https://new.kenyalaw.org/akn/ke/judgment/kehc/2026/12310

**REPUBLIC OF KENYA** **IN THE HIGH COURT OF KENYA AT NAIROBI** **COMMERCIAL AND TAX DIVISION** **INSOLVENCY PETITION NO. E015 OF 2026** **IN THE MATTER OF FREEDOM AIRLINES EXPRESS LIMITED** **AND** **IN THE MATTER OF THE COMPANIES ACT, NO. 17 OF 2015** **AND** **IN THE MATTER OF THE INSOLVENCY ACT, NO. 18 OF 2015** **FRED BLACK INSURANCE** **BROKERS LIMITED..............................PETITIONER/CREDITOR** **VERSUS** **FREEDOM AIRLINES** **EXPRESS LIMITED……………………………RESPONDENT/DEBTOR** **RULING** 1. This ruling is in respect of the Respondent/Debtor’s Notice of Motion dated 26th May 2026 brought under section 425, 696(1)(a) of the insolvency Act, Section 10 of the Insolvency Regulations, Section 3A of the Civil Procedure Act, Order 40 Rule 1 and 4 and Order 42 Rule 6 of the Civil Procedure Rules. 2. The Debtors seeks an order restraining the advertisement and or publication of the insolvency petition, and the Petitioner be compelled to withdraw any instructions already issued for the advertisement of the insolvency petition dated 27th February 2026. Also sought is an order declaring the insolvency petition null and void *ab initio* and the same be struck off or dismissed on the ground that the debt is disputed and the cost of the petition be borne by the petitioner. 3. The application is premised on the grounds on the face of the record and supported by the annexed affidavit of Abdulkadir Abdullah Ali. He depones that the alleged debt of USD 82,006.04 is disputed. He avers that the Petitioner lacks the requisite *locus standi* to demand the debt, the right to collect the premiums had been novated to K.M. Dastur & Company Limited, part of the claim relates to a period when the insurance cover had been wrongfully suspended, and the claimed administrative fee of USD 10,000 was neither agreed upon nor ascertainable. He further states that the Petitioner was aware of these disputes before issuing the statutory demand and instituting the petition. 4. The deponent further avers that, following the Court's order directing the advertisement of the petition, the Respondent, a licensed commercial airline operating since 2007, faces imminent and irreparable commercial and reputational harm, despite being financially solvent and able to meet all undisputed obligations. According to him, publication of the petition would undermine the confidence of financiers, shareholders, regulators and customers, thereby jeopardizing its business and operating licences. 5. He contends that advertising a petition founded on a genuinely disputed debt constitutes an abuse of the insolvency process and urges the Court to exercise its inherent jurisdiction to restrain the advertisement pending the inter partes hearing. He further states that the Respondent has lodged a Notice of Appeal against the orders directing advertisement and maintains that, unless a stay is granted, the intended appeal will be rendered nugatory. Accordingly, he prays that the advertisement of the liquidation petition be restrained pending the determination of the application and that the petition be dismissed with costs. 6. The Chief Executive Officer of the Petitioner, Pernille Duckworth, opposes the application through the Replying Affidavit sworn on 16th June 2026. It is contended that the application is procedurally incompetent, misconceived and an abuse of the insolvency process. She avers that insolvency proceedings are governed exclusively by the Insolvency Act and the Insolvency Regulations, and that the application is improperly founded on provisions of the Civil Procedure Act and Rules, which are inapplicable. 7. She further contends that the Respondent's complaints regarding the Petitioner's *locus standi*, the alleged novation of the debt to K.M. Dastur & Company Limited, the suspension of the insurance cover, and the disputed administrative fee are not interlocutory issues but constitute the Respondent's substantive defence to the liquidation petition, which ought to be determined at the hearing of the petition rather than through an interlocutory application. 8. According to the deponent, the Respondent had previously mounted a similar challenge to the statutory demand in Insolvency Cause No. HCCOMMIN/E137 of 2024, which was struck out as time-barred, and is now impermissibly seeking to relitigate the same issues. She further deposes that the prayers sought have been overtaken by events since, pursuant to the Court's order of 25th May 2026, the Petition was duly advertised on 27th May 2026, rendering the injunctive relief sought moot. She maintains that the advertisement was mandatory under the Insolvency Act and undertaken in compliance with a court order. 9. On the merits, the Petitioner asserts that the debt is valid, due and undisputed, contending that the Respondent received the benefit of the insurance cover, that the Petitioner, as insurance broker, is legally entitled to recover unpaid premiums, that the alleged novation did not affect the debt in issue, and that the cancellation of the insurance policy resulted from the Respondent's own default. She further avers that the Respondent has produced no evidence of solvency or ability to pay its debts and has failed to discharge the statutory presumption of insolvency. Accordingly, she urges the Court to dismiss the application with costs and to expedite the hearing and determination of the liquidation petition. 10. The application was canvassed by oral arguments by counsel, and the Petitioner filed written submissions dated 5th June 2026. **Analysis and determination** 1. I have carefully considered the application, the affidavits filed by the parties, the rival submissions by counsel and the applicable law. The issue for determination is whether the application is merited. 2. The Petitioner contends that the application is invalid because it references the Civil Procedure Act and Rules, which do not apply to insolvency cases. While insolvency proceedings are governed by the Insolvency Act no 18 of 2015 and the Insolvency Regulations 2016, the application also explicitly relies on Section 425 of the Insolvency Act. This section authorizes the Court to dismiss a liquidation petition or stay proceedings if there are substantial grounds to dispute the debt or if the petition is abusive. 3. Similarly, Section 696(1)(a) grants the Court authority to stay proceedings pending appeal. Simply citing the Civil Procedure Act alongside the relevant insolvency laws does not automatically make the application invalid. The Court’s main role is to deliver substantive justice and can rightly treat the application as filed under the Insolvency Act. I conclude that the application is properly before the Court. 4. The principal relief sought is an order restraining the advertisement of the liquidation petition and compelling the petitioner to withdraw any instructions relating thereto. There is no dispute that, in compliance with the Court’s order of 25th May 2026, the liquidation petition was advertised on 27th May 2026. The advertisement having already taken place, nothing remains to be restrained; that limb of the Notice of Motion is overtaken by events and accordingly spent and will not be considered further. 5. I now address the main issue in the Debtor’s application, that is, whether to dismiss the liquidation petition at this early stage due to the genuinely contested debt of USD 82,006.04. The authority under Section 425 of the Insolvency Act to dismiss a petition summarily is limited and should be applied carefully, only in clear-cut cases. It is well known that a winding-up petition should not be used as a tool to force recovery of a debt that is legitimately disputed in good faith and with substance. However, the court must also be cautious to prevent debtors from hindering legitimate petitions by raising minor objections solely to delay proceedings. 6. The Debtor claims the debt is disputed, while the Petitioner denies this. Allegations regarding novation, the legality of suspending the insurance coverage, and the contractual foundation of the USD 10,000 administrative fee cannot be fairly settled solely on conflicting affidavit evidence. These issues require the court to assess witness credibility, interpret the contractual documents within their full commercial context, and make factual determinations that should only be made after a trial. 7. Therefore, I believe that whether the USD 82,006.04 debt is due and undisputed or genuinely contested is a matter that falls directly under the substantive merits of the liquidation petition. It would be premature and inappropriate to decide this question without a full hearing. The Debtor will have the chance to present defenses, challenge the debt, and prove its solvency during the hearing. If successful, the petition will be dismissed with costs. If not, the Court will issue suitable orders. The most proper and efficient course is to dismiss the strike-out application and to schedule the petition for a full hearing on its merits. 8. It is noteworthy that the Respondent previously contested the statutory demand in Insolvency Cause No. HCCOMMIN/E137 of 2024, but that case was dismissed as time-barred. Although this current application is not strictly *res judicata*, it is evident that the Respondent is essentially requesting this Court to revisit questions about the validity of the statutory demand and the underlying debt via a different procedural route. Such an approach conflicts with the principles of orderly insolvency proceedings. 9. I am equally unable to accept the Respondent's contention that advertisement alone justifies the grant of injunctive relief. Advertisement of a liquidation petition is a statutory requirement intended to notify creditors and other interested parties. Once ordered by the Court, compliance with that statutory obligation cannot, without more, amount to an abuse of process. 10. The Respondent also cited the filing of a Notice of Appeal against the order to advertise. However, it is well established that merely filing an appeal does not automatically stay or suspend the execution of the order. Order 42 Rule 6 of the Civil Procedure Rules aligns with the Court's inherent jurisdiction, clearly stating that a party must obtain an explicit stay order. Since no stay was granted by this Court or the Court of Appeal before the advertisement was made, the Petitioner cannot be faulted for following a lawful court order. If the appeal has merit, the Respondent can pursue it, but it does not justify the reliefs sought in this motion. 11. Ultimately, the Court must guard against determining, at an interlocutory stage, issues reserved for the hearing of the liquidation petition itself. To do so would amount to prejudging the Petition without the benefit of a full hearing, a course that would offend the rules of natural justice and the constitutional guarantee of a fair hearing. 12. The upshot is that the Debtor’s Notice of Motion dated 26th May 2026 is dismissed with costs. The liquidation petition shall proceed to hearing on its merits. **RULING** delivered virtually, dated and signed at **NAIROBI** This **31st** day of **July** 2026. **PETER M. MULWA** **JUDGE** **In the presence of:** *Ms. Jane Okoth h/b for Mr. Miano* for Petitioner *Ms. Wamuyu h/b for Mr. Gitau* for Debtor Court Assistant*: Lispa*