https://new.kenyalaw.org/akn/ke/judgment/kehc/2026/6664

In re Chemelil Sugar Company Limited (Insolvency Cause E008 of 2020) [2026] KEHC 6664 (KLR) (Commercial & Admiralty) (14 May 2026) (Judgment) Neutral citation: [2026] KEHC 6664 (KLR) Republic of Kenya In the High Court at Nairobi (Milimani Commercial Courts) Commercial and Admiralty Insolvency Cause E008 of 2020 PM Mulwa, J May 14, 2026 IN THE MATTERS OF CHEMELIL SUGAR COMPANY LIMITED AND IN THE MATTER OF THE INSOLVENCY ACT 2015 IN THE MATTER OF THE COMPANIES ACT 2015 Judgment 1.Before the Court is the Petition dated 15th November 2019 by the Petitioner, Multipackaging Limited, seeking liquidation of the Company, Chemelil Sugar Company Limited, on account of an alleged indebtedness of Kshs. 3,919,534.85. 2.The Petition is supported by the Verifying Affidavit of Parag Savani, sworn on 15th November 2019, together with the annexures thereto. The Petitioner’s case is that it supplied goods to the Company, which remained unpaid as at 26th July 2017. Consequently, the Petitioner instituted Nairobi CMCC No. 9060 of 2017, Multipackaging Limited t/a Printpak v Chemelil Sugar Company Limited, wherein judgment was entered in its favour and a decree issued for the sum of Kshs. 3,919,534.85 together with costs and interest. 3.The Petitioner contends that despite demand and the existence of the decree, the Company has failed, neglected and/or refused to settle the decretal sum and is therefore unable to pay its debts within the meaning of the Insolvency Act. The Petitioner urges the Court to liquidate the Company. 4.The Petition is opposed. The Company filed a Replying Affidavit sworn on 11th December 2020 and a Supplementary Affidavit sworn on 28th March 2022 by Pauline Akello, its Legal Officer. 5.The Company avers that it is neither insolvent nor incapable of paying its debts. It contends that although it has experienced financial difficulties, it remains commercially viable and efforts are being undertaken by the Government of Kenya through the Ministry of Agriculture, Livestock, Fisheries and Cooperatives to revive its operations. The Company further states that there are ongoing plans to lease the sugar mills with a view to restoring profitability and enhancing its ability to settle outstanding liabilities. 6.The Company therefore argues that liquidation would be premature, unjust and contrary to the public interest, particularly given its strategic role in the sugar sector and the ongoing revival initiatives. 7.The Petition was canvassed by way of written submissions, which I have considered together with the pleadings and the law. 8.The issue for determination is whether the Petitioner has established grounds to warrant liquidation of the Company. 9.The law governing liquidation on account of inability to pay debts is found in the Insolvency Act, No. 18 of 2015. Section 424(1)(e) of the Insolvency Act provides that a company may be liquidated by the Court if the company is unable to pay its debts. 10.Section 384 of the Insolvency Act provides the circumstances in which a company may be deemed as being unable to pay its debts in the following words:“(1)For the purposes of this Part, a company is unable to pay its debtsa.if a creditor (by assignment or otherwise) to whom the company is indebted for hundred thousand shillings or more has served on the company, by leaving it at the company's registered office, a written demand requiring the company to pay the debt and the company has for twenty-one days afterwards failed to pay the debt or to secure or compound for it to the reasonable satisfaction of the creditor;b.if execution or other process issued on a judgment, decree or order of any court in favour of a creditor of the company is returned unsatisfied in whole or in part; orc.if it is proved to the satisfaction of the Court that the company is unable to pay its debts as they fall due.(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). 11.However, the jurisdiction to liquidate a company is discretionary and must be exercised judiciously. Liquidation is a drastic remedy whose effect is to bring the life of a company to an end. Consequently, the Court must be satisfied not merely that a debt exists, but that the company is truly unable to pay its debts and that liquidation is appropriate in the circumstances 12.Section 427(1) of the Insolvency Act states:“On the hearing of a liquidation application, the Court may make such of the following orders as it considers appropriatea.an order dismissing the application;b.an order adjourning the hearing, conditionally or unconditionallyc.an interim liquidation order; ord.any other order that, in its opinion, the circumstances of the case require.” 13.In the present case, it is not disputed that the Petitioner is owed the decretal sum arising from the judgment in Nairobi CMCC No. 9060 of 2017. It is also not in dispute that the Company proposed to liquidate the debt by monthly instalments of Kshs. 300,000/=, which proposal was not fully honored, although the Company had, by 21st January 2025, paid a sum of Kshs. 1.2 million towards the debt. 14.The material placed before the Court further demonstrates that the Company remains operational and that there are ongoing governmental efforts aimed at reviving its operations through leasing arrangements intended to restore profitability and improve its ability to settle outstanding liabilities. 15.The Court takes judicial notice of the critical role played by public sugar companies in the national economy, particularly with regard to employment, the livelihoods of farmers, and the welfare of surrounding communities. Liquidation of such an entity would therefore have far-reaching economic and social consequences. 16.In re Ukwala Supermarket Limited [2019] KEHC 7877 (KLR) the court stated thus:“In any petition brought for the purpose of liquidating a company, the court has the discretion once the petitioner has established the right to bring a petition and the grounds alleged, to make or deny the order sought. By the same vein, the court also has inherent jurisdiction to strike out any petition which is bound to fail or is an abuse of the process of the court.” 17.While the existence of the decretal sum is not disputed and the Company has admittedly experienced financial difficulties, the evidence before the Court shows that partial payments have been made towards settlement of the debt and that there exist ongoing efforts directed at the Company’s financial recovery. 18.In determining whether to grant a liquidation order, the Court must balance the interests of the creditor against the broader objectives of insolvency law and the public interest. The mere existence of a debt, even where undisputed, does not inexorably lead to liquidation. 19.Having considered the circumstances of this case, I am not persuaded that the Company has reached a state of hopeless or irretrievable insolvency warranting liquidation. The evidence placed before the Court demonstrates ongoing efforts towards financial recovery and settlement of liabilities. 20.I am therefore satisfied that the interests of justice would not be served by placing the Company under liquidation at this stage, particularly in view of the ongoing revival efforts and the wider public interest considerations attendant to the operations of the Company. 21.The Petition dated 15th November 2019 is hereby dismissed. 22.Considering the admitted indebtedness and the circumstances of the matter, each party shall bear its own costs. JUDGMENT DELIVERED VIRTUALLY, DATED AND SIGNED AT NAIROBI THIS 14TH DAY OF MAY 2026.P.M. MULWAJUDGEIn the presence of:Ms. Muhorofor PetitionerMs. Osodo h/b for Mr. Kounahfor RespondentCourt Assistant: Lispa