https://new.kenyalaw.org/akn/ke/judgment/kehc/2026/11845

**REPUBLIC OF KENYA** **IN THE HIGH COURT OF KENYA AT NAIROBI** **MILIMANI LAW COURTS (COMMERCIAL AND TAX DIVISION)** **CIVIL CASE NO. E952 OF 2021** **JOSEPH GACHINAH KARIA** ................................ **PLAINTIFF/APPLICANT** **VERSUS** **DUNCAN NDEGWA MURIITHI** ............ **1ST DEFENDANT/RESPONDENT** **DR. PHILOMENA MUIRURI** ............... **2ND DEFENDANT/RESPONDENT** **HOMELAND LOUNGE LIMITED** ......... **3RD DEFENDANT/RESPONDENT** **AND** **EQUITY BANK (KENYA) LIMITED** ...................... **1ST INTERESTED PARTY** **KENYA COMMERCIAL BANK (KCB) LTD** ........ **2ND INTERESTED PARTY** **THE REGISTRAR OF COMPANIES** .................... **3RD INTERESTED PARTY** **COOPERATIVE BANK LIMITED** ........................ **4TH INTERESTED PARTY** **RULING** 1. The dispute before this Court presents a classic case of corporate warfare. The battleground is **Homeland Lounge Limited**. The combatants are its foundational directors and shareholders. The matter is hotly contested. The record reveals a bitter struggle for control following an arbitral award. The Court is called upon to determine whether the sanctity of a judicial decree has been violated. 2. At the onset, the Court warns itself that this is largely a company boardroom dispute that has spilled over into the courtroom. The Court must be cautious not to allow itself to be used to micro-manage the day-to-day affairs of the company. Boardroom affairs ought to be decided through established corporate and management structures, not through continuous judicial intervention. However, where there is a blatant disregard for the law and lawful decrees, the Court's jurisdiction is firmly engaged. **Background Facts** 3. A clear and chronological understanding of this litigation is necessary to put the current applications into perspective. The 3rd Defendant, **Homeland Lounge Limited**, was incorporated to run a hospitality business. The foundational shareholders were the Plaintiff, the 1st Defendant, and the late **David Wokabi Muriithi**. 4. Differences arose regarding the management of the company, leading to a contested resolution dated 26th November, 2021. The resolution purported to remove the Plaintiff as a director. Aggrieved, the Plaintiff filed this suit. On 4th April, 2022, the parties recorded a consent to refer the dispute to arbitration. They appointed **Mr. Martin Munyu** as the sole arbitrator. 5. On 21st June, 2024, the sole arbitrator rendered a final Arbitral Award to resolve the leadership impasse. The award, which was formally adopted as a Judgment of this Court on 23rd October, 2024, made several critical declarations: 1. *It confirmed equal shareholding among the three founders (holding one ordinary share each).* 2. *It nullified the irregular removal of the Plaintiff as a director.* 3. *It restrained the 1st and 2nd Defendants from taking funds out of the company without the Plaintiff's approval.* 4. *It mandated joint management and directed the rectification of specific bank accounts.* 6. The 1st and 2nd Defendants admit knowledge of the decree. Peace, however, remains elusive. The parties have returned to Court hurling accusations of contempt, fraud, and corporate sabotage. 7. There are two separate applications before the Court for determination. Given the overlapping factual matrix, the Court consolidate them for the purpose of this single decision. 8**. The First Application:** The Plaintiff approached this Court vide a Notice of Motion dated 23rd January, 2025. The application is brought under **Section 5 of the Judicature Act**, **Sections 1A, 1B, 3A**, and **63 of the Civil Procedure Act**, and **Order 40 Rules 2 & 4 of the Civil Procedure Rules**. The Applicant seeks the following reliefs: * 1. *THAT this Application be certified as urgent and be heard ex parte in the first instance service thereof be dispensed with (spent).* 2. *THAT pending the hearing and determination of the Application herein, an order be and is hereby issued to restrain KCB Bank Kenya Limited from withdrawing, taking out funds, operating or running Account Numbers 1275260772, 1294015303 or any other account in the name of Homeland Lounge Limited without the approval of the Applicant as ordered in the final arbitral award.* 3. *THAT pending the hearing and determination of the Application herein, an order be and is hereby issued to restrain Equity Bank (Kenya) Limited from withdrawing, taking out funds, operating or running Account Numbers 0120280132863, 1750278481560 or any other account in the name of Homeland Lounge Limited without the approval of the Applicant.* 4. *THAT pending the hearing and determination of the Application herein, an order be and is hereby issued to restrain Cooperative Bank of Kenya Limited from withdrawing, taking out funds, operating or running Account Number 01148575437200 or any other account in the name of Homeland Lounge Limited without the approval of the Applicant.* 5. *THAT KCB Bank Kenya Limited, Equity Bank (Kenya) Limited and Cooperative Bank of Kenya Limited be and are hereby ordered to file in court forthwith bank statements for all accounts they hold in the name of Homeland Lounge Limited.* 6. *THAT the 1st and 2nd Respondents be and are hereby ordered to make full disclosure on the affairs of Homeland Lounge Limited in the period 26/11/2021 up to the date of making these orders including but not limited to the books of account for the years 2022 & 2023, sales records, income, expenditure, list of all bank accounts opened in the name of the company and the current bank balances.* 7. *THAT the 1st and 2nd Respondents be and are hereby ordered to pay to the company all the funds held in KCB Bank Account No. 1294015303 belonging to Homeland Lounge Limited since its opening up to the date of these court orders.* 8. *THAT the Honourable Court be pleased to issue orders citing the 1st and 2nd Respondents for contempt of court and committing them to civil jail for a term of six (6) months and/or until they purge their contempt.* 9. *THAT the 1st and 2nd Respondents be and are hereby removed as directors of Homeland Lounge Limited for failure to comply with court orders and the law.* 10. *THAT the 3rd Respondent should be ordered to pay the Applicant the sum of Kshs 6,156,800/-.* 11. *THAT the costs of this Application be provided.* 9. **The Second Application:** The Plaintiff subsequently filed a Notice of Motion dated 23rd April, 2025. It is brought under **Sections 863 & 864 of the Companies Act 2015** and **Section 36(1) of the Arbitration Act**. The Applicant seeks the following reliefs: * 1. *THAT this Application be certified as urgent and be heard ex parte in the first instance service thereof be dispensed with (spent).* 2. *THAT pending the hearing and determination of the Application herein, an order be and is hereby issued to restrain the 1st and 2nd Defendants/Respondents from holding Annual General Meeting on 7/5/2025 or any other date or holding any shareholders meeting or directors meeting or selling or transferring or altering the shareholding or directorship or in any other way interfering with the shareholding and directorship of Homeland Lounge Limited.* 3. *THAT pending the hearing and determination of the Application herein, an order be and is hereby issued to restrain the 1st and 2nd Defendants/Respondents from removing or considering a petition for the removal of the plaintiff as a director of Homeland Lounge Limited.* 4. *THAT pending the hearing and determination of this Application, the 1st and 2nd Defendants whether by themselves or their agents be restrained from amending, altering, changing, deleting, adding or in any other way interfering with the contents of the memorandum and articles of association of Homeland Lounge Limited as they were as at 6/12/2021 when the suit herein was filed.* 5. *THAT an order be and is hereby issued directing the registrar of companies, the 3rd interested party herein, to cancel and/or rectify entries in the register of homeland lounge limited allocating shares as follows: Duncan Ndegwa Muriithi (400 ordinary shares), Joseph Gachina Karia (260 ordinary shares), Philomena Wairimu Muiruri (340 ordinary shares).* 6. *THAT an order be and is hereby issued directing the registrar of companies, the 3rd interested party herein to cancel and/or rectify entries in the register of homeland lounge limited amending, altering, changing, deleting, adding or in any other way interfering with the contents of the memorandum and articles of association of Homeland Lounge Limited as they were as at 6/12/2021.* 7. *THAT an order be and is hereby issued directing the registrar of companies to rectify entries in the register of homeland lounge limited to reflect that Duncan Ndegwa Muriithi, Joseph Gachina Karia and the estate of the late David Wokabi Mathenge are the shareholders of Homeland Lounge Limited holding one (1) ordinary share each as held by the arbitral award of sole arbitrator Mr. Martin Munyu published on 21/6/2024.* 8. *THAT this Honourable Court be pleased to receive, recognize and to enforce the award on quantum of costs delivered by the learned sole Arbitrator Mr. Martin Munyu LLB, FCIArb dated 22nd November 2025 as a Judgment of this Honourable Court.* 9. *THAT the costs of this Application be provided.* 10. The 1st and 2nd Defendants vehemently oppose both applications through their respective Replying Affidavits. They contend that operational necessity dictated the movement of funds, that the share allotment was historically sound, and that the Plaintiff has approached the Court with unclean hands. **Issues for Determination** 11. The Court has considered the two applications, the responses filed, the written submissions, and the oral highlights by Counsel for the parties. The Court distils the twin applications into four core issues for determination as follows: * 1. *Whether this Court is functus officio regarding the substantive prayers for discovery, injunctions against non-party banks, and removal of directors.* 2. *Whether the 1st and 2nd Defendants are in contempt of the Court decree, and if so whether a case for committal been made out.* 3. *Whether the company register warrants rectification to restore the equal shareholding structure.* 4. *Whether the arbitral award on costs be recognized and enforced despite alleged procedural deficiencies in the attachment of the arbitral agreement.* **Analysis** 12.The Court takes note that these are post Judgment applications. The Arbitral process is long concluded and the award adopted as a decree of this Court. * 1. **Whether this Court is functus officio regarding the substantive prayers for discovery, injunctions against non-party banks, and removal of directors.** 13. The doctrine of *functus officio* is a foundational pillar of our jurisprudence. It prevents a Court from reopening a matter once a final judgment has been rendered. The Supreme Court of Kenya articulated this clearly in **Odinga v Independent Electoral & Boundaries Commission & 3 others (Petition 5, 4 & 3 of 2013 (Consolidated)) [2013] KESC 8 (KLR) (24 October 2013) (Ruling)**. The Supreme Court noted as follows: *"* *This principle has been aptly summarized further in Jersey Evening Post Limited v A1 Thani [2002] JLR 542 at 550:* *“A court is functus when it has performed all its duties in a particular case. The doctrine does not prevent the court from correcting clerical errors nor does it prevent a judicial change of mind even when a decision has been communicated to the parties. Proceedings are only fully concluded, and the court functus, when its judgment or order has been perfected. The purpose of the doctrine is to provide finality. Once proceedings are finally concluded, the court cannot review or alter its decision; any challenge to its ruling on adjudication must be taken to a higher court if that right is available” [emphasis supplied].* 14. When **Namisi, J.** adopted the Arbitral Award as a Judgment of this Court, the substantive dispute ended. The Plaintiff's First Application seeks sweeping injunctions against non-party banks, the removal of directors, and extensive discovery of sales and financial records for the years 2022 and 2023. These are new, substantive prayers that fall outside the execution of the existing decree. The arbitrator explicitly declined to order an in-depth independent audit or to remove the Defendants as directors. This Court cannot, in post-judgment applications, issue substantive reliefs that were denied by the arbitrator. The Court is *functus officio* on these specific prayers. 15. Furthermore, the Plaintiff seeks drastic orders against **Equity Bank**, **KCB Bank**, and **Cooperative Bank**, (the Interested Parties) aiming to restrain them from allowing withdrawals. These banks were merely enjoined as Interested Parties. No substantive cause of action was pleaded or proved against them during the arbitration. It is a trite principle, famously established in **Giella v. Cassman Brown & Co. Ltd (1973) EA 358**, that an injunction cannot issue in a vacuum without a substantive claim. Consequently, Prayers 2, 3, 4, 5, 6, 7, 9, and 10 of the First Application dated 23rd January, 2025 are legally untenable and are hereby declined. **(b) Whether the 1st and 2nd Defendants are in contempt of the Court decree, and if so whether a case for committal been made out.** 16. The law on contempt is settled. The primary objective is to uphold the dignity and authority of the Court. The standard of proof is stringent. The Court of Appeal in **Mutitika v Baharini Farm Ltd [1985] KECA 60 (KLR)** established the binding threshold for contempt in Kenya. The standard is higher than a balance of probabilities. It approaches, but does not strictly meet, the standard of beyond reasonable doubt. Contempt proceedings are quasi-criminal in nature. The Court of Appeal in the stated the position as follows: *"In our view, the standard of proof in contempt proceedings must be higher than proof on the balance of probabilities, almost but not exactly, beyond reasonable doubt... The standard of proof beyond reasonable doubt ought to be left where it belongs, to wit, in criminal cases. It is not safe to extend it to an offence which can be said to be quasi-criminal in nature."* 17. The ingredients of contempt are clearly outlined by the High Court in **Cecil Miller v Jackson Njeru & Another [2017] KEHC 1499 (KLR)**, which the Plaintiff correctly relies upon. 18. The Plaintiff alleges that the Defendants are in contempt of the Court's decree. He cites the High Court decision in **Republic v County Government of Kitui Ex Parte Fairplan Systems Limited [2022] KEHC 930 (KLR)**. Contempt requires wilful, contumacious disobedience of a clear court order. The law on the standard of proof required in contempt proceedings is settled. The primary objective is to uphold the dignity and authority of the Court. 19. The question that vexes this Court is which specific orders were deliberately breached with quasi-criminal malice? The Plaintiff asserts that the decree restrained the Defendants from withdrawing funds without his approval. He demonstrates that the sum of Kshs 37,929,000 was transferred from KCB Account No. 1294015303 to another operational account without his consent. 20. The 1st and 2nd Defendants vehemently deny removing the money for their own personal use. They aver that the transfer was an operational necessity to pay suppliers and keep the business afloat as a going concern. They have annexed bounced cheques and operational schedules to support this claim. Homeland Lounge Limited is said to be an active business entity. A company must pay its workers, suppliers, and utility bills to remain a going concern. The payment of ordinary business expenses does not instantly equate to a malicious or fraudulent "taking out of funds" for personal aggrandizement. 21. The strict, quasi-criminal threshold required to commit a party to civil jail has not been met. The evidence presented on the utilization of the Kshs 37.9 million is highly conflicting. A Court of law cannot conduct a forensic accounting audit via affidavit evidence to determine whether every withdrawn shilling was a legitimate business expense or a fraudulent conversion. If the Plaintiff believes that funds were misappropriated, this is a matter that must be reserved for the Company itself to take up through its Board Meetings and internal governance structures. A forensic audit commissioned by the Board may be required to prove embezzlement to the high standard necessary for quasi-criminal sanctions. It is not for this Court to step into the boardroom and untangle operational expenditures. The prayer for contempt is therefore not proved. It is dismissed. **(c) Whether the company register warrants rectification to restore the equal shareholding structure.** 22. The Plaintiff challenges the sudden alteration of the company’s shareholding. Armed with the decree, he points out that a recent CR12 indicates a drastically altered shareholding structure. The register now reflects 400 shares for **Duncan Ndegwa Muriithi**, 340 for **Dr. Philomena Muiruri**, and 260 for **Joseph Gachinah Karia**. This excludes him from equal ownership. 23. The 1st and 2nd Defendants claim the remaining 997 unissued shares were lawfully allotted during a meeting on 25th May, 2021 based on unequal capital contributions. However, the arbitral proceedings commenced well after this alleged 2021 meeting. The arbitrator specifically framed shareholding as an issue for determination. The arbitral award issued on 21st June, 2024 (and adopted as a Judgment of this Court) explicitly affirmed that the three foundational members hold one (1) ordinary share each. 24. The arbitrator's finding on equal shareholding was central to resolving the dispute. It was the *ratio decidendi* of the award. The Defendants attempt to classify this finding as a mere *obiter dictum*, relying on **Maingi & 5 others v Director of Public Prosecutions & another [2022] KEHC 13118 (KLR)**. That argument fails. The shareholding structure was a contested issue directly resolved by the tribunal. The Defendants cannot rely on a disputed 2021 minute to unilaterally overturn a 2024 judicial decree. 25. The Plaintiff now asks this Court to issue a mandatory injunction directing the Registrar of Companies to rectify the register. While this Court possesses the statutory power to rectify the register under **Sections 863** and **864 of the Companies Act**, **2015**, the Court must consider whether the administrative mechanisms provided within the Act have been exhausted. 26. **Section 862 of the Companies Act, 2015** provides a clear administrative remedy. It empowers the Registrar to rectify the register upon application. **Section 862(1)** commands as follows: ***"(1) On receiving an application made in accordance with this section, the Registrar shall remove from the Register an entry relating to a company that the Registrar is satisfied is of a kind that—*** ***(a) derives from anything invalid or ineffective or that was done without the authority of the company; or*** ***(b) is factually inaccurate, or is derived from something that is factually inaccurate or is forged."*** 27. The Plaintiff is already armed with a valid Court Decree from this Court confirming his equal shareholding. The decree clearly renders the subsequent 400/340/260 share split factually inaccurate and legally invalid. Therefore, the proper procedure is for the Plaintiff to present this Decree to the Registrar of Companies and make an application under **Section 862 of the Companies Act**. The Registrar is statutorily bound to act upon a valid Court decree demonstrating the inaccuracy of the current register. 28. The Court should not hastily invoke its powers under **Section 863** when a simpler, administrative remedy under **Section 862** is available and has not been attempted. The Plaintiff does not need to litigate this afresh before this Court. He simply needs to present the Decree to the Registrar. This approach honours the statutory design of the Companies Act. 29. However, the Court must emphasize that this does not prevent the parties from coming back to Court if the Registrar declines or fails to act in accordance with the decree. Should the administrative process fail, the doors of justice remain open for an application under **Section 863**. However, at this juncture, the prayer for direct court-mandated rectification is premature. **(d) Whether the arbitral award on costs be recognized and** **enforced despite alleged procedural deficiencies in the attachment of the arbitral agreement.** 30. In the Second Application, the Plaintiff seeks to recognize and enforce the award on the quantum of costs delivered by the sole Arbitrator, Mr. Martin Munyu, dated 22nd November, 2025. The costs were assessed at **Kshs 3,524,725.** 31. The statutory framework governing arbitral costs is anchored in **Section 32B of the Arbitration Act**. Section 32B (1) provides as follows: **"Unless otherwise agreed by the parties, the costs and expenses of an arbitration, being the legal and other expenses of the parties, the fees and expenses of the arbitral tribunal and any other expenses related to the arbitration, shall be as determined and apportioned by the arbitral tribunal in its award..."** 32. **Section 36 of the Arbitration Act** mandates the recognition and enforcement of arbitral awards upon application to the High Court. The Defendants have attempted to resist the adoption of the costs award by citing procedural irregularities. Specifically, they point out the Plaintiff's failure to perfectly attach certified copies of the original arbitral agreement and the final award on costs as strictly required under the Act. 33. **Section 36 of the Arbitration Act** states as follows: ***“(1) A domestic arbitral award shall be recognized as binding and, upon application in writing to the High Court, shall be enforced subject to this section and section 37.*** ***(2) An international arbitration award shall be recognised as binding and enforced in accordance to the provisions of the New York Convention or any other convention to which Kenya is signatory and relating to arbitral awards.*** ***(3) Unless the High Court otherwise orders, the party relying on an arbitral award or applying for its enforcement must furnish—*** ***(a) the original arbitral award or a duly certified copy of it; and*** ***(b) the original arbitration agreement or a duly certified copy of it.”*** 34. On this issue, the Court is guided by the persuasive and pragmatic jurisprudence developed by **Mshila, J.** in **Said & another v Banda Homes Limited [2022] KEHC 14265 (KLR)**. The Court stated as follows; ***“The Applicant has annexed to the Summons a certified copy of the Final Arbitral Award (Annexture ‘AST-1’). However, the Applicant did not annex a copy of the Arbitral Agreement as required under Section 36(3)(b). The Applicant has therefore not met the conditions requisite for the recognition of the Arbitral Award.*** **Findings and Determination** ***In light of the foregoing this court makes the following findings and determinations;*** ***The application is found to have merit and it is hereby allowed.*** ***The Court hereby directs the Applicant to file the original Arbitration Agreement with the Court through Deputy Registrar Commercial & Tax Division within 14 days from the date hereof;*** ***Upon compliance the order of recognition and enforcement of the Arbitral Award dated January 15, 2021 by Arbitrator Prof. Paul Musili Wambua shall be deemed to be granted.”*** 35. In the **Said vs the Banda Homes** litigation, the Judge correctly opined that the absence of certified copies of the arbitral agreement at the execution stage should not automatically defeat a substantive award on costs where the existence of the arbitration is not in dispute. **Mshila, J.** established that the Court retains the inherent jurisdiction to partially allow prayers for costs in the interest of justice, provided the authenticity of the arbitral proceedings is uncontested by the parties. 36. Applying the **Said vs Banda Homes** principle to the present facts, it is undeniable that the parties willingly submitted to arbitration under **Mr. Martin Munyu**, Learned Arbitrator. The order to proceed for arbitration was made in these very proceedings. The substantive award was already adopted by **Namisi, J.** In this very suit. The Defendants have not mounted any statutory challenge against the arbitrator's assessment of costs on 22nd November, 2025. Therefore, elevating procedural technicalities over substantive justice would be an affront to **Article** **159(2)(d) of the Constitution**. The award on costs merits formal adoption. 37. The Plaintiff therefore partially succeeds in one application only, being the second one. 38. As to costs the same lie at the discretion of this Court and ordinarily follow the event. The Plaintiff having failed in one application and succeeded in the other, the fair order is that there shall be no orders as to costs **Determination** 39. The Court makes a determination as to the Plaintiff’s two applications by way of Notices of Motion dated 23rd January, 2025 and 23rd April, 2025 as follows: * 1. *The Plaintiff’s application by way of a Notice of Motion dated 23rd January, 2025 is dismissed in its entirety for lack of merit.* 2. *The Plaintiff’s application by way of a Notice of Motion dated 23rd April, 2025 is partially allowed in the following terms:* 1. *;THAT this Honourable Court HEREBY receives, recognizes and enforces the award on quantum of costs delivered by the learned sole Arbitrator Mr. Martin Munyu LLB, FCIArb dated 22nd November 2025 as a Judgment of this Honourable Court, subject to the Plaintiff presenting and furnishing the Deputy Registrar of this Court with a Certified copy of the Award on Quantum of costs dated 22nd November, 2025.* *(c) That there be no orders as to costs on both applications.* 40. It is so ordered. **DATED, SIGNED AND DELIVERED AT MILIMANI THIS 29TH DAY OF JULY, 2026** **NJOROGE BENJAMIN K.** **JUDGE** **In the presence of:** Mr. Thuku for the Plaintiff/Applicant. Mr Njenga holding brief for Mr. Lempaa for the 1st, 2nd and 3rd for the Defendants/Respondents. N/A for the 1st Interested Party/Respondent. Mr. Mahinda for the 2nd Interested Party/Respondent N/A for the 3rd Interested Party/Respondent Miss Munanie for the 4th Interested Party/Respondent. Mr. John Paul - Court Assistant.