https://new.kenyalaw.org/akn/ke/judgment/kehc/2026/11856

Flocash Ltd v Kcb Bank Kenya Ltd (Insolvency Notice E144 of 2025) [2026] KEHC 11856 (KLR) (Commercial and Tax) (29 July 2026) (Ruling) Neutral citation: [2026] KEHC 11856 (KLR) Republic of Kenya In the High Court at Nairobi (Milimani Commercial Courts) Commercial and Tax Insolvency Notice E144 of 2025 BK Njoroge, J July 29, 2026 Between Flocash Ltd Creditor and Kcb Bank Kenya Limited Debtor Ruling 1.The Applicant filed the Notice of Motion dated 26th August, 2025 seeking the following orders;a.The Court to set aside the Statutory Demand dated 8th August, 2025;b.The Court to strike out the Statutory Demand dated 8th August, 2025;c.The costs of this Application be provided for. 2.The Application was supported by the Affidavit of Maseline Ambogo Keya. She stated that FloCash Limited issued a statutory demand dated 8th August, 2025 requiring KCB Bank Kenya Limited to pay an alleged debt of USD 1,037,781 and Kshs. 45,519,632 within 21 days. In default it threatened to commence liquidation proceedings. The Bank contended that any determination of a bank's inability to pay its debts, as well as its liquidation, falls exclusively within the mandate of the Central Bank of Kenya and the Kenya Deposit Insurance Corporation under the Banking Act and the Kenya Deposit Insurance Act. It therefore argued that the Court lacks original jurisdiction over the matter. That the statutory demand improperly seeks to circumvent the contractual dispute resolution process and the specialized statutory framework governing banks. 3.The Bank further maintained that the alleged debt is genuinely and substantially disputed, noting that a joint reconciliation failed to establish the claimed sums. Further, that the Creditor subsequently sought further information to verify the alleged outstanding amounts. This demonstrated that the debt was never ascertained. It argued that the statutory demand was issued in bad faith as a debt collection tool rather than a legitimate insolvency measure, despite liquidation being a remedy of last resort. According to the Bank, allowing liquidation proceedings to proceed would cause severe prejudice, trigger market panic and systemic financial risks, and amount to an abuse of the insolvency process. 4.In reply, the Respondent filed the Replying Affidavit sworn on 23rd September, 2025 and stated that the Debtor/Applicant has expressly admitted the existence of the BIN Sponsorship Agreement dated 17th June, 2022. This confirmed the contractual relationship underpinning the present claim. It also acknowledged participating in a joint reconciliation exercise, receiving the Applicant's demands and statutory demand, and requesting further particulars on chargebacks. These admissions demonstrate that the dispute concerns the quantum of the debt rather than its existence, and that the debt is capable of ascertainment through the reconciliation records held by the Debtor. 5.It is further submitted that, Section 52 of the Banking Act neither invalidates contractual obligations arising from ordinary commercial banking transactions, nor does it curtail a creditor's rights under the Insolvency Act. Accordingly, the Debtor cannot rely on the Banking Act to evade its contractual and statutory obligations. That the admitted debt, the unsatisfied statutory demand, and the failure to set it aside satisfy the legal threshold for liquidation by the Court. Issues for determination 6.The Court has carefully considered the Application, the response, the written submissions and oral highlights by Counsel for the parties. The Court frames a single issue for determination as follows:a.Whether the Statutory Demand should be set aside. Analysis 7.The Court’s power to set aside a statutory demand is anchored both in its inherent jurisdiction and in statute, and is expressly provided for under Regulations 16 and 17 of the Insolvency Regulations. In particular, Regulation 17(6) empowers the Court to set aside a statutory demand where:a.the debtor appears to have a counterclaim, set-off, or cross-demand equal to or exceeding the amount demanded;b.the debt is disputed on grounds which appear to the Court to be substantial;c.the creditor holds security whose value equals or exceeds the debt; ord.the Court is satisfied, on other grounds, that the demand ought to be set aside. 8.Further, Regulation 16(1) of the Insolvency Regulations, 2016 provides that a debtor may apply to set aside a statutory demand within twenty-one (21) days from the date of service of the demand, or where the demand has been advertised, from the date of the advertisement’s first appearance. 9.It is clear that the Regulation confines the Court’s jurisdiction to setting aside a statutory demand to four grounds only, namely: where there is a counterclaim/set‑off/cross‑demand equal to or exceeding the debt; or where a debt is genuinely disputed on substantial grounds; or where security equal to or exceeding the debt; or where there are other sufficient reasons. 10.The Applicant herein argued that the impugned Statutory Demand amounts to an abuse of the Court process as it seeks to circumvent the contractual and statutory mechanism under the Banking Act and Kenya Deposit Insurance Act to determine the validity or otherwise of the claim lodged by Creditor against the Bank. The Statutory Demand is premature and therefore in breach of the doctrine of exhaustion of alternative remedies. 11.The Court further notes that the Debtor averred that the debt is genuinely and substantially disputed, noting that a joint reconciliation failed to establish the claimed sums. That the Creditor subsequently sought further information to verify the alleged outstanding amounts. Thus, demonstrating that the debt was never ascertained. 12.The Respondent does not dispute that there was a joint reconciliation and that it further sought information to verify the alleged outstanding amounts; this information is yet to be given as confirmed by the Respondent. 13.The Court reiterates the finding in Kevian Kenya Limited v Hipora Business East Africa Limited [2025] KECA 1195 (KLR)“When there is a genuine dispute on substantial grounds that requires a full evidentiary hearing and reconciliation of accounts, insolvency proceedings are not the appropriate forum for determining the validity of the debt. The policy is to prevent the use of insolvency proceedings for coercive debt collection where a genuine dispute exists.” 14.In light of the above, the Statutory demand is hereby set aside. 15.As to costs, the same follow the event and are awarded at the discretion of this Court. The Court awards the costs to the successful Applicant. Determination 16.The Debtor’s Application by way of a Notice of Motion dated 26th August, 2025 is allowed in the following terms:a.The Court hereby sets aside the Statutory Demand dated 8th August, 2025;b.The Court hereby strikes out the Statutory Demand dated 8th August, 2025;c.The costs be borne by the Creditor/Respondent. 17.It is so ordered. DATED, SIGNED AND DELIVERED AT MILIMANI THIS 29TH DAY OF JULY, 2026NJOROGE BENJAMIN K.JUDGEIn the presence of:Mr. Mutugi for the Creditor/Respondent.Mr. Kiche for the Debtor/Applicant.Mr. John Paul - Court Assistant.