https://new.kenyalaw.org/akn/ke/judgment/kehc/2026/7793

**REPUBLIC OF KENYA** **IN THE HIGH COURT OF KENYA** **COMMERCIAL AND TAX DIVISION** **INSOLVENCY NOTICE NO. E165 OF 2024** **KIPKELION CORNER LIMITED…………………………. DEBTOR/APPLICANT** **VERSUS** **PHOENIX PROPERTIES LIMITED…………………CREDITOR/RESPONDENT** **RULING** 1. This is an application by the Debtor/Applicant seeking to set aside or strike out the Statutory demand issued by the Respondent. **Background Facts** 2. The Applicant filed the Notice of Motion dated 18th March, 2025 seeking the following orders; 1. *Spent.* 2. *The Honourable Court be pleased to set aside and/or strike out the statutory demand issued by the Respondent against the Applicant dated 1st August 2024 in its entirety.* 3. *This Honourable Court be pleased to grant an interim order restraining the Respondent from presenting or proceeding with any liquidation petition against the Applicant pending the hearing and determination of this application.* 4. *The costs of this application be borne by the Respondent.* 5. *This Honourable Court be pleased to grant any further orders it deems just and appropriate in the circumstances.* 3. The Application was supported by the Affidavit of **Divyesh Indubhai** **Patel**. He deponed that the statutory demand dated 1st August, 2024 is defective, invalid, and amounts to an abuse of the Court process. This is because the alleged debt of Kshs. 309,003,638.98 is genuinely disputed. It was further contended that the debt is the subject of ongoing Court proceedings and/or an Appeal. Thus, this rendered the demand premature and unenforceable. Additionally, the Applicant maintained that it has a valid Counter-claim or set-off which significantly reduces the alleged amount below the statutory threshold under the Insolvency Act. In the circumstances, the statutory demand is being improperly used as a coercive tool rather than for legitimate insolvency purposes, thereby constituting an abuse of process. 4. The Respondent, vide the Replying Affidavit of **KAMALJEET SINGH MATHARU** sworn on 24th April, 2025, opposes the application. He stated that **Regulation 16(3)** and **(4) of the Insolvency Regulations** require that an application to set aside a statutory demand be supported by an affidavit. It should detail, inter alia, the date of service, the grounds for setting aside, and annex a copy of the Statutory demand. In this case, the Applicant was served on 19th August, 2024 as evidenced by the Affidavit of Service sworn on 25th September, 2024. Yet it failed to file the application within the prescribed timelines under **Regulation 16(1)**, thus rendering it grossly out of time. Further, the Applicant has failed to annex a stamped or received copy of the statutory demand, suggesting deliberate non-disclosure. Consequently, the application is incompetent and liable to be struck out for non-compliance with the mandatory provisions of the Insolvency Regulations. 5. The Respondent further stated that following the Applicant’s failure to vacate leased premises after expiry of the lease, it filed **ELC Case No. 287 of 2005**, in which judgment was delivered on 30th August, 2018 in its favour. The Court ordered the Applicant to vacate the premises, pay Kshs. 23,699,000/= with interest, mesne profits of Kshs. 900,000/= per month from 1st November 2004 until vacant possession, and costs. The costs were later taxed at Kshs. 3,809,942.93/=. The Court further rejected the Applicant’s alleged claim of Kshs. 129,026,793/= for lack of proof and noted that no Counter-claim had been filed. Subsequent proceedings before the Court of Appeal upheld this position, emphasizing that no Counter-claim existed. That the Applicant had not paid rent for over a decade, and that the Respondent was entitled to enjoy the fruits of its judgment. To date, no Appeal has been filed against the ELC judgment and the Applicant has not settled any part of the decretal sum. 6. The Court has seen a Supplementary Affidavit sworn on 18th June, 2025 by **DIVYESH INDUBHAI PATEL.** It maintains that the Application was filed after leave was obtained. That the debt is a seriously disputed debt. **Issues for determination** 7. The Court has carefully considered the Application, the response, and the written submissions. The single issue for determination is; *a) Whether the Statutory Demand should be set aside.* **Analysis** 8. The Court’s power to set aside a statutory demand is anchored both in its inherent jurisdiction and in statute. It is expressly provided for under **Regulations 16** and **17 of the Insolvency Regulations**. In particular, **Regulation 17(6)** empowers the Court to set aside a statutory demand where: **(6) The Court may grant the application if—** **(a) the debtor appears to have a counterclaim, set-off or cross-demand which equals or exceeds the amount of the debt or debts specified in the statutory demand;** **(b) the debt is disputed on grounds which appear to the Court to be substantial;** **(c) it appears that the creditor holds some security in respect of the debt claimed by the demand, and either paragraph (6) is not complied with in respect of the demand, or the Court** **is satisfied that the value of the security equals or exceeds the full amount of the debt; or** **(d) the Court is satisfied, on other grounds, that the demand ought to be set aside** 9. Further, **Regulation 16(1) of the Insolvency Regulations, 2016** provides that a debtor may apply to set aside a statutory demand within twenty-one (21) days from the date of service of the demand. Alternatively, where the demand has been advertised, from the date of the advertisement’s first appearance. 10. It is clear that the Regulation confines the Court’s jurisdiction to setting aside a statutory demand to four grounds only, namely: 1. *where there is a counterclaim/set‑off/cross‑demand equal to or exceeding the debt;* 2. *or where a debt is genuinely disputed on substantial grounds;* 3. *or where security equal to or exceeding the debt;* 4. *or where the Court is satisfied that other sufficient reason exists.* 11. Before delving any further into the merits of the Application, it is notable that the Respondent pointed out that the Application was filed out of time contrary to **Regulation 16(1) of the Insolvency Regulations**. That it ought to have been filed by 22nd August, 2024 or at the latest by 9th September, 2024. The Applicant deliberately failed to annex a stamped copy of the statutory demand to conceal the delay. Consequently, the Application is incompetent and should be struck out for non-compliance with the applicable Regulation. 12. The Applicant argued that it obtained leave from this Court **(****Hon. Noelle Kyanya)** on 18th March, 2025 to file the application out of time. That therefore, the application is properly on record both factually and legally. The Applicant added that leave was granted in the presence of Counsel for the Respondent herein, who at the time did not raise any objection. That up to date the said leave has neither been reviewed, set aside, nor appealed against, and thus remains *in situ.* 13. The Court has perused the Court record and particularly on 18th March, 2025. Notably, the Applicant did not mention the issue of seeking leave. Further, the record itself doesn’t indicate that the same was discussed. **Hon. Noelle Kyanya** the **Deputy Registrar** of this Court simply placed the matter before **Hon. Adisa** a **Deputy Registrar** and issued a mention date. *“Njoroge – Respondent* *Creditor – A* *We haven’t put in our response as we haven’t been served with the claim – we pray for 14 days to comply.* *DR – Mn 18/3/2025* *Ouma – Creditor* *Debtor – Chirchir h/b Mrs. Njoroge* *Ouma – its related to E164, E165, E166, E167, E168 and E169 which is coming before Hon. Adisa on 20/3/25. I pray it be placed before her so that directions are given wholesomely.* *DR – Matter is placed before Hon. Adisa on 20/3/25 for mention alongside the other matters”* 14. **Regulation 16 of the Insolvency Regulations, 2016**, provides as follows: **16. Application to set aside statutory demand** **(1) The debtor may, apply to the Court for an order to set aside the statutory demand—** **(a) within twenty-one days from the date of the service on the debtor of the statutory demand; or** **(b) if the demand has been advertised in a newspaper, from the date of the advertisement's appearance or its first appearance, whichever is the earlier.** **(2) Subject to any order of the Court under regulation 17 (7), time limited for compliance with the statutory demand shall cease to run from the date on which the application is lodged with the Court.** **(3) The debtor's application shall be in Form 7 set out in the First Schedule and shall be supported by an affidavit, which shall be in Form 8 set out in the First Schedule.** **(4) The affidavit referred to under paragraph (3) shall—** **(a) specify the date on which the statutory demand came into the debtor's possession;** **(b) state the grounds on which the debtor claims that it should be set aside; and** **(c) annex a copy of the statutory demand.** 15. The Court observes that indeed the Applicant has not disclosed when it received the statutory demand, as pointed out by the Respondent. Further, it has also not stated why it did not file the application to set aside the statutory demand within twenty-one (21) days, as provided in Regulation **16(1)(a) of the Insolvency Regulations**. It is also observed that no leave was either sought or granted by this Court to file the Application outside the statutory timelines. 16. The Statutory Demand is dated 1st August, 2024, and going by the date of the Statutory demand, the Twenty-One (21) days of filing expired on 22nd August, 2024. Going by the date of service the Twenty-One (21) days period expired on 9th September, 2024. The application to set aside should have been made between 22nd August, 2024 and 9th September, 2024. Notably, the present Application was filed on 18th March, 2025, over seven months later. In addition, the Applicant did not seek the leave of this Court to file the Application out of time. Such leave could not in any event be obtained from or granted by the Deputy Registrar who exercises a separate jurisdiction and neither holds brief for the Court nor is she a substitute Judge. 17. The Application for setting aside the statutory demand dated 1st August, 2024 was therefore filed out of time. There is no competent application before the Court. We so hold. The Court follows the decisions in **D Manji Construction Limited v Associated Construction Company (K) Limited [2025] KEHC 13624 (KLR)** and **Development Bank of Kenya Limited v Samuel Kazungu Kambi [2021] KEHC 12733 (KLR).** The Application fails and is struck out due to the time bar. 18. As to costs the same lie at the Court’s discretion. Costs ordinarily follow the event. This Court will not deny a successful party their costs unless for cogent reasons. The successful Respondent is awarded costs to be paid by the Applicant. **Determination** 19. The Applicant’s Application by way of a Notice of Motion dated 18th March, 2025 is HEREBY struck out. 20. The Respondent is awarded the costs thereof. 21. It is so ordered. **DATED, SIGNED AND DELIVERED AT MILIMANI THIS 04TH DAY OF JUNE, 2026.** **NJOROGE BENJAMIN K.** **JUDGE** **In the presence of;** Mr. Odhiambo for the Debtor/Applicant. Mr. Ouma for the Creditor/Respondent. Mr. John Paul - Assistant.