[2024] KECPT 901 (KLR)

Kimetto & 2 others v Litein Kipangenge Farmers Co-operative Society Limited (Tribunal Case 286/E005 of 2023) [2024] KECPT 901 (KLR) (Civ) (23 May 2024) (Judgment)

Neutral citation: [2024] KECPT 901 (KLR)

Republic of Kenya

In the Cooperative Tribunal

Civil

Tribunal Case 286/E005 of 2023

Janet Mwatsama, Vice Chair, B Sawe, F Lotuiya, P. Gichuki, M Chesikaw & PO Aol, Members

May 23, 2024

Between

Edwin Kimetto

1st Claimant

Sammy Tonui

2nd Claimant

Samwel Rono

3rd Claimant

and

Litein Kipangenge Farmers Co-operative Society Limited

Respondent

Judgment

Facts of the case. 1. Around April 2023, the Respondent issued a Notice calling for an Annual General Meeting that was to be held at Litein County Council Hall on 18th May, 2023.

2. The proposed agenda of the meeting was to include:i.The Chairman’s Report.ii.The Registered 2021 Audited Accounts.iii.Members’ complains.iv.Elections.As per the by-laws of the Respondent, the Annual General meeting was to only be attended by members of the Respondent and the members who were to attend were expected to write their names and append their signatures to indicate their participation.

3. It is the Claimants’ contention that the process of identifying members was unsupervised and as such those who participated in the Annual General Meeting cannot be verified. That is was apparent that many non-members including ‘boda boda’ operators, ‘mama mboga’ and women working with Kericho County in a program called (equalizer) participated in the Annual General Meeting.

4. That the very act of non-members participating in the Annual General Meeting was prejudicial as the Annual General meeting was not constituted properly and as such could not pass certain resolutions.That also given the high number of non-members present, the meeting turned rowdy and chaotic with shouting and as such members present were unable to go through the whole agenda as had been indicated. Members were unable to inquire or go through the audited accounts, the financial statements of assets and liabilities and the accounts held in Co-operative Bank and Equity Bank.

5. It is also the Claimants’ contention that the presiding officer for the elections scheduled at the Annual General Meeting failed from the begining to inform members of the pre-requisites for the elections which included academic qualifications of the candidates vying as provided for in the by-laws of the Society and as such non-qualified candidates participated in the elections. The Claimants also allege that the presiding officer was impartial and even openly campaigned for some candidate and as such, the whole process of elections was marred with incurable irregularities making it null and void.

6. The Claimants also allege that the Respondents have also been acquiring loans without involvement of members or without going through the process prescribed in the by-laws and as such some liabilities such as the:a.Parties Sacco debt of Kshs. 18,900,000/=b.Equity Bank loan of 500,000/=c.Debt of Kshs. 9,000,000/= owed to milk suppliers.d.Rent income of Kshs. 10,000,000/= and many others were not approved.The Claimants filed this case seeking among many others that this Tribunal:i.Make an order to vacate the resolutions passed at the Annual General Meeting of 18th May, 2023ii.Make an order for a fresh Annual General Meeting which should be held in compliance with the laid down regulations as established by the law.iii.Make an order quashing the elections held at the Annual General Meeting of 18th May, 2023 and the subsequent inauguration of the officials elected at that Annual General Meeting.iv.Make an order Calling for fresh elections in compliance with the laid down regulations as established by the law.v.Make an order compelling the management of the Respondent to publish information regarding the number of bank accounts they are holding.vi.Make an order barring further financial decisions until a fresh Annual General Meeting is held.

7. In response, the Respondent submitted that some of the Claimants are sore losers and are only in court because they contested the elections that were held at the Annual General Meeting and lost. That there would not have been any case at this Tribunal had they won. That if the whole process was illegal as they claim they would not have offered themselves for elections.

8. To the Respondent, the Annual General meeting of 18th May, 2023 was held as had been directed by the Commissioner of Co-operatives as per his letter dated 10th March, 2023 and all the conditions prescribed were followed including the reasons why the first meeting that was scheduled for 27th April, 2023 was postponed.To the Respondent, the election at the Annual General Meeting was above board and followed the by-laws and the Returning officer scrutinized the membership register and as such non-members didn’t vote or participate in the elections.

9. The Respondent also filed as they had been ordered by the Tribunal: The Annual Report and financial Statement for the year 2019 and 2021.

Bank Statements from both Co-operative and Equity Banks.

The budget for 2020-2023.

10. We have considered the pleadings and evidence adduced during the hearing and set two questions for determination.i.Whether the resolutions of the Annual General Meeting/ Special General meeting held on 18th May, 2023 should be vacated and fresh Annual General Meeting/ Special General Meeting be held in accordance with the laid down regulations.ii.Whether this Tribunal should make orders barring further financial decisions until a fresh Annual General Meeting/ Special General Meeting is held.

Issue one: 11. Whether the Resolutions of the Annual General Meeting/ Special General Meeting of 18th May 2023 should be vacated and fresh Annual General Meeting/ Special General Meeting be held in accordance with the laid down regulations.Annual General meetings or Special General Meetings, (whichever the case) are important in the management and operations of Co-operatives as they serve the important purpose of being the platforms for accountability to members. Co-operatives are distinct from their members legally, but still require some of their members to act as the human agents for the Cooperatives those human agents for accountability purpose, have to keep the other members who are not involved in management abreast of the status of operations, management of finances and other resources through either Annual General Meetings or Special General Meetings.Annual General Meetings or Special General Meetings are the backbone of good governance in Co-operatives as during Annual General Meetings or Special General Meetings, members sit at the decision making table and mold the destiny and fate of their Co-operative Society, they gather and discuss pertinent issues and pass resolutions that are binding on the Co-operative Society and its membership.Given the Importance of Annual General Meetings and Special General Meetings, such meetings should be held in an environment that allow members to participate properly and effectively. From the evidence adduced at the hearing, we are not satisfied with the structures that were put in place during the Special General Meeting of 18th May, 2023. To begin with, the Respondents have not satisfied this Tribunal with evidence of how they verified those who were in attendance or how they locked out non-members from participating in the Special General Meeting. The Respondents have only provided an attendance list, not a membership register that supports their claim that all those who attended were members.

12. Second, the Respondent has not given sufficient evidence to convince us that there was a proper structure during the Special General Meeting of 18th May, 2023 to allow for adequate time and environment to discuss and interrogate the financial reports and books of Account that were tabled to the Special General Meeting.

13. Third, sufficient evidence has not been adduced to identify and verify those who were in attendance without this, its difficult to confirm that those who were in attendance were all eligible to vote.

14. Fourth, no evidence has been presented to confirm that those who offered themselves for the election that was held at the Special General meeting satisfied the eligibility criteria to even participate in the said elections. It is our considered position that no doubt should be left that those who are elected in office are eligibly and validly elected.

15. Accountability is an important facet in the Management and Operations of Co-operative Societies and when as a Tribunal we are not presented with sufficient evidence to show some seriousness in the holding of a Special General Meeting, we are left with no option but to order a fresh Annual General Meeting or Special General Meeting (whichever the case) that complies with the laid down regulations and good governance practices.

Issue two: 16. Whether this Tribunal should make orders barring further financial decisions until a fresh Annual General Meeting / Special General Meeting is held.Section 58 of the Co-operative Societies Act gives the Commissioner of Co-operatives the power to call for inquiry in matters relating to finances and financial decision of Co-operative Societies. This, he may do in his own accord, or when directed by the Cabinet Secretary in charge or on the Application of not less that one-third of members present and voting at a meeting of a Co-operative Society.

17. This Tribunal as per the Co-operative Societies Act, should only be involved in participating on matters of finances involving Co-operative Societies at an appeal stage. At the first instance, it is our advice now that the Claimants have been served with annual financial reports, bank statements and books of account to interrogate the same and follow the process stipulated by the Co-operative Societies Act in raising queries concerning the Management and decision making relating to the financial decision making in their co-operative society. At this level, we still don’t have jurisdiction to make orders barring further financial decision; that’s the province of the Commissioner of Co-operatives.Judgment is entered in favour of claimant against Respondent.

Final Orders. 18. The Statement of Claim dated 24th May, 2023 succeeds to the extent that:i.The Special General Meeting held on 18th May, 2023 and the resolutions made including the election held, have been nullified.ii.A fresh Special General Meeting has been ordered in the next 60 days from the date of this judgement to be conducted in strict compliance of the regulations established by the Co-operative Societies Act.iii.Costs to the Claimant.

JUDGMENT SIGNED, DATED AND DELIVERED VIRTUALLY AT NAIROBI THIS 23RD DAY OF MAY 2024. Hon. J. Mwatsama Deputy Chairperson Signed 23. 5.2024Hon. Beatrice Sawe Member Signed 23. 5.2024Hon. Fridah Lotuiya Member Signed 23. 5.2024Hon. Philip Gichuki Member Signed 23. 5.2024Hon. Michael Chesikaw Member Signed 23. 5.2024Hon. Paul Aol Member Signed 23. 5.2024Tribunal Clerk JemimahMiruka advocate for the RespondentKipleting advocate for the Claimants.Hon. J. Mwatsama Deputy Chairperson Signed 23. 5.2024