[2021] KECPT 572 (KLR)

REPUBLIC OF KENYA

IN THE CO-OPERATIVE TRIBUNAL AT KISUMU

TRIBUNAL APPEAL CASE NO. 8 OF 2018

FELIX OTANDE ............................APPELLANT/RESPONDENT

VERSUS

THE COMMISSIONER FOR CO-OPERATIVE

DEVELOPMENT ..............................................1ST RESPONDENT

BUSIA COUNTY ASSEMBLY SACCO

SOCIETY LIMITED .....................................2ND RESPONDENT

JUDGMENT

The matter for determination is the appeal vide Memorandum of Appeal dated 21. 9.2018 on the following grounds:

1. That the Commissioner erred in law and infact in carrying out an inquiry and applying a procedure envisaged under the Co-operative Societies Act to an entity not registered under the Co-operative Societies Act and thus does not fall within the purview of the Powers of the Commissioner for Co-operative Development.

2. That Commissioner erred in law and infact in reaching a decision and or a determination that is strange in law and thus null and void.

3. That the Commissioner erred in law and fact by excising his legal mandate beyond jurisdiction.

4. That the Commissioner erred in law and infact in reaching a decision including a recommendation for surcharge against the Appellant without reconciliation of accounts or undertaking a proper reconciliation showing the total assets and liabilities of the Sacco, the loan portfolio and debts of the Sacco and related matters so as to lay a basis and justification for the recommended surcharge against the Appellant.

5. That the Commissioner’s recommendation purportedly surcharging the Appellant herein kshs.6,720,830. 00/= is without basis at all, is unfounded, unsupported and beyond the express mandate and terms of reference of the inquiry.

6. That the Commissioner erred in law and fact and procedure in arriving at a recommendation and decision to surcharge the Appellant without affording the Appellant and opportunity to be heard in Defence and thus against the principal of Natural Justice.

7. That the Commissioner erred in law and in fact in making a decision without looking at the evidence and documents presented to them.

The Appellant prayed as follows:

1. That the decision of the Commissioner of Co-operative Development as contained in the undated Inquiry Report of the Busia County Assembly Sacco May 2018 be set aside all together, annulled and or declared null and void.

2. Costs of this Appeal be awarded to the Appellant.

The Respondent opposed the Appeal vide their Replying Affidavit filed on 27. 11. 2020.

The Appeal was ordered to be dispensed with by way of written submissions on 3. 2.2021 and 10. 2.2021 respectively.

The Appellants in their written submissions brought this Appeal vide the provision of Section 58 Cooperative Society Act that the powers exercised by the Commissioner for Co-operatives Developments ( 1st Respondent)can only be exercised against a Co-operative Society defined under Section 2 Co-operative Societies Act that is, that the Co-operative Society was not registered.

That the 1st Respondent authorized an Inquiry and a Report dated May 2018 was generated. That the Appellant was surcharged and ordered to pay Kshs.6,720,830/=.

The Appellant set out the grounds of Appeal and grouped them into 2 as follows:

1. Grounds 1,2 and 3; the legitimacy of the decision of 1st Respondent to authorize an Inquiry on unregistered entity Busia County Assembly Sacco Society;

2. Grounds 4,5,6 and 7; the procedure adopted by the 1st Respondent, that the Appellant was not afforded an opportunity to be heard.

We will therefore determine the Appeal based on the 2 main grounds above as per the issues hereof:

1. Registration of the Busia County Assembly Sacco Society and legitimacy of 1st Respondent’s decision to Surcharge.

2. Legality of the procedure leading to Surcharge and the merits of the Appeal.

3. Costs of the Appeal.

1. REGISTRATION AND DECISION TO SURCHARGE.

The Appellants submitted that the 2nd Respondent was not a registered entity. That the 2nd Respondent was not a registered entity. That the 2nd Respondent did not produce the certificate of registration hence the 2nd Respondent is not an entity within the provisions of Section 58 Co-operative Societies Act. That for this reason therefore, the inquiry conducted by the 1st Respondent was void ab initio. In response the 2nd Respondent submitted that it was registered as a Co-operative Society Certificate of Registration Number (C/S14684) and therefore, the 1st Respondent had the mandate to perform an inquiry. That the Inquiry Report of May 2018 is therefore valid.

On this issue, we have noted that the 2nd Respondent filed the Certificate of Registration as annexture “GEE1” ....their Replying Affidavit. The said document is the Certificate of Registration, Registration number CS/14684 in the name of Busia County Assembly Savings and Credit Society Limited, Registered on 13. 9.2013. This is also confirmed in the Inquiry Report Page 1.

In the Inquiry Report, dated May 2018, Page 1, we note that the origin of the 1st Respondent is that it in April 2012, Members group decided to register the women’s group KONAMESO SACCO. The Konameso Rural Sacco Society Limited was registered in 2013 and it drew its membership from Public Servants is the Busia Local Authority. That the Busia County Assembly Staff decided to form a Sacco and they amended the By-laws of the Busia Rural Sacco. That this therefore established the Busia County Assembly Sacco with an inception membership of 212 members. At page 3, the Inquiry Report .......on the period from 2013-2017.

In the circumstances therefore we find that the 1st Respondent is a Registered Co-operative Society as per the provisions of Section 11 Co-operative Society Act which provides that:

“ A certificate of Registration or of a provisional Registration signed by the commissioner SHALL be conclusive evidence that the society therein mentioned is duly registered or provisionally registered, unless it is proved that such registration of the society has been cancelled or has been terminated.”

In the circumstances therefore, there being no evidence of cancellation or termination of the Certificate of Registration number CS/14684, we therefore deem that the one filed as conclusive evidence of registration as provided under Section 11 Cooperative Societies Act.

2. LEGALITY OF THE PROCEDURE LEADING TO SURCHARGE AND THE MERITS OF THE APPEAL.

The Appellant submitted that the procedure for the Inquiry was not carried out within the confines of the law. That the Appellant was not given the right to be heard in defence on the issues adversely mentioning him. That the report is one sided, and violates the Respondent’s legitimate expectation that the issues of concern that may have been raised against him, he would be offered an opportunity to respond to.

In response, the Respondent submitted that the 1st Respondent acted within his mandate under Section 58 and 73 Co-operative Societies Act. That the mandate and power to Surcharge are within the law and jurisdiction of the 1st Respondent.

We have carefully considered the documents, pleadings and all evidence presented and on record. We have also noted the provisions of Section 58 Co-operative Societies Act which provides for Inquiry by Commissioner.

1. “ The Commissioner may, of his own accord, and shall on the direction of the Minister, as the case may be, or on the Application of not less than one-third of the members present and voting at a meeting of the society which has been duly advertised, hold an Inquiry or direct any person authorized by him in writing to hold an Inquiry, into the by-laws, working and financial conditions of any Co-operative Society”

2. .............

3. The Commissioner shall report the findings of his Inquiry at a general meeting of the society and shall give directions for the implementation of the recommendations of the Inquiry report Section 73 Co-operative Societies Act Powers to Surcharge.

(1) Where it appears that any person who has taken part in the organization or management of a Co-operative Society, or any past or present officer or member of the Society-

(a)

(b)

(2) Upon Inquiry under sub Section 1, the Commissioner may, if he considers it appropriate, make an order requiring the person to repay or restore the money or property or any part thereof to the Co-operative Society together with interest......

Section 74 Co-operative Societies Act – Appeal against order

(1) Any person aggrieved by an order of the Commissioner under Section 73 (1) May, within 30 days, appeal to the Tribunal.

The procedure for filing an appeal is provided for under Rule 8 Co-operative Tribunal (Practice and Procedure) Rules 2009 sub Rule 3 which indicates the mandatory documents to be filed together with the memorandum of Appeal. They are :-

a. Memorandum of appeal;

b. Inquiry Order;

c. Inquiry/inspection Order;

d. Minutes of the General meeting whose decision is appealed against;

e. Notice of intention to surcharge;

f. Surcharge order; and

g. Any other relevant documents.

The Memorandum of Appeal dated 21. 9.2018 was filed together with:

(i) The Inquiry Report of May 2018;

(ii) By-laws registered on 4. 7.2013.

There were no minutes, no notice of intention to surcharge, no surcharge order and no other relevant documents were provided by the Appellant. The documents are the basis of the Appeal and since the Appellant did not provide when the Surcharge Order appealed against, we are left to wonder what decision/order of the 1st Respondent the Appellant is appealing against.

On the merits of the Appeal, as discussed earlier, the provisions for Inquiry, Inspection and Surcharge are provided for under Section 58, 59, 60A, 73,74 and 75 Co-operative Societies Act.The Commissioner (1st Respondent) has a mandate/ power to conduct an Inquiry under Section 58 Co-operative Societies Act. This is either on his own accord, on the direction of the Minister, or on the application of the members. After the inquiry, the Report is presented to the Annual General Meeting for directions on implementation and recommendations.

See WAWERU RICHU – VS COMMISSIONER OF COOPERATIVES &BILA JACHO HUPATI SACCO LIMITED [2020] eKLR.

.......................

Thereafter, the 1st Respondent is mandated to issue a surcharge Order based on the Inquiry Report.

In this matter, the Inquiry Report, is dated May 2018 and was presented to the Special General Meeting held on 24. 8.2018 in which meeting the Appellant was in attendance (Respondent’s annexture GEE 2 abc). The intention to Surcharge dated 5. 9.2018 was issued to the Appellant. The Surcharge Order was issued on 16th October 2018.

In the intention to Surcharge, the Appellant was required to show cause why he should not be surcharged. The Appellant did not show cause as required, hence the surcharge order was issued.

After the issuance of the Surcharge Order, the Appellant filed this appeal dated 21. 9.2018. The Appellant attended the Special General Meeting as number 123 on the minutes when the Inquiry Report was presented and adopted unanimously on 24. 8.2018. ( Min4: BSA/SACCO/SGM/13/2018). Nothing shows that the Appellant raised any queries or concerns during the said Special General Meeting. Thereafter, the Notice of Intention to Surchargewas issued on 5. 9.2018. The Appellant did not challenge the said intention or show cause why he should not be Surcharged. The Surcharge Order was issued on 16. 10. 2018 and the Appeal was filed on 21. 9.2018 vide the Memorandum of Appeal dated 21. 9.2018. We note that the Appeal was filed before the Surcharge Order of 16. 10. 2018 was issued. The Appeal prays for the Inquiry Report of May 2018 be set aside, annulled or declared null and void. Under the Co-operative Societies Act, there is no provision for an Appeal against an Inquiry Report. The procedure is that the Inquiry Report must be adopted by the members and thereafter, the procedure for surcharge follows. The jurisdiction of the Tribunal is set in motion after the Surcharge Order is issued and Section 74 Co-operative Societies Act provides:

“ 1. Any person aggrieved by an order of the Commissioner under Section 73 (1) may, within thirty days, appeal to the Tribunal.”

We note that before the Inquiry Report is adopted and a surcharge order issued, any person aggrieved by the process should address such grievances to the Commissioner before a surcharge order is issued. A surcharge order is issued, the person aggrieved has 30 days to file an appeal against the surcharge order. The Appellant therefore did not follow the proper procedure in provoking the jurisdiction of the Tribunal. We also find that the Appeal against any Inquiry Report does not lie with the Tribunal. The Appellant had sufficient time and opportunities to challenge the Inquiry Report after it was presented to the members, or after an Intention to Surcharge was issued. The Appellant therefore did not utilize all the opportunities provided to him but instead filed an appeal against an Inquiry Report. The Tribunal’s jurisdiction is only invoked after the issuance of the surcharge Order and that is the only basis of an Appeal to the Tribunal.

The Inquiry carried out by the Commissioner is Independent of any other lawful process carried out by separate body or person arising out of the same subject matter as provided under Section 73 Co-operative Societies Act.

We have carefully considered the evidence on record, the written submissions and the authorities cited by the parties.

In conclusion, we find that the Tribunal has no jurisdiction to entertain any appeals against Inquiry Reports by the Commissioner. The Jurisdiction of the Tribunal is invoked by the issuance of the Surcharge Order under Section 74 Co-operative Societies Act. We therefore find that the Appeal filed herein has no merits and accordingly dismiss it in its entirety.

3. Costs

It is trite law that costs follow the event. The Appeal having no merits therefore we award the costs of the appeal with Interest to the Respondent.

JUDGMENT SIGNED, DATED AND DELIVERED VIRTUALLY THIS 6TH DAY OF MAY, 2021.

Hon. B. Kimemia Chairperson ...................................

Hon. J. Mwatsama Deputy Chairperson ....................................

Mr. P. Gichuki Member ....................................

Tribunal Clerk .............................