[2006] KEHC 1479 (KLR)
The court held that the making of a receiving order under section 9(1) of the Bankruptcy Act does not automatically stay pending proceedings against the debtor. Instead, the court has discretion to order a stay, and such a stay may be included in the receiving order or granted upon application. The court further...
Source-derived case information.
- Citation
- [2006] KEHC 1479 (KLR)
- Parties
- Plaintiff: Hon. Ezekiel Kiplelei Barng'etuny; Defendant: Kenya Commercial Bank Ltd
- Court
- High Court
- Court Station
- High Court at Eldoret
- Jurisdiction
- Kenya
- Case Number
- Civil Case 186 of 2000
- Procedural Posture
- Civil Case / Ruling on Oral Application for Stay of Proceedings Following Receiving Order Under Bankruptcy Act
- Outcome
- Suit stayed pending notification and action by the Official Receiver.
- Judges
- AI Tullu
- Legal Topics
- Bankruptcy Proceedings, Stay of Proceedings, Receiving Order, Official Receiver Powers
- Source Language
- en
Source-derived case record
Summary, issues, holding and outcome
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Parties
Hon. Ezekiel Kiplelei Barng'etuny
Plaintiff
Kenya Commercial Bank Ltd
Defendant
Procedural Posture
Civil Case / Ruling on Oral Application for Stay of Proceedings Following Receiving Order Under Bankruptcy Act
Legal Issues
- 1 Whether the making of a receiving order under section 9(1) of the Bankruptcy Act mandates an automatic stay of pending court proceedings against the debtor.
- 2 Whether the court has discretion to stay proceedings in a suit pending at the time a receiving order is made.
- 3 What is the role of the Official Receiver in ongoing litigation involving the debtor after a receiving order.
Ratio Decidendi
The court held that the making of a receiving order under section 9(1) of the Bankruptcy Act does not automatically stay pending proceedings against the debtor. Instead, the court has discretion to order a stay, and such a stay may be included in the receiving order or granted upon application. The court further found that, following a receiving order, the Official Receiver becomes the receiver of the debtor's property and must be notified of all pending suits. The debtor loses capacity to act in litigation without the consent and involvement of the Official Receiver. Accordingly, the court ordered a stay of the suit until the Official Receiver is notified and decides whether to terminate...
Court Disposition
Suit stayed pending notification and action by the Official Receiver.
Orders
- The suit is stayed until the Official Receiver is notified and decides whether to terminate or take over the proceedings.
- The defendant is to serve all process in this suit on the Official Receiver.
Full Case Text
Judgment text and source record
25 paragraphs
REPUBLIC OF KENYA IN THE HIGH COURT OF KENYA AT ELDORET
Civil Case 186 of 2000
HON. EZEKIEL KIPLELEI BARNGETUNY .................................................................... PLAINTIFF
VERSUS
KENYA COMMERCIAL BANK LTD ......................................................................... DEFENDANT
R U L I N G:
At the hearing of an application for leave to amend Defence and Counter claim filed by Defendant, the Plaintiff’s Counsel presented in court a Gazette Notice No. 83 of 7th February, 2003 publishing a Receiving Order against the Defendant, Ezekiel Barngetuny. The receiving order was caused to be gazetted by the Official Receiver and was made on 18th December, 2002. This fact is not disputed by the Defendant.
On the basis of this and the provisions of section 9(1) of the Bankruptcy Act, the plaintiff has asked this court to stay all proceedings in this suit. The defendant has opposed the said oral application saying that there is no provision for stay of proceedings and that the Defendant can prosecute its counter claim.
I have considered the provisions of Section 9(1) of the Bankruptcy Act which stipulates as followed:-
“9(1) on the making of a receiving order the official receivershall be thereby constituted receiver of the property of the debtor,and thereafter, except as directed by this Act, no creditor to whomthe debtor is indebted in respect of any debt provable in bankruptcyshall have any remedy against the property or person of the debtor in respect of the debt, or shall commence any action or other legal proceedings, except with the leave of the court and on such terms inthe court may impose.”
This suit was pending in court when the receiving order was given. A careful reading shows that one must obtain leave of the court before commencing any action or other legal proceedings against a debtor. However, there is no reference to any stay of proceedings in respect of existing and/or pending suits as of the time a Receiving Order is made. It would appear that the court has a discretion to order stay of proceedings when granting a Receiving Order. Rule 144 of the Bankruptcy Rules reads:-
“144: There may be included in a receiving order an orderstaying any action or proceeding against the debtor or stayingproceedings generally”
This demonstrates that there is no automatic stay of proceedings. However, once a receiving order is given, no proceedings can be prosecuted by or against the debtor without the consent of the Receiver. In fact under the provisions of section 9(1), it is my view, the Receiver is required to take over all suits pending in court filed by the debtor or filed against such a debtor.
In the premises, I do hereby order that this suit be stayed until the Official Receiver is notified of it and decides whether to terminate it or take it over. The Defendant is to serve all process in this suit on the Official Receiver as the Debtor has no capacity to retain counsel in any commercial litigation without the consent and involvement of the Receiver.
DATED AND DELIVERED AT ELDORET ON THIS 28TH DAY OF JULY 2006
M. K. IBRAHIM
JUDGE
28/7/06
Coram - Ibrahim J
CC Chelanga
Mrs. Manani for the plaintiff
Mr. Shivaji for the defendant/respondent
Ruling read in their presence.
M. K. IBRAHIM
JUDGE