[1989] KEHC 9 (KLR)
The court found that the applicant, as an unsecured creditor who cannot obtain payment, is entitled to a winding up order. The existence of a debenture and appointment of a receiver does not preclude the making of a winding up order, as per Section 222(1) of the Companies Act. The court noted that there was no other...
Source-derived case information.
- Citation
- [1989] KEHC 9 (KLR)
- Parties
- Applicant: Middle East Bank of Kenya; Respondent: Equity Display Centre Ltd.; Respondent: Dudo Africa Co Ltd.
- Court
- High Court
- Court Station
- High Court at Nairobi (Milimani Law Courts)
- Jurisdiction
- Kenya
- Case Number
- Winding Up Cause 29 of 1988
- Procedural Posture
- Winding Up Cause / Ruling on Petition for Winding Up Order
- Outcome
- Winding up order granted against the company. Costs to be borne by the company. Official Receiver appointed as liquidator.
- Legal Topics
- Winding Up, Creditor Rights, Company Liquidation
- Source Language
- en
Source-derived case record
Summary, issues, holding and outcome
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Parties
Middle East Bank of Kenya
Applicant
Equity Display Centre Ltd.
Respondent
Dudo Africa Co Ltd.
Respondent
Procedural Posture
Winding Up Cause / Ruling on Petition for Winding Up Order
Legal Issues
- 1 Whether a winding up order should be granted against the company at the instance of an unsecured creditor.
- 2 Whether the existence of a prior debenture and appointment of a receiver precludes the making of a winding up order.
- 3 Whether it is just and equitable to wind up the company in the circumstances.
Ratio Decidendi
The court found that the applicant, as an unsecured creditor who cannot obtain payment, is entitled to a winding up order. The existence of a debenture and appointment of a receiver does not preclude the making of a winding up order, as per Section 222(1) of the Companies Act. The court noted that there was no other remedy available to the applicant and that it was just and equitable to wind up the company. The wishes of the unsecured creditor were given primary consideration, and the court exercised its discretion to grant the order sought.
Court Disposition
Winding up order granted against the company. Costs to be borne by the company. Official Receiver appointed as liquidator.
Orders
- A winding up order is made against Equity Display Centre Ltd.
- Costs of the petition shall be borne by the company.
Full Case Text
Judgment text and source record
23 paragraphs
REPUBLIC OF KENYA
IN THE HIGH COURT OF KENYA
AT NAIROBI (NAIROBI LAW COURTS)
WINDING UP CAUSE 29 OF 1988
IN THE MATTER OF EQUITY DISPLAY CENTRE LIMITED
AND
IN THE MATTER OF COMPANIES ACT
Ruling.
By a Petition dated 5th July,1988 filed on 14th July, 1988 the Petitioner Middle East Bank of Kenya
hereinafter called the Petitioner) who is an unsecured creditor of Equity Display Centre Ltd. (hereinafter called the Company ) applied for a winding up order against the company. The company is indebted to the petitioner in the sum of shs 306,401/15. The Petition was duly served and advertised. A senior Deputy Registrar of this Court on 15th December,1988 certified that the provisions of the Companies (Winding Up) Rules had been complied with and that the petition could proceed to hearing.
On 27th January, 1989 when the petition was heard by me apart from Mr Le Pelley who is counsel for the petitioner, Mr Murimi appeared for a secured creditor to oppose the petition. He stated that there was debenture dated 17th July 1985 on/all undertaking good-will assets book debts and uncalled capital of the Company in favour of his clients’ namely Dudo Africa Co Ltd.
He further stated that the Company owed far more to his clients than the value of its total assets and there was no likelihood of any surplus assets.
In fact he said that even his client is not likely to recover its debt in full. He said that the directors of the Company had already left the country.
Mr Murimi further stated from the bar that before the filing of this Petition a receiver had already been appointed under the said debenture. He was appointed in May,1988 and his appointment was registered with the Registrar of Companies on 15/7/1988. The receiver had already taken charge of all the assets of the Company. It would be pointless, he argued, to appoint a liquidator in the circumstances. In deed, he said, there would be a clash between the receiver and the liquidator. He argued that the liquidator should not be appointed. There was no other opposing or supporting creditor.
Section 222(1) of the Companies Act (Cap 486) taking about the powers of the Court on the hearing of a Petition says “On hearing a winding up Petition the Court may dismiss it…………………………….but the Court shall not refuse to make a winding up order on the ground only that the assets of the company have been mortgaged to an amount equal to or in excess of those assets or that the company has no assets”.
Mr Le-Pelley cited from Page 81 of Farmers ‘Company Precedents Part II Winding-up 17th Edition: The note reads: “……….and in particular where the Company’s assets are entirely covered by debentures, the wishes of the unsecured creditors will be primarily considered”.
According to Halsburys Law of England4th EditionVolume7 Para 1033 “A Creditor who cannot obtain payment is entitled as of right to a winding up order subject only to the Courts’ power on the hearing of the Petition to give effect to the wishes of a majority of the creditors on the question whether a winding up order shall be made and whether the petition shall or shall not standover”.
There is no other remedy open to the petitioning creditor and in the circumstances I hold that it is just and equitable that the company should be wound up.
Accordingly I make a winding up order against the company.
Costs of the Petition shall be borne by the Company. The Official Receiver is hereby appointed as the liquidator.
Dated and Delivered at Nairobi this 22nd day of February , 1989.
G.S PALL
JUDGE.