and 2nd respondents and Imperial Bank] dated 15th July 2016 was equally binding to [CBK]. 2.The learned Judge erred in law in finding that upon placing [Imperial Bank] under receivership, [CBK] took over control of [Imperial Bank] by operation of the law. 3.The learned Judge erred in law and in fact in holding that [CBK] gave an undertaking through a consent entered into on 15th July 2016 and that it assumed control of [Imperial Bank] through Kenya Deposit Insurance Corporation. 4.The learned Judge erred in law and misapprehended the meaning and tenure of Sections 43(1), and (2), 45 and 61 of the Kenya Deposit Insurance Act. 5.The learned Judge erred in law and in fact by going against a well-established principal of law that was laid down by this Honourable Court in National Bank of Kenya Limited vs. Pipeplast Limited that Courts of law should not re-write or interfere with parties agreements/contracts unless, undue influence or coercion was applied at the time of making the agreement. 6.That the learned Judge erred in law in failing to appreciate the import of Section 50 (2) and Section 54 of the Kenya Deposit Insurance Act by making orders that purports to extinguish the powers of the [Liquidator] and [CBK] respectively as bestowed by the aforesaid provisions of the statute. 7.The learned Judge erred in law and in fact in failing to appreciate the submissions of [CBK] and the authorities cited in support thereof. 8.The learned Judge erred in law and misapprehended the express import and meaning of Section 56 (2) of the Kenya Deposit Insurance Act and continued with the suit and subsequent application only to grant leave on 25th November 2022.” 24.Equally aggrieved, the 2nd appellant filed an appeal against the impugned ruling in Civil Appeal No. E010 of 2023 vide a Memorandum of Appeal dated 24th January 2023 on the following 13 grounds:“ 1.That the learned Judge erred and misdirected herself in law on the provisions of Section 56(2) of the Kenya Deposit Insurance Act that makes it mandatory for the 1st and 2nd Respondents to seek sanction before commencing or continuing civil proceedings against [Imperial Bank] when in liquidation. 2.That the learned Judge erred in law and in fact in finding that the 1st and 2nd Respondents had sought sanction of the High Court in their Notice of Motion application dated 20th December 2021 to proceed with the suit while in truth and fact, the application only sought leave to have the application heard during the High Court's recess and not sanction to proceed with the suit on account of the [Imperial Bank’s] liquidation. 3.That learned Judge erred in law and acted without jurisdiction in allowing the 1st and 2nd Respondents’ application despite sanction not having been sought nor granted before the application was filed in contravention of the binding decision of this Honourable Court in Kenya Deposit Insurance Corporation vs. Richardson & David Limited & Another [2017] eKLR. 4.That the learned Judge erred in law and acted without jurisdiction in granting the 1st and 2nd Respondents leave to proceed with the application, subsequent applications and the main suit, a prayer not sought by the 1st and 2nd Respondents in their Notice of Motion application dated 20th December 2021. 5.That the learned Judge erred and misdirected herself in law in purporting to extend an ‘interim order’ indefinitely and in effect granting orders not sought by the 1st and 2nd Respondents in their substantive Notice of Motion application. 6.That the learned Judge erred in law in ordering that within thirty (30) days from the date of the Ruling, [Imperial Bank and CBK] should jointly and severally give a binding undertaking to pay any sums adjudged due and payable to the 1st and 2nd Respondents after full adjudication and determination of the main suit, an order which would amount to giving preferential treatment to the 1st and 2nd Respondents who are under a statutory obligation to lodge and prove their claim with the liquidator as provided for under Section 33 of the Kenya Deposit Insurance Corporation Act. 2.That the learned Judge erred in law in assuming jurisdiction that she did not have in granting a condition that the ‘interim orders’ issued on 22nd December 2021 would remain in force unless [Imperial Bank and CBK] were to issue an undertaking to the 1st and 2nd Respondents when the 1st and 2nd Respondents had confirmed in their final submissions that they were not challenging the Appellant's liquidation. 2.That the learned Judge misdirected herself in law when she failed to appreciate that the consent order recorded on 15th July 2016 was no longer enforceable as [Imperial Bank] had been placed under liquidation and enforcing the consent would be contrary to the law in giving the 1st and 2nd Respondents preferential treatment as depositors. 3.That the learned Judge erred and misdirected herself in law by micro-managing the liquidation process of [Imperial Bank] by purporting to suspend the liquidation of [Imperial Bank] indefinitely contrary to the binding decision of this court in Kenya Deposit Insurance Corporation vs. Richardson & David Limited & Another [2017] eKLR. 4.That the learned Judge grossly erred in law as the effect of her ruling and order would be to place the Appellant's legal status in limbo since the orders of 22nd December 2021 have the effect of indefinitely suspending the liquidation of [Imperial Bank] despite its banking license having been revoked. 5.That the learned Judge disregarded the statutory framework governing the liquidation of banks and financial institutions under the Kenya Deposit Insurance Act. 6.That the learned Judge deliberately delayed the hearing and determination of the application while extending the interim orders for a period of eleven (11) months without giving due consideration to the public interest in the efficient liquidation of [Imperial Bank] to enable depositors and creditors get their refunds. 7.That the learned Judge erred in law in failing to consider the detailed evidence tendered by [Imperial Bank], the applicable principles of law and the authorities cited to her and as a result arrived at a perverse decision in law.” 25.In support of the 1st appellant’s appeal, its learned counsel, M/s. Amolo & Gacoka, filed written submissions accompanied by a case Digest & Bundle of Authorities dated 28th July 2023, which we have taken to mind. 26.Likewise, learned counsel for the 2nd appellant, M/s. Issa & Company, filed written submissions and a Case Digest dated 20th November 2024 in support of its appeal, and which we have duly considered. 27.On their part, learned counsel for the 1st and 2nd respondents, M/s. Oluga & Company, filed identical written submissions and a List of Authorities in Civil Appeal No. E008 of 2023 and in E010 of 2023 dated 26th November 2024 and 24th February 2025 respectively, and which we have also taken to mind. 28.Having considered the records of the two consolidated appeals, the grounds on which they are anchored, the respective submissions of learned counsel and the law, we find that the following 5 issues commend themselves for our determination, namely: (i) whether the 1st and 2nd respondents were statute bound to first obtain the court’s sanction to file the subject application and, if so, whether the learned Judge was at fault in holding that the manner in which the sanction was sought did not render the application fatally defective;(ii)whether the learned Judge erred in holding that the consent order in issue was equally binding upon the 1st appellant; (iii) whether the learned Judge erred in directing the appellants to give an undertaking to pay any sums adjudged due to the 1st and 2nd respondents upon full determination of the suit; (iv) whether the learned Judge was at fault in making the discharge of the ex-parte stay orders conditional upon the appellants furnishing the undertaking aforesaid; and (v) whether the learned Judge erred in granting prayers not sought in the application. 29.On the 1st issue as to whether the respondents discharged their statutory duty to first obtain the court’s sanction prior to filing their application, and whether the learned Judge was at fault in holding that the manner or form in which the sanction was sought did not render their application fatally defective, we take to mind the learned Judge’s holding in the impugned ruling where she had this to say:“ 41.…. The defendants submitted that… the plaintiffs ought to have sought sanction of Court before filing the application herein and/or proceeding with any suit that was pending against it. The plaintiffs submitted that in the present application, prayer 4 seeks leave of the Court to file the application herein…. 42.It is not in dispute that Section 56(2) of the KDI Act does not specify the time when the sanction of the Court ought to be sought and it also does not specify that sanction must precede the application, and that it cannot be sought simultaneously or contemporaneously with a substantive prayer. In addition, the KDI Act does not specify the manner or form in which an application that seeks sanction of the Court shall take …. 43.In the Notice of Motion dated 20th December, 2021, the plaintiffs prayed for the Court to grant leave for the orders sought in the said application. In this Court’s view, the said prayer is synonymous with the plaintiffs seeking the Court’s sanction for the hearing of the application herein as the 2nd defendant had been put in liquidation. In this Court’s view, the use of the word “sanction” or “leave” is a matter of semantics as the meaning of the two words is more or less similar, as in both instances, approval or permission of the Court is necessary in order for a party to do a certain action …. 45.As Judge Kasango held in the case of Johnson Mbugua Mugo & 2 others v Dominic Kinuthia Mugo & another (supra), it would have been more prudent to seek the sanction or leave of the Court first before filing the substantive application herein. It is however my finding that the combination of the prayer seeking leave of the Court with the other prayers in the present application is one of procedural technicality and it affects the form rather than the substance of the application herein, and is curable under the provisions of Article 159(2)(d) of the Constitution of Kenya, 2010. I therefore hold that the plaintiffs complied with the provisions of Section 56(2) of the KDI Act, hence the application herein is not fatally defective.” 30.Taking issue with the learned Judge’s decision, learned counsel for the 1st appellant submitted that section 56(2) of the Act requires that no injunction may be brought, and no civil proceeding may be commenced or continued against the institution or in respect of its assets without the sanction of the court; that the High Court did not grant the respondents or any of them leave to continue with the suit as required by section 56(2); that leave was only granted on 25th November 2022 vide the impugned ruling; and that the proceedings continued without leave in consequence of which they were a nullity. 31.Learned counsel for the 2nd appellant were like minded and submitted that the respondents’ Chamber Summons application only sought leave to have their Notice of Motion application heard during the High Court’s vacation and, in the meantime, they be granted interim ex-parte orders; that there was no prayer for sanction or leave pursuant to section 56(2) of the Act, and that the application made no reference to the 2nd appellant being in liquidation; that the learned Judge misapprehended the prayers sought at paragraph 4 of the 1st and 2nd respondents’ application and erroneously held that the prayer was synonymous with seeking the court’s sanction for hearing of the application; that section 56(2) of the Act provides that no civil suit may be commenced or continued against an institution or in respect of its assets without leave of the court once the institution has been placed in liquidation; that the 2nd appellant having been placed in liquidation on 8th December 2021, it was incumbent upon the 1st and 2nd respondents to seek and obtain sanction pursuant to section 56(2) of the Act prior to filing the application; and that failure to do so rendered their application defective and liable to dismissal. 32.Counsel cited the case of Kirtesh Premchand Shah v. Trust Bank Limited [2007] KECA 60 (KLR) where this Court, when interpreting the corresponding section 228 of the now repealed Companies Act (which required leave of the court before an action could be commenced or proceeding continued after a winding up order had been made or an interim liquidator had been appointed), stated that:“…. It matters not that the words used in section 228 are “action” and “proceeding” and that they are not defined. The construction of the words must be wide enough to include any form of proceedings in court brought by any lawful procedure before such court.” 33.In addition, counsel cited the case of Joseph Kaara Mwethaga v. Thabiti Finance Company Limited (In Liquidation) & 4 others [1998] KECA 275 (KLR) where this Court held that the appellant therein was mandatorily required to obtain leave of the court to proceed with the suit against the respondent bank that was undergoing involuntary liquidation; and that failure to obtain such leave rendered the suit, and an application for injunctive reliefs, incurably defective and incompetent in law. 34.On their part, learned counsel for the respondents submitted that, firstly, the suit in the High Court as well as the application dated 20th December 2021 were against two defendants, Imperial Bank and CBK (the appellants); that section 56(2) of the Act does not apply to the 1st appellant, which was not in liquidation; that, secondly, there was an express prayer for leave in the 1st and 2nd respondents’ application; and that section 56(2) of the Act does not provide that sanction must precede an application, or that leave/sanction cannot be sought simultaneously or contemporaneously with the substantive prayer. 35.Counsel cited the case of Johnson Mbugua Mugo & 2 Others v Dominic Kinuthia Mugo & another [2004] KEHC 162 (KLR), which dealt with a corresponding section 241 of the repealed Companies Act, for the proposition that combining a prayer for sanction with other substantive prayers is not fatal; that, even if there was no prayer for leave, section 56(2) of the Act uses the word “may” and not “shall”, meaning that that section 56 (2) is not mandatory but permissive; and that its effect is that failure to obtain court’s leave or sanction is not fatal to the suit or interlocutory application. 36.In addition, counsel cited the case of Kenya Wildlife Service v Joseph Musyoki Kalonzo [2017] KECA 234 (KLR) for the proposition that the use of the word “may” is permissive and not mandatory, and does not oust the jurisdiction of the court. 37.We take to mind the provisions of section 56 of the Act, which reads:56.Stay of proceedings (1) … ….(2)No injunction may be brought or any other action or civil proceeding may be commenced or continued against the institution or in respect of its assets without the sanction of the Court. 38.In Rashik Kumar Punja Shah & another v Chase Bank Limited (In Liquidation) & another [2021] KEHC 4092 (KLR), Mativo, J. (as he then was) correctly elucidated on the rationale behind the provisions of section 56(2) of the Act as follows:“ 21.The intent and purpose of section 56 (2) is to eliminate any applications which are either frivolous, vexatious or hopeless and secondly to ensure that the applicant is only allowed to proceed to institute the proceedings if the court is satisfied that there is a case for further consideration. The requirement that the court sanctions the proceedings is designed to shield the liquidator from busy bodies with misguided or trivial complaints, and to remove the uncertainty as to whether a liquidator could safely proceed with his functions while court proceedings pend in court even though misconceived. The court is called upon to identify and filter out, at an early stage, claims which may be trivial or without merit. 22.At this stage an applicant must show…: -(i)'sufficient interest' in the matter otherwise known as locus standi;(ii)that he/she is affected in some way by the decision being challenged; and,(iii)that he/she has an arguable case and that the case has a reasonable chance of success. The applicant has the burden of demonstrating that the application raises a serious issue. This is a low threshold. If the court is not persuaded as aforesaid, sanction will be denied and the matter proceeds no further. The facts relied upon must be clearly set out in the founding affidavit or draft pleadings or both. The court is not required to make final findings of contested facts and law but only needs to weigh the relative strength of the party’s cases.” 39.The argument advanced by the 1st and 2nd respondents is that the use of the word “may” in section 56(2) of the Act denotes that the provision is couched in permissive and not in mandatory terms; and that non-compliance with the provision of that section would not be fatal to an action or proceeding. 40.In Peter Muturi Njuguna v Kenya Wildlife Service [2017] KECA 42 (KLR), this court held that:“ 13.On the interpretation of statutes where the words "may" and "shall" have been used, this Court has held before that:-‘It cannot, therefore, be overemphasized that while the court must rely on the language used in a statute or in the rules to give it proper construction, the primary purpose is to discern the intention of the Legislature (or Minister) in enacting or making of the provision … …. Whether the words “shall” or “may” convey a mandatory obligation or are simply permissive, will depend on the context and the intention of the drafters.’See the case of Sony Holdings Ltd –vs- Registrar of Trade Marks & Another [2015] eKLR. 14.In the Australian case of Johnson's Tyne Foundry Pty Ltd v Maffra Shire Council (1948) 77 CLR 544 at 568, Williams, J stated:‘‘May’, unlike ‘shall’, is not a mandatory but a permissive word, although it may acquire a mandatory meaning from the context in which it is used, just as ‘shall’ which is a mandatory word, may be deprived of the obligatory force and become permissive in the context in which it appears.’ 14.The true construction therefore lies in the context. Ordinarily the word "may" is permissive and not mandatory but the contextual meaning would vary with the intention of the drafters.” 41.Appreciating the intent and purpose of section 56(2) of the Act, its provisions can only be construed as having been drafted in prohibitive terms effectively creating a statutory bar to actions or proceedings against institutions in liquidation without prior sanction of the court. In this regard, courts have time and time again construed this provision, and other identical provisions requiring the court’s sanction before litigation is commenced against companies undergoing liquidation or winding up, as being mandatory in nature. 42.In Kirtesh Premchand Shah v. Trust Bank Limited (supra), this Court made the following observations with regard to the identical provisions of section 228 of the repealed Companies Act:“We find no provision in the Companies Act precluding applications and appeals to this Court from the rigours of section 228. They are in the category of “actions” and “proceedings” referred to in that section. It seems logical to us therefore that a party intending to proceed against the Bank in this court must seek the leave or sanction of the winding up court and it matters not that the superior court granted leave in the same matter earlier. The sanction or leave of the court is sought and granted on the basis of facts and circumstances existing when the matter is laid before the court and the court exercises its discretion on those particular facts.” 43.In Bougainville Estate Limited v Kenya Deposit Insurance Corporation (KDIC) (Suing in their capacity as Receiver Managers of Imperial Bank Limited- (In Receivership) & 3 others [2021] KECA 132 (KLR), Kairu, JA. held that:“9. … given the express bar in Section 56(2) of the Kenya Deposit Insurance Act against institution of suits in the nature of which the applicant had filed without sanction of the court and the concession by the applicant that leave had not been sought prior to the institution of the suit, the intended appeal would appear somewhat tenuous.” 44.In our considered view, the statutory requirement to seek and obtain the court’s sanction, pursuant to section 56(2) of the Act, before continuing or commencing an action or proceedings against an institution placed under liquidation is a condition precedent and not a mere formality. 45.In the present case, the 1st and 2nd respondents had sought the court’s sanction in prayer 4 of their Notice of Motion dated 20th December 2021 together with other substantive prayers in the following terms:“ 4.The Honourable court be pleased to grant leave for the orders sought herein.” 46.In our considered view, the learned Judge correctly held that the words “sanction” and “leave” were synonymous in the context of section 56 (2) of the Act. Black’s Law Dictionary (9th edn.) defines “sanction” as “official approval or authorization” and “leave of court” as “judicial permission to follow a non-routine procedure.” The pertinent question that arises is whether it was fatal for the 1st and 2nd respondents to seek the court’s sanction contemporaneously with the substantive prayers in one application instead of first seeking the sanction in a stand-alone application as urged by the appellants. 47.In Johnson Mbugua Mugo & 2 Others v Dominic Kinuthia Mugo & another [2004] KEHC 162 (KLR), the Liquidator of a company subject to winding up proceedings filed an application seeking leave or sanction of the court for the appointment of an advocate in the proceedings, as mandatorily required under section 241 of the repealed Companies Act, alongside other substantive prayers. Considering the issue as to whether the application was fatally defective, Kasango, J. correctly held that:“The said application amongst its prayer is a prayer seeking the sanction for the appointment of counsel. I think it is unfortunate that counsel did not first seek the sanction and once sanction was granted then file the application for other prayer. I am of view that even combining of all those prayers is not prejudicial and is not fatal to the application but it may be prudent to first deal with prayer No. 2 and once that prayer is granted the Liquidator can proceed with the other prayers.” 48.The requirement under section 56(2) of the Act is substantially satisfied where a party seeks the court’s sanction prior to the action or civil proceedings the party wishes to continue or commence against an institution placed under liquidation. Accordingly, the application was not fatally defective for seeking the court’s sanction alongside the substantive prayers. However, it was for the learned Judge to first deal with the preceding issue as to whether leave or sanction ought to be granted and, if the answer was in the affirmative, then proceed to deal with the substantive prayers. 49.In this case, the learned Judge did not explicitly identify the question as to whether sanction or leave ought to be granted as an issue for determination. However, it is clear from the fact that the learned Judge proceeded to deal with the substantive prayers and from order (i) of the impugned ruling that the learned Judge was persuaded that the 1st and 2nd respondents were deserving of leave to seek the substantive orders in their application. It must also be noted that the bar in section 56(2) of the Act could only apply in respect of the 2nd appellant, as the institution placed under liquidation, and not as against the 1st appellant. 50.Considering the provisions of section 446(1) of India’s now repealed Companies Act, 1956 (which barred the commencement or continuance of suits or other proceedings against a company subject of a winding up order without obtaining leave of the court), the Supreme Court of India in Harihar Nath & Ors vs. State Bank of India & Ors 2006 (4) SCC 457 observed that:“ 18.It is now well settled that if any winding up order is passed, during the pendency of a suit against the company, and if the suit is continued without obtaining leave, in spite of that bar contained in section 446(1), the decree passed is only voidable at the instance of the liquidator, and not void ab initio. In fact, where such decree has been passed against the company and others, the only person who can avoid the decree on the ground of non-compliance with section 446(1) of the Act, is the official liquidator of the company and not the other defendants.” 51.In view of the foregoing, we reach the inescapable conclusion that the respondents discharged their statutory duty to obtain the court’s sanction before pursuing the substantive orders in their application. Accordingly, the learned Judge was not at fault in holding that the manner or form in which the sanction was sought did not render their application fatally defective. 52.Turning to the 2nd issue as to whether the learned Judge erred in holding that the consent order in issue was equally binding upon the 1st appellant, it is noteworthy what the learned Judge had to say:“ 48.It is not contested that on 13th October, 2015 through Gazette Notice No. 7715, the 1st defendant placed the 2nd defendant under receivership and appointed the Kenya Deposit Insurance Corporation as its Receiver Manager in accordance with Section 43(1) and (2) of the KDI Act. The consent was entered into on 15th July, 2016. It is therefore evident that consent between the 2nd defendant and the plaintiffs was entered into during the pendency of the receivership. 49.Section 43(1) of the KDI Act provides that the Central Bank shall, in consultation with the Cabinet Secretary whenever the circumstances require, appoint the corporation to be the sole and exclusive Receiver of any institution. I am therefore of the considered view that pursuant to the provisions of Section 43 of the said Act, after the appointment of KDIC by the 1st defendant, KDIC gave frequent reports and recommendations to the 1st defendant herein, and therefore, upon placing a the 2nd defendant under receivership, the 1st defendant herein, took over the control of the 2nd defendant by operation of the law …. 51.In light of the forgoing, it is discernible that at the time the 2nd defendant gave an undertaking through a consent entered into on 15th July, 2016, the Kenya Deposit Insurance Corporation which had been appointed as the 2nd defendant’s Official Receiver, was in control of the businesses and affairs of the 2nd defendant and carried on the business and management of the 2nd defendant’s assets, liabilities and affairs. Therefore, the 2nd defendant could only have entered into the said consent of 15th July, 2016, with the full knowledge and approval of KDIC and the 1st defendant. This Court finds that it is improper for the 1st defendant to claim that the said consent is not binding to it when it assumed control of the 2nd defendant through KDIC when it placed the 2nd defendant under receivership. 51.Authorities abound to the effect that a consent order can only be set aside if it can be demonstrated that it was procured through fraud, non-disclosure of material facts or mistake or for a reason which would enable a Court set it aside …. 53.In the present circumstances, I hold that the consent entered into on15th July, 2016 between the plaintiffs and the 2nd defendant when it was under receivership had the ripple effect, of not only binding the 2nd defendant but the 1st defendant as well.” 53.Expressing a contrary view, counsel for the 1st appellant submitted that the 1st appellant neither gave any undertaking nor assumed any contractual obligations under the consent. According to counsel, it was the 2nd appellant that gave a qualified undertaking. In their opinion, the learned Judge erred by going against a well-established principle laid down in National Bank of Kenya Limited v Pipeplast Limited, Samkolit (K) Limited and Another [2001] KECA 362 (KLR) that courts should not re-write or interfere with parties’ agreements/contracts unless undue influence or coercion was applied at the time of making the agreement. 54.Counsel further submitted that section 51 of the Act in no uncertain terms provides for the autonomy of the KDIC as receiver and that it shall not be subject to the directions or supervision of any other entity in the exercise of its rights, powers and privileges; that, by CBK placing Imperial Bank under receivership and receiving reports from KDIC pursuant to section 43(1) of the Act does not imply or amount to taking over control of the 2nd appellant; that at no time did the 1st appellant take control of the 2nd appellant by operation of law or otherwise; and that section 45(1) of the Act does not make the consent binding upon CBK. 55.Counsel for the respondents submitted that, as the proceedings of the High Court show, both appellants were part and parcel of the negotiations leading to the consent recorded on 15th July 2016; that, after the learned Judge recorded the consent, the parties’ respective counsel, including Mr. Chege for the 1st appellant, appended their signatures; and that the 1st appellant not only confirmed the consent orally but also signified its acceptance through execution by its counsel. 56.According to counsel, the reason why the 1st appellant participated in the negotiations, confirmed and signed the consent, was because it was the 2nd appellant’s statutory regulator and the one that appointed the receiver manager and, subsequently, the liquidator. Counsel further submitted that the 1st appellant was always in charge of Imperial Bank’s affairs through the receiver manager and liquidator; and that, without the 1st appellant’s approval and signature, the consent would not have been recorded in court, and would not have had any legal effect. 57.It is instructive that, even though the consent was signed by counsel for the 1st appellant, none of the terms of the consent recorded by the parties imposed any obligation upon the 1st appellant to perform any act. It was only the 2nd appellant that gave the undertaking to pay any sums adjudged as due to the 1st and 2nd respondents upon hearing and determination of the suit. To our mind, the 1st appellant’s liability in the circumstances of this case would only be confined to the statutory obligations under the Act. In any event, the 1st appellant did not take control of the 2nd appellant by operation of law by virtue of having appointed KDIC as the 2nd appellant’s receiver and, subsequently, as its liquidator. It is not lost on us that KDIC operates as an agent of the institution under receivership, but does not assume its liabilities. 58.Section 50(7)(b) of the Act only requires the 1st appellant’s assistance in situations of systemic risk, primarily in an advisory or technical role. Section 50 provides that:50.Receivership powers… ….(5)Where the Corporation exercises one or more powers under this section, the Corporation shall not, by reason of the exercise of such powers, be held to have assumed or incurred any obligation or liability of the institution for its own account.… ….(7)In undertaking its functions under this Part, the Corporation may—a.….b.in circumstances that pose systemic risk and in order to minimize moral hazard and resolution costs while preserving banking services in case of an institution’s failure adopt various resolution mechanisms as may be prescribed with the assistance of the Central Bank and the Government.….(10)The Central Bank shall in circumstances that pose systemic risk provide technical assistance to restore the financial and economic condition of an institution. 59.It must also be borne in mind that the independent role of KDIC as a receiver of a financial institution is set out in section 51(1) of the Act in the following words:51.Autonomy of Corporation as receiver1.Upon appointment as receiver pursuant to this Act, the Corporation shall not be subject to the direction or supervision of any other entity in the exercise of the Corporation’s rights, powers, and privileges. 60.To our mind, none of the terms of the consent, which had a contractual effect, imposed any binding liability upon the 1st appellant. Accordingly, the learned Judge’s finding was tantamount to varying and/or re-writing the contract between the parties. 61.In John Maina Warui v Othaya Boys’ High School [2014] KECA 529 (KLR), this Court held that:“14. Circumstances under which a consent judgment may be interfered with were considered in the case of Brooke Bond Liebig (T) Limited vs Maliya - (1975) E.A. 266. It was stated that prima facie, any order made in the presence and with the consent of counsel is binding on all parties to the proceedings or action and those claiming under them and cannot be varied or discharged unless obtained by fraud or collusion or by an agreement contrary to the policy of the court or if the consent was given without sufficient material facts or in misapprehension or ignorance of material facts or in general for a reason which would enable the court to set aside an agreement …. A consent order has contractual effect upon the parties.” 62.In Pius Kimaiyo Langat v Co-operative Bank of Kenya Limited [2017] KECA 152 (KLR), this Court also held that:“ 38.We are alive to the hallowed legal maxim that it is not the business of courts to rewrite contracts between parties. They are bound by the terms of their contracts, unless coercion, fraud or undue influence are pleaded and proved. See National Bank of Kenya Ltd vs Pipeplastic Samkolit (K) Ltd [2002]2 EA 503.The primary task of the court is to construe the contract and any terms implied in it. See Megarry, J. in the case of Coco vs A. N. Clark (Engineers) Ltd. - [1969] RPC 41.” 63.In view of the foregoing, we find that the learned Judge was at fault in holding that the consent order in issue was equally binding upon the 1st appellant. To the contrary, its terms were binding on the 2nd appellant and on the respondents’ subject, however, to the law governing the administrative and judicial proceedings in receivership and liquidation of bodies corporate, the intricacies into which we need not delve or pronounce ourselves thereon. 64.Next comes the 3rd question as to whether the learned Judge erred in directing the appellants to give an undertaking to pay any sums adjudged as due the 1st and 2nd respondents on final determination of their claims. In this regard, the learned Judge held:“56… It is worth noting that the suit herein is yet to be heard and determined on its merits therefore, this Court cannot grant an order for deposit of USD 7,277,314.91 in a joint interest earning account in the names of the Advocates on record as it would amount to usurping the powers of the Liquidator, pre-empting the outcome of the main suit which is yet to be heard and determined on merits and giving preferential treatment to the plaintiffs contrary to the provisions of Section 50(2) of the KDI Act. 57.This Court cannot on the other hand ignore the fact that there is a binding consent that has not been set aside. I therefore agree with Mr. Oluga for the plaintiffs that this Court should give an order with the aim of protecting the plaintiffs interest in the event they ultimately succeed in their claim herein, as the same will serve the intended purpose of the consent on record. 58.The upshot is that the application herein is merited and it is allowed…” 65.Understandably, counsel for the 1st appellant chose to differ and submitted that, when the consent was recorded, the 2nd appellant was already under receivership, and that a moratorium was in force under section 50(2) of the Act; that the respondents should not have been treated differently from the other depositors; and that the order given directing payment of any judgment sums in favour of the two respondents was not only discriminatory, but also prohibited by section 50(2) of the Act. 66.On their part, counsel for the 2nd appellant submitted that the learned Judge had no jurisdiction to compel the 2nd appellant to furnish an undertaking in the terms of the impugned orders; that settlement of a decree is governed by law and the Civil Procedure Rules; that in making the order, the learned Judge was seeking to circumvent statutory provisions that prohibit execution of decrees against the 2nd appellant and, in the process, accord preferential treatment to the 1st and 2nd respondents as depositors in breach of section 50 (9) of the Act; that the consent was recorded at a time when the 2nd appellant was under receivership, and in line with the Act; that, after the 2nd appellant was placed in liquidation during the pendency of the suit, the consent ceased to be enforceable at law; and that the undertaking imposed by the court was contrary to statute, as section 56(3) of the Act provides that no attachment and/or execution may be undertaken while an institution is in liquidation. 67.Counsel cited the case of Kwanza Estates Limited v Dubai Bank of Kenya Limited (In Liquidation) & another [2016] KECA 465 (KLR) for the proposition that no attachment, execution or other method of enforcement may take place or continue on a company in liquidation. Counsel submitted that the 1st and 2nd respondents, like all other depositors, are entitled to a refund of their deposits once the liquidation process is finalized and all assets realized; that, however, the refund must conform to the provisions of the Act; and that there can be no preferential treatment to any depositor or creditor as sought by the 1st and 2nd respondents. According to counsel, the respondents admitted in their submissions dated 27th June 2022 that they were not challenging the 2nd appellant’s liquidation. 68.Counsel for the 1st and 2nd respondents submitted that the appellants would not suffer any prejudice by giving the undertaking as ordered by the learned Judge; that all the judge ordered them to do was to commit that they will honour the decree; that a defendant in a case is expected to honour the decree; that this is a legal obligation bestowed upon the defendant, whether the court says it or not; and that the only difference here is that the court stated in the impugned ruling that the appellants will be required to honour the decree and ordered them to state as much by giving its undertaking to that effect. 69.Counsel further submitted that there was an undertaking in the same fashion given by consent of all the parties on 15th July 2016; and that both appellants were part and parcel of the negotiations leading to the consent. Counsel argued that the reason why the appellants are doing everything possible to make sure they do not give the undertaking is because they want to completely wind up the 2nd appellant through the liquidation process so that if the High Court case finally succeeds, there will be nothing left to satisfy the decree. According to counsel, the 1st appellant is a public institution charged with regulating the banking sector to ensure the protection of depositors. 70.Counsel contended that, instead of protecting the 1st and 2nd respondents, who deposited with the 2nd appellant a colossal sum of money amounting to Kshs. 1 Billion, the 1st appellant has put up a spirited fight to see that, if successful, the respondents’ judgment is fully liquidated; and that the appellants are not acting in good faith or in the interest of justice and the public when they resist the attempt by the two depositors to recover their money. 71.We take to mind the provisions of section 50(2) of the Act, which provides:50.Receivership powers2.For the purposes of discharging its responsibilities as receiver, the Corporation shall have power to declare a moratorium on the payment by the institution to its depositors and other creditors and the declaration of the moratorium shall—(a)be applied equally and without discrimination to all classes of creditors:Provided that the Corporation may offset the deposits or other liabilities owed by the institution to any depositor or other creditor against any loans or other debts owed by that depositor or creditor to the institution; ….” 72.Our reading of the afore-cited provision is that, from the moment the 2nd appellant was placed in receivership, the moratorium on all payments to, or preferential treatment of, depositors and other creditors otherwise than in accordance with the Act, took effect and remained in force. It is also not lost on us that section 56(3) of the Act is emphatic that no attachment, garnishment, execution or other method of enforcement of a judgment or order against an institution placed under liquidation, or its assets, may take place or continue. 73.To our mind, sections 33 and 57 of the Act clearly set out the framework for payment of claims by the liquidation agent. Those provisions do not classify debts due to depositors who have filed claims against the institution in court, or depositors who have secured a judgment, as being among the debts that may be given priority to all other debts. 74.In view of the afore-cited statutory provisions, we reach the respectful conclusion that the impugned orders of the High Court compelling the 2nd appellant to give the undertaking amounted to creating an avenue of enforcement of the judgment in the 1st and 2nd respondent’s suit in a manner that circumvented the provisions of section 56(3) of the Act, thereby according preferential treatment to the 1st and 2nd respondents over other depositors contrary to the provisions of sections 33 and 57 of the Act. 75.Purely for comparison, we borrow a leaf from the decision in Kirtesh Premchand Shah v. Trust Bank Limited (supra) where this Court, with reference to the provisions of the now repealed Companies Act, held that:“The elaborate provisions and procedures under Part VI of the Act and “The Companies (Winding Up) Rules” made thereunder attest to the jealous concern of the court in guiding the process of liquidation ….In Palmers Company Law, Volume 1 (22nd Edition) we find the following passage:‘The object of the winding-up provisions of the Companies Act 1862’, said Lindley L.J. in Re Oak Pitts Colliery Co., ‘… is to put all unsecured creditors upon an equality and to pay them pari passu.’ To accomplish this it was indispensable that proceedings against the company by way of action, execution, distress or other process should be suspended; otherwise the winding up would resolve itself into a scramble for the assets….” 76.Those principles apply in equal measure to the winding up and liquidation of banking institutions as was the case here. In our considered view, the learned Judge erred in granting the impugned orders with the aim of breathing new life into the terms of the consent agreement entered into when the 2nd appellant was still in receivership. Such an undertaking by the 2nd appellant after being placed under liquidation would be in violation of section 56(3) of the Act. 77.Turning to the 4th issue as to whether the learned Judge was at fault in making the discharge of the ex-parte stay orders conditional upon an undertaking by the appellants, counsel for the respondents submitted that the issues relating to the question as to whether the 2nd appellant’s liquidation should continue are moot because the order made by the learned Judge staying the liquidation process until the appellants gave the undertaking in the prescribed terms was stayed by this Court vide its ruling dated 26th May 2023 after which the liquidation process continued and, based on the notices published by the Liquidation Agent from time to time, could possibly be at its final stages. According to counsel, the order staying liquidation has been overtaken by events and, in the circumstances, this court need not pronounce itself thereon. 78.We agree with counsel for the respondents, who conceded that the impugned conditional stay has been overtaken by events and need not say more thereon as it has been rendered moot, save to underscore the fact that the learned Judge was at fault in granting those orders contrary to statute law on liquidation of banks and other bodies corporate (see: Kenya Deposit Insurance Corporation v Richardson & David Limited and Another [2017] eKLR, which enunciated the principle that specialized institutions, such as the 1st appellant and KDIC should be left to discharge their statutory functions in receivership and liquidation, and that courts do well to steer away from the temptation to micromanage them unprocedurally against the grain of section 5(1) of the Act. And that settles the 4th issue before us. 79.As to whether the learned Judge erred in granting prayers not sought in the application, counsel for the 2nd appellant submitted that the learned Judge granted leave to the respondents to have their application, subsequent applications and the main suit heard while the 2nd appellant was in liquidation; that The learned Judge was also at fault by purporting to extend the ex-parte orders granted on 22nd December 2021; that it is trite law that parties are bound by their pleadings, and that a court cannot grant orders not sought by a party in its pleadings; that the respondents had only sought leave to have their application heard during the High Court’s recess, and did not seek any sanction required under section 56(2) of the Act or extension of the interim orders; and that, by granting the sanction and extending the ex-parte orders, the learned Judge made orders not sought by the respondents in their application. 80.Counsel cited the case of Antony Francis Wareham t/a AF Wareham & 2 others v Kenya Post Office Savings Bank [2004] KECA 166 (KLR) for the proposition that cases are tried and determined on the basis of the pleadings made and the issues of fact or law framed by the parties or the court on the basis of those pleadings; and that a court should not make any findings on unpleaded matters or grant any relief not sought by a party in the pleadings. 81.In addition to the foregoing, counsel cited the case of Ngorika Farmers Co-Operative Society Ltd v John Kiarie & 2 others [2006] KEHC 3019 (KLR) where this Court held that “where there was no prayer for any injunction whatsoever in the plaint, orders sought by the plaintiff in an application for injunction could not issue in the circumstances.” 82.It is noteworthy that the respective counsel for the 1st appellant and for the respondents did not make any submissions on this issue. 84.In our considered view, the learned Judge erred in granting leave to the 1st and 2nd applicants to have subsequent applications and the main suit heard when Imperial Bank was still in liquidation. It is worth noting, though, that the respondents had neither sought such sanction in their application nor canvassed the same at the hearing of the application. In effect, such sanction did not arise as an issue framed by the parties for determination. 85.We form this view taking to mind this Court’s decision in Galaxy Paints Company Ltd v Falcon Guards Ltd [2000] KECA 215 (KLR) where the Court held that:“It is trite law … that issues for determination in a suit generally flow from the pleadings, and unless pleadings are amended in accordance with the provisions of the Civil Procedure Rules, the trial court … may only pronounce judgment on the issues arising from the pleadings or such issue as the parties have framed for the court's determination.” 86.The only exception to that general rule was appreciated in Kinyanjui Kamau v George Kamau Njoroge [2015] eKLR where the High Court persuasively held that:“Of course, if an issue arises in the course of hearing, and the same is fully canvassed by the parties, then even if that issue was not pleaded, then the court will make a determination on the matter. As was held in Odd Jobs v Mubia [1970] EA 476, ‘a court may base its decision on an unpleaded issue if it appears from the course followed at the trial that the issue has been left to the court for [its] decision.’” 87.Finally, the question of who bears the costs of the appeal commends itself for our determination on the principle that costs follow the event. It is not lost on us that the 1st and 2nd respondents commenced proceedings in their suit against the appellants in an attempt to use the court process to secure preferential treatment in the face of clear statutory provisions that govern liquidation and winding up, and which do not permit such treatment. But for their suit, none of the appellants would have been subjected to costs in the lower court and on appeal to this Court. In our considered view, the two respondents must shoulder the costs of the appeal notwithstanding the public-interest nature of the dispute arising from the process of receivership and liquidation of the 2nd appellant. 88.Having carefully considered the records of the two consolidated appeals, the grounds on which each was anchored, the rival submissions of the parties, the cited authorities and the law, we come to the inescapable conclusion that the two appeals succeed.Accordingly, we give the following orders and directions, namely that:a.the 1st appellant’s Civil Appeal No. E008 of 2023 and the 2nd appellant’s Civil Appeal No. E010 of 2023 be and are hereby allowed;b.the Ruling and Orders of the High Court of Kenya at Mombasa (Njoki Mwangi, J.) dated 25th November 2022 be and is hereby set aside; andc.the costs of the two appeals be borne by the 1st and 2nd respondents.It is so ordered. DATED AND DELIVERED AT MOMBASA THIS 15TH DAY OF MAY, 2026.F. TUIYOTT..................................JUDGE OF APPEALDR. K. I. LAIBUTA CArb, FCIArb............................................JUDGE OF APPEALF. W. NGENYE-MACHARIA...........................................JUDGE OF APPEALI certify that this is a true copy of the originalSignedDEPUTY REGISTRAR