[1980] KEHC 6 (KLR)
The court found that the applying creditor had not complied with section 220(a) of the Companies Act, which requires a creditor to make a demand for payment before presenting a winding up petition. The affidavit in support did not demonstrate that such a demand had been made. Furthermore, the company had paid all...
Source-derived case information.
- Citation
- [1980] KEHC 6 (KLR)
- Parties
- Applicant: Abdul Haji R Arain; Respondent: Velco Properties (K) Ltd
- Court
- High Court
- Court Station
- High Court at Nairobi (Milimani Law Courts)
- Jurisdiction
- Kenya
- Case Number
- Bankruptcy Cause 21 of 1979
- Procedural Posture
- Winding Up Petition / Judgment
- Outcome
- petition dismissed
- Judges
- EN Juma
- Legal Topics
- Winding Up of Companies, Creditor Petitions, Inability to Pay Debts, Statutory Demand Requirements
- Source Language
- en
Source-derived case record
Summary, issues, holding and outcome
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Parties
Abdul Haji R Arain
Applicant
Velco Properties (K) Ltd
Respondent
Procedural Posture
Winding Up Petition / Judgment
Legal Issues
- 1 Whether the company is unable to pay its debts as required under section 219 of the Companies Act.
- 2 Whether the applying creditor made a statutory demand for payment as required by section 220(a) of the Companies Act.
- 3 Whether the petition for winding up is being used to pressurize the company to pay the creditor.
Ratio Decidendi
The court found that the applying creditor had not complied with section 220(a) of the Companies Act, which requires a creditor to make a demand for payment before presenting a winding up petition. The affidavit in support did not demonstrate that such a demand had been made. Furthermore, the company had paid all other creditors except the applying creditor and one other, which indicated that the company was not generally unable to pay its debts. The court also noted that the petition appeared to be motivated by a desire to pressurize the company rather than genuine insolvency. Consequently, the statutory requirements for winding up had not been satisfied, and the petition was dismissed.
Court Disposition
petition dismissed
Orders
- The winding up petition is dismissed.
- No order as to costs.
Full Case Text
Judgment text and source record
23 paragraphs
REPUBLIC OF KENYA
IN THE HIGH COURT OF KENYA
AT NAIROBI (NAIROBI LAW COURTS)
BANKRUPTCY & WINDING-UP CAUSE 21 OF 1979
IN THE MATTER OF VELCO PROPERTIES (K) LTD
AND
IN THE MATTER OF COMPANIES ACT
JUDGMENT
The applying Creditor has petitioned the court in pursuance of the provisions of the Companies Act and under rule 32(2) of the companies (Winding Up) Rules for orders that
1. Abdul Haji R Arain, creditor owed Shs 120,000/- by the company he substituted as the Petitioner Creditor.
2. Costs of the application be costs in the cause.
There is an affidavit in support of the application.
Mr Oweggi for the applying creditor ---------------------- that the company is unable to pay its debts. The court was referred to section 219 (e) of the Companies Act (the Act) and ----------------- to make an order Winding Up the Company.
Mr Omondi for the company stated that the original petition was withdrawn because the company was able to pay. The Applying Creditor knew that the company is paying its credits. Mr Omondi told the court that all the other creditors of the company have been paid except for one Mutunda and the Applying Creditor.
Case of Re Company 1894, 2, Chancery Division page 349 was cited in support of the contention that the Applying Creditor was actually putting pressure on the company to pay him.
Section 219 of the Act provides for the circumstances in which a company may be wound up by the court. One of such circumstances is inability to pay debts and section 220 of the Act ------------- inability to pay debts.
The affidavit of the Applying creditor does not comply with section 220(a) of the Act under which a creditor is required to demand payment. So, it hasn’t been proved that the company is unable to pay. I am fortified in this --------------- by the affidavit in opposition wherein it is deponed inter alia that the Applying Creditor had not demanded payment. Also, there is affidavit evidence which wasn’t even challenged that the company has paid all the other creditors, leaving just one – the Applying Creditor! True the court does not know how much was owed by the company. The relevant factor however is that the company has paid the other creditors. That is evidence that the company is not unable to pay its debts.
The Applying Creditor was substituted soon after the original petitioner withdrew, having been paid by a Director of the company. The apparent -------------------- on the Applying Creditor petition for Winding Up even before demanding would suggest that the real motive may be different. Mr Omondi’s submission based on the decision in In Re a Company, 2 ch 1894 page 349 at page 351 that the ------------------------ and to pressurize the company to pay has considerable force. I yet would prefer to rest my decision in this petition on the ground that demand having not been made, the court is unable to determine if the company is truly unable to pay its debts. It is trite law even in ordinary claims that demand must be made before proceeding to sue.
Section 222 of the Act gives the court under powers after hearing a winding-up petition. Having considered the matter, I decide to dismiss the petition.
No order as to costs.
Dated and delivered at NAIROBI THIS 25TH DAY OF June, 1980
J.O NYARANGI
JUDGE