[2017] KEHC 9992 (KLR)

REPUBLIC OF KENYA

IN THE HIGH COURT OF KENYA AT NAIROBI

MILIMANI LAW COURTS

COMMERCIAL & TAX DIVISION

CIVIL CASE NO. 242 OF 2017

DILESH SOMCHAND BID...……………………..…........PLAINTIFF

-VERSUS-

RASIKLAL KANTARIA.............…………..............1ST DEFENDANT

STEVE OMENGE JOHNSON MAINDA..................2ND DEFENDANT

PETER THINWA WARUTERE.................................3RD DEFENDANT

TAUSI ASSURANCE COMPANY LIMITED............4TH DEFENDANT

INSURANCE REGULATORY AUTHORITY..............5TH DEFENDANT

RULING

[1]The Plaintiff, Dilesh Somchand Bid, filed this suit on 8 June 2017,through the law firm of Issa & Company Advocates, praying for Judgment against the Defendants jointly and severally as follows:

[a]A declaration that the appointment of Steve Omenge Johnson Mainda (the 2nd Defendant) and Peter Thinwa Warutere by the 4th Defendant without complying with the Corporate Governance Guidelines for Insurance and Reinsurance Companies is null and void;

[b] A declaration that the appointment of Steve Omenge Johnson Mainda and Peter Thinwa Warutere by the 4th Defendant without adherence to the agreement made on 11 February 2015 between the Plaintiff and the 1st Defendant and ratified by the Board of Directors is null and void;

[c]A Declaration that the approval by the 5th Defendant of the appointment of Steve Omenge Johnson Mainda and Peter Thinwa Waruterewithout ensuring that there was compliance was in violation of its statutory duty and therefore the approval is null and void.

[d] An Order of Permanent Injunction to restrain Steve Omenge Johnson Mainda and Peter Thinwa Warutere from acting, discharging, sitting or in any way carrying on as directors of the 4th Defendant;

[e] A Mandatory Injunction to issue against the 5th Defendant to compel it to revoke the approval of Steve Omenge Johnson Mainda and Peter Thinwa Warutere as directors of the 4th Defendant and to compel the 4th Defendant to comply with the provisions of the Corporate Governance Guidelines for Insurance and Reinsurance Companies;

[f]An order that in default of the 4th Defendant complying with the Corporate Governance Guidelines for Insurance and Reinsurance Companies, the matter be referred to the Commissioner for Insurance to cancel the 4th Defendant's Insurance Licence;

[g] General Damages against the 1st Defendant;

[h] Costs of the suit;

[i] Any other or further relief as the court may deem appropriate.

[2] The brief background of the matter, as can be gleaned from the averments in the Plaint, are that both the Plaintiff and the 1st Defendant are shareholders and directors of the 4th Defendant. 1st Defendant is also the Chairman of the 4th Defendant's Board of Directors. It was the contention of the Plaintiff that in a meeting held at The Stanley Sarova on 11 February 2015 between the Plaintiff and the 1st Defendant in the presence of Mr. Rapinder Sehmi, also director of the 4th Defendant, it was agreed that all the decisions relating to the affairs of the 4th Defendant would be by agreement between the Plaintiff and the 1st Defendant; and that in the event of any conflict in regard to any issues, the matter would be referred to Mr. Rapinder Sehmi and his decision would be final.

[3]It was further the contention of the Plaintiff that pursuant to the agreement aforesaid, a Memorandum was executed between him and the 1st Defendant which was tabled before the Board of Directors on 25 November 2016 for endorsement and was duly ratified; and that pursuant to that Memorandum, the Managing Director of the 4th Defendant, Ritta Thatthi, forwarded a letter from the 1st Defendant as the Chairman of the Board of Directors for discussion at the next Board meeting, and that some of the documents thus forwarded were the Curriculum Vitae for the 2nd and 3rd Defendants, and indicated that he wished to propose them two persons as directors of the 4th Defendant.

[4] The Plaintiff further averred that at a meeting of the Board of Directors held on 27 February 2017, the 1st Defendant proposed the appointment of the 2nd and 3rd Defendants as independent directors despite his objection thereto on the ground that the two had not been referred to the Nomination Committee for the due diligence inquiry; but that the 1st Defendant bulldozed his way at the Board meeting and had the two directors appointed without any fit and proper assessment being undertaken by the 4th Defendant's Nomination Committee and in disregard and breach of the 5th Defendant's Guidelines. The names were thereafter forwarded to the 5th Defendant, which approved the irregular appointment without satisfying itself that the two proposed directors had been subjected to the fit and proper test criteria. It was therefore the contention of the Plaintiff that the appointment of the 2nd and 3rd Defendants by the 4th Defendant and the approval by the 5th Defendant were in violation of the mandatory Corporate Governance Guidelines; and therefore null and void; hence the prayer for a Mandatory Injunction directing the 5th Defendant to revoke the approval and to compel the 5th Defendant to discharge its statutory mandate to ensure compliance with its Guidelines and the other prayers set out in the Plaint.

[5]Along with the Plaint, the Plaintiff filed the Notice of Motion dated 8 June 2017 seeking temporary injunction to restrain the 2nd and 3rd Defendants from acting, discharging, sitting or in any way carrying on as directors of the 4th Defendant pending the hearing and determination of both the application and the main suit. The application was supported by the Plaintiff's affidavit, sworn on 8 June 2017; which is, in the main, a reiteration of the averments in the Plaint.

[6] In response to the application, the 4th Defendant filed Grounds of Opposition dated 13 June 2017 through the law firm of Oraro & Company Advocates. Those grounds are:

[a]That the action is an abuse of the process as it is a dispute between the Plaintiff and the 1st Defendant;

[b] That the Plaintiff and the 1st Defendant unlawfully agreed to refer all the disputes in the 4th Defendant to be determined between themselves or Mr. Rapinder Sehmi, to the exclusion of the Board of Directors of the 4th Defendant, contrary to the provisions of the Companies Act, 2015 and the Articles of Association of the 4th Defendant;

[c] That the appointment of the 2nd and 3rd Defendants was carried out in accordance with the Articles of Association of the 4th Defendant and not in breach of the Corporate Governance Guidelines for Insurance and ReinsuranceCompanies, 2011 as purported by the Plaintiff;

[d]That the Plaintiff has not come to court with clean hands and does not deserve equitable remedies as the application is intended to facilitate the benefit of the Plaintiff to the prejudice of the 4th Defendant as is evident in the Memorandum dated 11 October 2016;

[e] That as evidenced in the Supporting Affidavit to the application, sworn by the Plaintiff, the dispute is not compliance with the Corporate Governance Guidelines for Insurance and Reinsurance Companies, 2011 but lack of agreement by the Plaintiff to the appointment of the two new directors irrespective of the Fit and Proper Purpose Criteria as indicated at paragraph 31 of the said affidavit.

[f] That the application is predicated on an illegality.

[7] Besides the Grounds of Opposition, the 4th Defendant filed a Notice of Preliminary Objection dated 13 June 2017, thereby giving notice that it would raise a Preliminary Objection to the hearing of the Plaintiff's application on a point of law, to the effect that there is not only an alternative remedy under Section 3A, 3E, 9,67(c)(ii) and 168 of the Insurance Act, Chapter 487 of the Laws of Kenya, but also that the Plaintiff had already invoked the same. The Preliminary Objection was canvassed by way of written submissions; and for the Plaintiff, Mr. Oraro, SC, filed his written submissions on 20 June 2017 while Mr. Issa filed written submissions on behalf of the Plaintiff on 28 June 2017.

[8] According to Mr. Oraro, there is an elaborate procedure set out in the Insurance Act for the settlement of any disputes falling within the jurisdiction of the 5th Defendant. He drew the attention of the Court to the provisions of Section 3A of the Act, by which the 5th Defendant is empowered to issue supervisory guidelines and prudential standards from time to time for the better administration of the insurance industry; and submitted that it was pursuant to that provision that the Guidelines were issued. Counsel also made reference to Section 67C(2)(ii)of the Act, by which the Commissioner, with the approval of the Board of the 5th Defendant, may remove any officer or employee of an insurance company who, in the opinion of the Commissioner, has caused or contributed to any contravention of any provision of the Act or regulations or directions made thereunder or to any deterioration in the financial stability of the insurer or has been found guilty of conduct detrimental to the interest of the policy holders; and posited that any person aggrieved by the decision of the Commissioner is under obligation, by dint of Section 168 and 173 to appeal to the Insurance Tribunal, which may, subject to such terms and conditions as it may consider necessary, uphold, reverse, revoke or vary such decision.

[9]In the premise, it was the contention of the Mr. Oraro that where there is a clear procedure for the redress of any particular grievance prescribed by the Constitution or an Act of Parliament, that procedure must be followed. Counsel relied on the cases of Speaker of National Assembly vs James Njenga Karume [1992] eKLRand Gladys Mwaniki & 6 others vs Gordon Oluoch & Others [2015] eKLRin support of his submissions that, in the circumstances, this Court has no jurisdiction to entertain the application or the suit itself. He accordingly urged for the striking out of the suit with costs to the 4th Defendant.

[10] Counsel for the Plaintiff, on his part, urged the Court to draw a distinction between the role of the Commissioner of Insurance while sitting as the Chief Executive Officer of the 5th Defendant and his role as the Commissioner of Insurance. It was therefore his submission that a decision made with the approval of the 5th Defendant under Section 67C(2)(ii) of the Insurance Act, arising from a contravention of the Corporate Governance Guidelines, is effectively a decision of the 5th Defendant and not the decision of the Commissioner of Insurance. Counsel further submitted that the jurisdiction of the Tribunal is limited to hearing appeals from the decision of the Commissioner of Insurance and does not have jurisdiction with respect to decisions made by the Insurance Regulatory Authority.

[11]With regard to Section 168 of the Insurance Act, it was the contention of Counsel that what is sought herein is a Mandatory Injunction to compel the 5th Defendant to perform its statutory duty; and that this is not a suit brought against the Board or the Cabinet Secretary in charge of Finance or any person authorized by them for acts done in good faith under the Act as is envisaged by Section 168(1) of the Insurance Act. For this reason, it was argued that the Plaintiff is well within his rights to bring forth the instant suit and that the Court has jurisdiction to determine the dispute before it to ensure that the rule of law is upheld. Accordingly, the Plaintiff urged the Court to dismiss the 4th Defendant's Preliminary Objection in order for his application for injunction to be heard and determined on its merits.

[12] As was enunciated in the case of Mukisa Biscuits Manufacturing Co. Ltd vs. West End Distributors [1969] EA 696:

"... a preliminary objection consists of a point of law which has been pleaded, or which arises by clear implication out of pleadings, and which if argued as a preliminary point may dispose of the suit. Examples are an objection to the jurisdiction of the court or a plea of limitation or a submission that the parties are bound by the contract giving rise to the suit to refer the dispute to arbitration."

And therefore the single issue for my determination, at this stage, is whether the point raised by Mr. Oraro, SC, is tenable as a Preliminary Objection.

[13]The 5th Defendant, as a public body, is a creature of Section 3 of the Insurance Act; and its objects and functions are set out in Section 3A of the Act; which include the formulation and enforcement of standards for the conduct of insurance and reinsurance business in Kenya. There is no gainsaying, therefore, that it was in that capacity that the 5th Defendant issued the Corporate Governance Guidelines for Insurance and Reinsurance Companies, 2011; which were signed by Sammy M. Makove in his capacity, not just as a Chief Executive Officer of the 5th Defendant, but also as a Commissioner. Clearly, the argument by the Plaintiff's Counsel that there is a distinction between the two roles, to my mind, amounts to mere splitting of hairs and is untenable, for Section 3E(1) of the Insurance Act is explicit that:

"There shall be a Commissioner of Insurance who shall be the Chief Executive Officer of the Authority and who shall be appointed by the Board ..."

[14]And Section 67C of the Act does give the Commissioner the mandate, pursuant to Section 67C(2)(iii) to intervene in the management of insurance companies, including the power to:

"... appoint three competent persons familiar with the business of insurers to its Board of Directors to hold office as directors who shall not be removed from office without the approval of the Commissioner."

In the premises, any grievances arising from such decisions must, of necessity be channeled through the avenue provided for in Section 173 of the Act, which stipulates that:

(1) A person aggrieved by a decision of the Commissioner under this Act may, within one month from the date on which the decision is intimated to him, appeal to the Tribunal which may, subject to such terms and conditions as it may consider necessary, uphold, reverse, revoke or vary that decision.

(2) Except as provided in this section the decision of the Tribunal on an appeal made to it under subsection (1) shall be final and conclusive.

(3) A person aggrieved by a decision of the Tribunal made under subsection (1) may, if it involves a question of law, within one month from the date on which the decision is intimated to him, appeal therefrom to the court.

[15] It is now trite that where there is a clear procedure for the redress of any particular grievance, then that procedure ought to be followed strictly. (See Speaker of the National Assembly vs. James Njenga Karume [1992] eKLR). Accordingly, I fully agree with the expressions by Odunga, J in Gladys Mwaniki (Regional Club) & 6 Others vs. Gordon Oluoch & 7 Others [2015] eKLR that:

"The Constitution ...clearly recognizes the role of independent tribunals in dispute resolution scheme. Accordingly, where there is an alternative remedy provided under an Act of Parliament, which remedy is effective and applicable to the dispute before the Court, the Court ought to ensure that that dispute is resolved in accordance with the relevant statute...where an obligation is created by statute and a specific remedy is given by that statute, the persons seeking the remedy is deprived of any other means of enforcement."

[16] In the foregoing premises, it is my considered finding that the Plaintiff's suit and the application filed therein dated 8 June 2017 are not only premature, but are also completely incompetent. I would accordingly uphold the Preliminary Objection and order that the suit be struck out accordingly with costs to Defendants.

Orders accordingly.

DATED, SIGNED AND DELIVERED AT NAIROBI THIS 22ND DAY OF SEPTEMBER, 2017

OLGA SEWE

JUDGE