[2018] KEHC 10233 (KLR)
The court found that GEM CM Construction Limited owed a debt to the Petitioner, which remained unpaid and unsecured. The Company conceded its inability to pay, and there was no evidence of assets matching the liabilities. The court was satisfied that the requirements of Section 384 of the Insolvency Act were met,...
Source-derived case information.
- Citation
- [2018] KEHC 10233 (KLR)
- Parties
- Respondent: GEM CM Construction Limited; Applicant: Christine Wahome (for Petitioner)
- Court
- High Court
- Court Station
- High Court at Nairobi (Milimani Commercial Courts)
- Jurisdiction
- Kenya
- Case Number
- Insolvency Cause 7 of 2016
- Procedural Posture
- Insolvency Cause / Final Ruling on Liquidation Petition
- Outcome
- Petition allowed; company ordered to be liquidated.
- Judges
- F Tuiyott
- Legal Topics
- Company Liquidation, Insolvency Petition, Unsecured Debt, Appointment of Liquidator
- Source Language
- en
Source-derived case record
Summary, issues, holding and outcome
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Parties
GEM CM Construction Limited
Respondent
Christine Wahome (for Petitioner)
Applicant
Procedural Posture
Insolvency Cause / Final Ruling on Liquidation Petition
Legal Issues
- 1 Whether GEM CM Construction Limited is unable to pay its debts as required under Section 384 of the Insolvency Act.
- 2 Whether the debt owed to the Petitioner is unsecured and remains unpaid.
- 3 Whether liquidation is the appropriate remedy in the circumstances.
Ratio Decidendi
The court found that GEM CM Construction Limited owed a debt to the Petitioner, which remained unpaid and unsecured. The Company conceded its inability to pay, and there was no evidence of assets matching the liabilities. The court was satisfied that the requirements of Section 384 of the Insolvency Act were met, justifying the grant of a liquidation order. The drastic nature of liquidation was considered, but the absence of alternative remedies and the lack of security or assets led the court to conclude that liquidation was merited. The Official Receiver was appointed as provisional liquidator, and costs were awarded to the Petitioner to be paid out of the Company's assets.
Court Disposition
Petition allowed; company ordered to be liquidated.
Orders
- GEM-CM Construction Limited is to be liquidated under the provisions of the Insolvency Act 2015.
- The Official Receiver is appointed as provisional liquidator of the Company.
Full Case Text
Judgment text and source record
31 paragraphs
REPUBLIC OF KENYA
IN THE HIGH COURT OF KENYA AT NAIROBI
MILIMANI COMMERCIAL COURTS
COMMERCIAL & TAX DIVISION
INSOLVENCY CAUSE NO. 7 OF 2016
IN THE MATTER OF GEM CM CONSTRUCTION LIMITED
AND
IN THE MATTER OF THE INSOLVENCY ACT NO. 18 OF 2015
RULING
1. The Court is now able to complete its Ruling of 6th July 2018.
2. In paragraph 5 of that Ruling this Court observed;
“Given that liquidation of a Company is really the death knell of a Company and is obviously a drastic Order, this Court is reluctant to make such an Order unless it is certain that it is the only appropriate Order to make. So as to satisfy myself fully as to which way to go, I direct that the parties furnish this Court with affidavit evidence as to whether item 7 of the Consent referred to in paragraph 3 herein was effected and whether the debt owed by the Company to the Bank is secured. And if so, the nature and details of the security and why they have not been enforced. The Court shall thereafter make its final orders on the Request for liquidation”.
3. The Petitioner herein filed an Affidavit through Christine Wahome which is sworn on 18th July 2018 while the Company’s further position was presented through the further Affidavit of Martin Kinoti sworn on 26th July 2018.
4. Having looked at the further evidence availed, I am able to conclude as follows:-
(i) The Petitioner was not party to the Consent Order of 243th October 2016 in Insolvency case No. 3 of 2016.
(ii) There is consensus between the Petitioner and the Company that the terms of the Consent were never effected.
(iii) Even if there was an intention to secure the Company’s debt to the Petitioner, the same was never done and therefore remains an unsecured debt.
5. I had in my earlier Ruling found that there is a debt owing to the Petitioner by the Company and that the Company conceded to its inability to pay. It now turns out that the unpaid debt is not secured.
6. One other issue would concern the Court. Liquidation Orders against a Company may in certain circumstances not be made if the Company owns assets that match the liabilities. There is no evidence of any assets belonging to the Company or their value. I am unable to find that the Company has assets that match the Petitioner’s liability.
7. The Court is satisfied that the Petition has established that the Company is unable to pay its debts in terms of Section 384 of The Insolvency Act and is therefore merited.
8. This Court grants the following Orders;-
(i) GEM-CM Construction Limited is to be liquidated under the Provisions of The Insolvency Act 2015.
(ii) The Official Receiver be appointed as a provisional liquidator of the Company.
(iii) Costs of this Petition to the Petitioner and shall be paid out of the Assets of the Company.
Dated, delivered and signed in open Court at Nairobi this 2nd day of November, 2018.
F. TUIYOTT
JUDGE
Present:-
Wafula h/b for Kimani for Petitioner
N/a for Company
Fred - Court Assistant