https://new.kenyalaw.org/akn/ke/judgment/kehc/2026/9776

Commissioner of Customs and Border Control v Pesapal Limited (Commercial Application E012 of 2024) [2026] KEHC 9776 (KLR) (Commercial and Tax) (2 July 2026) (Ruling) Neutral citation: [2026] KEHC 9776 (KLR) Republic of Kenya In the High Court at Nairobi (Milimani Commercial Courts) Commercial and Tax Commercial Application E012 of 2024 F Gikonyo, J July 2, 2026 Between Commissioner of Customs and Border Control Appellant and Pesapal Limited Respondent Ruling Extension of lapsed stay pending appeal 1.The respondent/ applicant filed the notice of motion dated 21.4.2026 primarily under section 54 of the Tax Procedures Act and Order 42 Rule 6 of the Civil Procedure Rules. 2.The applicant seeks the following: -1.Extension of the lapsed orders of stay of execution issued on 8.2.2026 pending the hearing and determination of its appeal to the Court of Appeal;2.An order restraining the appellant/ respondent whether by itself, its agents or through the Kenya Revenue Authority from enforcing, recovering or in any manner acting upon the contested tax demand; and3.Stay of execution of the judgment delivered on 8.8.2025 pending the hearing and determination of the appeal before the Court of Appeal. 3.The application is supported by an affidavit sworn by the applicant’s executive director, Agosta Malava Liko on 21.4.2026. The core grounds are that: -1.The court granted an interim stay of execution on 8.2.2026 for 60 days to preserve the substratum of the appeal before the Court of Appeal.2.The stay has since lapsed.3.The respondent has issued agency notices requiring payment of Kshs. 5,308,004/-, the alleged principal taxes, penalties and accrued interest.4.The applicant operates a critical payment infrastructure as a licensed payment service provider, and any disruption to its operations has far-reaching consequences on third parties, merchants and the financial ecosystem, thereby raising public interest considerations.5.Unless the court extends stay of execution, orders lifting enforcement measures and directs unfreezing of applicant’s bank accounts, the intended appeal will be rendered nugatory. 4.The appellant/ respondent opposed the application through a replying affidavit sworn by its officer, Elizabeth Kashindi on 4.4.2026. 5.Its main contentions are: -1.The applicant has not given a reason for the default of the conditional stay order which has since lapsed.2.The court lacks jurisdiction to extend the stay order.3.The court is functus officio.4.The application for extension of the stay order is disguised as review. Analysis and Determination 6.The stay orders granted have lapsed. The application before me seeks extension of the lapsed orders. Is the Extension of stay of execution issued on 5.2.2026 merited? 7.The orders of 5.2.2026 were as follows: -“ 27.The respondent/ applicant’s application 22.8.2025, is allowed in the following terms: -(1)A stay of execution of judgment dated 8.8.2025 together with the demand notice for Kshs.4,960,751 is issued pending the hearing of the appeal or further orders of the court on condition that the applicant shall provide a bank guarantee from a reputable bank for Kshs.4,960,751 within 60 days from today to the commissioner/ respondent and shall provide a copy to Court through the DR Commercial & Tax Division.(2If the applicant fails to comply with these orders within the time allowed, the stay order will lapse automatically.3)No orders as to costs as there was no response.” 8.During mention for directions on the instant application on 4.5.2026, the applicant indicated that delay in compliance was due to its inability to raise the deposit. The respondent opposed the extension because stay was conditional. 9.The court stayed the agency notice until delivery of the ruling slated for 2.7.2026. The court also directed the applicant to deposit the security within 3 days failure to which the stay order lapses and execution to issue. 10.The applicant filed a copy of the bank guarantee no. MD2612500005C for Kshs. 4,961,751.00 issued on 5.5.2026 by KCB Bank Kenya Ltd in respect of this matter. 11.The bank guarantee was issued within the additional three days granted by the court. By granting a further 3 days to the applicant to comply by issuing the bank guarantee, the court effectively enlarged the time for compliance. The condition attached to the stay order has been satisfied and the stay remains operative. 12.The prayers for extension of the lapsed orders of stay of execution issued on 5.2.2026 has been overtaken by events. A request for an order restraining the appellant/ respondent whether by itself, its agents or through the Kenya Revenue Authority from enforcing, recovering or in any manner acting upon the contested tax demand is subsumed in the stay granted herein. KRA should accordingly oblige. Respondent’s objections No explanation 13.The respondent argued that the applicant offered no explanation for the default. However, on 4.5.2026, the applicant indicated that delay in compliance was due to its inability to raise the deposit. This was considered by the court, and the alleged default has been cured by the subsequent court order and compliance therewith. Jurisdiction and functus officio 14.I have designed to tackle this objection last. 15.The respondent argued that the court lacks jurisdiction to extend the lapsed stay orders which were conditional. It also contended that the court having issued the conditional stay orders was functus officio. 16.A court become functus officio when the matter is finally determined and there is no residual jurisdiction under the statute or rules. 17.Post-judgment, the court has jurisdiction, say, to issue stay of execution or structural interdicts, or to tap from inherent power of the court in limited cases. 18.In this case, post-judgment, the court has jurisdiction to grant stay of execution pending appeal under Order 42 Rule 6 of the Civil Procedure Rules. As the appeal is to the Court of Appeal; ‘For the purposes of this rule an appeal to the Court of Appeal shall be deemed to have been filed when under the Rules of that Court notice of appeal has been given.’ Order 42 Rule 6 of the Civil Procedure Rules. 19.The conditional stay orders were issued on 5.2.2026 pursuant to Order 42 Rule 6 of the Civil Procedure Rules and extended on 4.5.26. 20.In my considered view, the conditional stay as reinstated and reissued for three days on 4.5.26 has not lapsed; was complied within the permitted three days. Thus, divesture of the court’s jurisdiction does not arise. 21.For these reasons, the court finds that the respondent’s objections under this head are without merit. A review? 22.On the basis of my decision herein, the proposition that the application is a disguised review is redundant. Agency notices for Kshs. 5,308,004/- 23.The respondent issued an agency notice dated 16.4.2026 for Kshs. 5,308,004/- freezing the applicant’s bank accounts. It contended that the conditional stay orders lapsed on 4.4.2026. 24.The applicant urged the court to grant stay of execution pending its appeal. It argued that the freezing of its accounts and the ongoing enforcement actions are severely impeding its operations including its ability to provide licensed payment services, meet its financial obligations and serve its customers and stakeholders. That, if the actions proceed, its appeal will be rendered nugatory. 25.The stay orders were issued on 5.2.2026. They lapsed 60 days thereafter on 6.4.2026. The agency notice was issued when the stay orders had lapsed. 26.However, any further enforcement actions would contravene the subsequent reinstatement of conditional stay orders on 4.5.2026, which were duly complied with on 5.5.2025. It is therefore appropriate and in the interest of justice that the agency notice of 16.4.2026 be stayed pending the appeal or further orders of the Court of Appeal or this court as the law provides or permits. Disposal 27.In conclusion, the stay orders of 5.2.2026 were subsequently reinstated and reissued on 4.5.2026 on specific terms and were complied with following the provision of the bank guarantee by the applicant as directed by the court on 4.5.2026. 28.In the upshot: -1.A stay of execution of the agency notice of 16.4.2026 is issued pending the hearing of the appeal or further orders of the court.2.The applicant to provide KRA with the original bank guarantee by end of the day.3.Each party to bear its costs. DATED, SIGNED AND DELIVERED AT NAIROBI THROUGH MICROSOFT TEAMS ONLINE APPLICATION THIS 2ND DAY OF JULY, 2026-------------F. GIKONYO MJUDGEIn the presence of: -Ochieng for AppellantMs Onsongo for RespondentCA – Ivan/Aggrey