[2022] KEHC 15291 (KLR)

Kiptoo v Kiptoo t/a Filling Station Enterprise (Insolvency Cause 1 of 2021) [2022] KEHC 15291 (KLR) (10 November 2022) (Ruling)

Neutral citation: [2022] KEHC 15291 (KLR)

Republic of Kenya

In the High Court at Nakuru

Insolvency Cause 1 of 2021

HK Chemitei, J

November 10, 2022

Between

Duncan Kemboi Kiptoo

Debtor

and

Alex Kipsang Kiptoo t/a Filling Station Enterprise

Creditor

Ruling

1. The applicant filed a notice of motion dated November 1, 2021 under sections 32, 33 and 34 of the Insolvency Act, 2015he prayed for the following orders; -a.Spent.b.Spent.c.Spent.d.That the court be pleased to appoint an insolvency practitioner to prepare a report under section 34 on the applicant herein.e.That upon receipt of a report by the insolvency practitioner the court be pleased to declare the applicant bankrupt.f.That the costs for the application be provided for.

2. The application is supported by the grounds on the face thereof and the sworn affidavit by the debtor/applicant on the even date. He deposed that he was a defendant in Kabarnet SPMCC No 40 of 2019 and the plaintiff in the suit referred to therein had obtained a decree against him for the sum of Kshs 921,888/=. He was also aware that warrant for arrest had been issued against him by the court. He deposed further that he was completely insolvent and had no financial means to meet the decree issued against him.

2. The debtor/applicant believes that his arrest and committal to jail was imminent and he expected other decrees to be issued against him in due cause and he would suffer substantially while in prison. That he owned title No Lembus/Chemugoch 1521 And 1522 but the same were sold by the bank due to his failure to service the loan advanced to him.

3. Further, that Nakuru CMCC 1188 of 2016 was still pending and he expected a judgment against him for the sum of Kshs 1,008,000/=. He said that he was not engaged in any income generating project and he depended on well-wishers and his debts currently stood in the sum of Kshs 15,535,363. 85/=. He ended his deposition by praying to the court that his application be allowed.

5. The creditor/respondent opposed the application vide his replying affidavit dated December 14, 2021. He deponed that in the matter Kabarnet SPMCC No 40 of 2019 he did sue the debtor/applicant and obtained a decree against him and his company Tonaks Oil Ltd for a sum of Kshs 921,888 after the debtor/applicant herein entered a consent on his own motion before the trial court conceding to all the demands made by him. That upon the lapse of 30 days’ period for stay of execution, the debtor/applicant was given numerous extensions in order to comply but he did not.

6. The creditor/respondent deponed further that the Senior Principal Magistrate Court at Kabarnet issued the debtor/applicant with a notice to show cause why he should not be committed to civil jail, a notice which he did not comply with. Thereafter, warrant of arrest was issued against the debtor/applicant herein on the October 14, 2021 but he had been in hiding from the jurisdiction of the court at Kabarnet in attempts to evade execution of the said warrant.

7. The creditor/respondent believes that the averment of the debtor/applicant herein in paragraph 5 of his supporting affidavit is not true and the same was a ploy to defeat his creditors. He also believes that the debtor/applicant was still the bona-fide owner of the pieces of land referred to in paragraph 8 of his supporting affidavit with regard to title no. Lembus/Chemugoch 1521 and 1522 as no documents had been attached to the effect that the said properties were indeed disposed off by a bank. Further, that the debtor/applicant had properties and income generating projects which he solely held or ran through proxy with a sole purpose of defeating his creditors.

8. He went to deponed that no supporting documents had been laid before this honourable court to support the provisions in paragraph 11 of the supporting affidavit by the debtor/applicant herein. That he resides and carries on gainful business within Marigat sub county within Baringo County and that the decree forming a basis of the applicant’s insolvency cause originated from Baringo County, which is within the Jurisdiction of the High Court of Kenya at Kabarnet. He prayed that this honourable Court dismiss the entire Insolvency application by the applicant herein as the same was not made in good faith. In the alternative, that this insolvency cause be referred to Kabarnet High Court to save him the trouble and costs of following up these proceedings at Nakuru.

9. The debtor/applicant filed a further affidavit dated April 21, 2022 in response to the creditor/respondent’s replying affidavit. He deposed that it was true that there was a valid decree against him in Kabarnet SPMCC No 40 of 2018 for Kshs, 921,888/= and a warrant of arrest issued against him for failure to honour the decree. He confirmed that he owned Lembus / Chemugoch 1521 and 1522 but the same were sold by the bank to recover unpaid loans and that the assets referred to in paragraph 8 of his affidavit were sold.

10. He deposed further that he had not been able to obtain records of sale for Lembus / Chemugoch / 1521 but he had information that the same was purchased by one Mr Tamar of Eldama Ravine Law Courts. That he does not hold any properties or conduct any business through proxies at all and he had given a list of liabilities against him in the petition naming each creditor and the amount owed to each creditor. Further, that this court had jurisdiction to deal with the matters in issue before and he therefore did not intend to cause suffering to the creditor/respondent by filing this matter in Nakuru.

11. The creditor KCB Bank Kenya Limited, through one Amos Rop the relationship manager swore an affidavit dated September 30, 2022 in support of the respondent’s perspective that the application as well as the insolvency petition was made in utmost bad faith. He confirmed that indeed the applicant had taken a mortgage facility through Tonaks oil limited amounting to Kshs 7,170000 and offered three securities namely Kampi Ya Moto /Kampi Ya Moto Block 1/1104 (Morop), Lembus /Chemugoch /1521 and 1522 as well as Njoro/Ngatia Block 8/121(Karuiru) the latter in the name of one Geoffrey Kangogo Kipruto.

12. He averred that the above securities were later sold by the bank in exercise of its statutory power of sale and the amount realized was insufficient to settle the loan. All that the creditor was now doing was to attempt to recover the amount through other means.

13. That the court should reject the application as the applicant has failed to clearly state his financial position through his company Tonaks oil limited. In essence he prayed that the application be dismissed.

14. When the matter came up for hearing the court directed the parties to file written submissions which they have complied.

Debtor/Applicant’s Submissions 15. The debtor/Applicant in his submissions referred to section 32 of the Insolvency Act which provides that the court may decline to deal with an application to be declared bankrupt if the same is not accompanied by a statement of the debtor’s financial position containing such particulars of the debtor’s creditors, debts, liabilities and assets as may be prescribed by the Insolvency regulations. He submitted that through his further affidavit he had made full and frank disclosure of his assets and liabilities in his statement of affairs.

16. The debtor/applicant submitted further that he had no financial means to satisfy the decree issued against him. He placed reliance in the cases of In the matter of Ali Jillo Fallan) Insolvency Cause 6 of 2018) [2021] KEHC 8 (KLR), Rajandra Ratilal Sanghani v Schoon Ahmed Noorani [2018] eKLR and Re Akbarakali Karim (Debtor)eKLR. He also urged the court to appoint an insolvency practitioner to prepare a report under section 34 of the Insolvency Act on him and upon receipt of the said report be pleased to declare him bankrupt.

Creditor/Respondent’s Submissions 17. The creditor/respondent in his submission raised the issue whether the debtor/applicant was bankrupt among other issues. He submitted that the applicant ought to demonstrate that he was a person able to make an application for his own bankruptcy. That the provisions of section 32 of the Insolvency Act provide an answer as when a debtor may apply for his own bankruptcy order. He submitted further that the present application was flawed in law as the applicant had failed to meet the requirements of the said Act by failing to provide the requisite documents. He placed reliance on the case of Hook v Jewson Ltd [1997] 1 BCLC 664 and also urged to be awarded costs.

Analysis and Determination 18. I have perused carefully the debtor/applicant’s application, the affidavits and submissions together with the cited law by both parties.

19. This court in determining this application is guided by section 32 (2) of the Insolvency Act which stipulates as follows:"(1)A debtor may make an application to the court for an order adjudging the debtor bankrupt only on the grounds that the debtor is unable to pay the debtor's debts.(2)The Court may decline to deal with such an application if it is not accompanied by a statement of the debtor’s financial position containing—(a)such particulars of the debtor’s creditors and of the debtor’s debts and other liabilities and assets as may be prescribed by the insolvency regulations; and(b)such other information as may be so prescribed.(3)The court may reject a statement of the debtor's financial position if of the opinion that it is incorrect or incomplete.(4)A debtor who makes an application under this section shall publish a notice of the application in—(a)a newspaper circulating within the region in which the debtor ordinarily resides; and(b)in such other publications (if any) as may prescribed by the insolvency regulations for purposes of this section.(5)The court may decline to hear the application if subsection (4) has not been complied with to its satisfaction."

20. Further, regulation 18 of the Insolvency Regulationsprovides as follows:"(3)For the purposes of section 32 (2) of the Act, the statement of the debtor’s financial position is required to include the following information —a.the debtor’s full name;b.the debtor’s current address, telephone number, and any other contact detail including mobile telephone number or an email address;c.if the debtor has used any other name, including any alias in the last seven years, those other names and aliases;d.the debtor’s date of birth;e.whether the debtor is male or female;f.the debtor’s Kenya Revenue Authority personal identification number;g.if the debtor has a current passport, his nationality and the passport number;h.if the debtor is employed—i.the employer’s name and address;ii.the debtor’s occupation or designation;iii.a statement of the debtor’s income;i.an itemised statement of the debtor’s expenses;j.deleted by LN 7/2018, r 7;k.a statement of the partner’s income;l.a statement of the debtor’s current assets, including the description, value, and location of those assets;m.a statement of any assets that the debtor has disposed of in the previous three years;n.a statement of the debtor’s liabilities, including any contingent liabilities, with the following details for each liability—(i)the amount;(ii)whether the liability includes goods and services tax;(iii)how liability was incurred;(iv)whether the liability is secured;(v)if the liability is secured, a description of the security;(vi)whether the liability is a preferential debt;o.a statement of all financial transactions by the debtor during the previous three years.(4)The debtor is required to sign and date the statement of the debtor’s financial position and arrange for the publication of the statement in the Kenya Gazette."

21. Upon perusal of the court record I note that no evidence of the publication has been annexed to debtor/applicant’s application seeking bankruptcy orders. The failure to publish a notice of the application for bankruptcy in a newspaper is a fatal error in terms of section 32 (2) of the Insolvency Act. The debtor/applicant has also failed to arrange for the publication of his statement of financial position in the Kenya Gazette pursuant to regulations 18 (4) of the Insolvency Regulations.

22. In view of the forgoing, the debtor/applicant’s failure to strictly adhere to the requirements of section 32 (2) and (4) of the Insolvency Act and regulations 18 (3) & (4) of the Insolvency Regulations is a material error. Section 32 (2) & (3) of the Insolvency Act empowers this court to dismiss the instant application on that ground.

23. This position sits well as was clearly found In Re Shadrack Kipyatich J Kibor – Debtor [2019] eKLR where the court dismissed the debtor/applicant’s application for failing to file a complete statement of financial position and advertising the notice for an application of a bankruptcy order.

24. In view of the above findings the application dated November 1, 2021 is hereby struck out with costs.

DATED SIGNED AND DELIVERED VIA VIDEO LINK AT NAKURU THIS 10TH DAY OF NOVEMBER 2022. H. K. CHEMITEI.JUDGE