[2022] KEHC 11024 (KLR)
The court found that the debtor failed to comply with the mandatory requirements of the Insolvency Act and Insolvency Regulations by not providing a statement of affairs and an application for appointment of a trustee. Without these documents, there was no full disclosure of the debtor's financial position as...
Source-derived case information.
- Citation
- [2022] KEHC 11024 (KLR)
- Parties
- Applicant: Faruk Amin Mohamed; Respondent: Elias Kamau Macharia (Personal Representative of the Estate of Nahashon Guocha Deceased)
- Court
- High Court
- Court Station
- High Court at Nairobi (Milimani Commercial Courts)
- Jurisdiction
- Kenya
- Case Number
- Insolvency Cause E011 of 2022
- Procedural Posture
- Insolvency Cause / Ruling on Interim Application for Stay of Execution Pending Bankruptcy Petition
- Outcome
- application dismissed with leave to comply within thirty days
- Judges
- DAS Majanja
- Legal Topics
- Bankruptcy Petition, Debtor Inability to Pay, Insolvency Regulations Compliance
- Source Language
- en
Source-derived case record
Summary, issues, holding and outcome
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Parties
Faruk Amin Mohamed
Applicant
Elias Kamau Macharia (Personal Representative of the Estate of Nahashon Guocha Deceased)
Respondent
Procedural Posture
Insolvency Cause / Ruling on Interim Application for Stay of Execution Pending Bankruptcy Petition
Legal Issues
- 1 Whether the debtor has demonstrated inability to pay debts as required under the Insolvency Act, 2015.
- 2 Whether the bankruptcy petition is compliant with the mandatory requirements of the Insolvency Act and Insolvency Regulations, 2016.
- 3 Whether the application for stay of execution is an abuse of court process.
Ratio Decidendi
The court found that the debtor failed to comply with the mandatory requirements of the Insolvency Act and Insolvency Regulations by not providing a statement of affairs and an application for appointment of a trustee. Without these documents, there was no full disclosure of the debtor's financial position as required by law. The court emphasized that compliance with these statutory provisions is essential for a debtor to benefit from the protections of the Insolvency Act. Consequently, the application for stay of execution was dismissed due to non-compliance, but the debtor was granted leave to comply with the regulations within thirty days.
Court Disposition
application dismissed with leave to comply within thirty days
Orders
- The application dated 5th May 2022 is dismissed.
- The debtor is granted leave to comply with the Insolvency Regulations within thirty (30) days from the date of the ruling.
Full Case Text
Judgment text and source record
25 paragraphs
Mohamed v Macharia (Personal Representative of the Estate of Nahashon Guocha Deceased) (Insolvency Cause E011 of 2022) [2022] KEHC 11024 (KLR) (Commercial and Tax) (13 June 2022) (Ruling)
Neutral citation: [2022] KEHC 11024 (KLR)
Republic of Kenya
In the High Court at Nairobi (Milimani Commercial Courts Commercial and Tax Division)
Commercial and Tax
Insolvency Cause E011 of 2022
DAS Majanja, J
June 13, 2022
In the matter of the insolvency act and in the matter of Faruk Amin Mohamed– a debtor
Between
Faruk Amin Mohamed
Debtor
and
Elias Kamau Macharia
Respondent
Personal Representative of the Estate of Nahashon Guocha Deceased
Ruling
1. The Debtor has filed a Bankruptcy Petition dated 5th May 2022 on the ground that he is unable to pay his debts following a judgment in the Magistrates Court at Milimani Commercial Courts Civil Case No. 4305 of 2014, Elias Kamau Wachira v Omar Abdi, Mutinda Musau and Faruq Mohamed where he owes at least KES. 3,263,112,42. Accompanying the petition is a Notice of Motion dated 5th May 2022 seeking a stay of execution of the court proceedings. In his deposition, the Debtor states that he is unable to make payments as his father who was assisting him passed away. He is apprehensive that he will be arrested and committed to civil jail if the court does not issue a stay of execution.
2. The Creditor has opposed the application through the replying affidavit of his advocate Alfred Ochieng sworn on 7th June 2022. The Creditor does not dispute the judgment against the Plaintiff but avers that the Debtor has failed to the show that he is unable to pay his debts. He states that the Debtor has not shown any evidence that he was being assisted to pay the debt by his father. He contends that the Debtor is abusing the court process as he is using the bankruptcy process to avoid his debt.
3. A person who is in financial distress and is unable to pay his debt may apply to the court for a bankruptcy order under section 32 of the Insolvency Act, 2015 which provides as follows:32(1)A debtor may make an Application to the Court for an order adjudging the debtor only on grounds that the Debtor is unable to pay the Debtors’ 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.
4. In an interim application such as the one before the court, the court ought to be satisfied that the debtor is unable to pay his debt. The court is not required to carry out a detailed inquiry but must be satisfied that there is sufficient evidence of indebtedness and that the application is not an abuse of the court process (see Rajendra Ratilal Sanghani v Schoon Ahmed Noorani Ml Comm Ic No. 033 of 2018 [2018] eKLR). It is for this reason that a debtor is required to give a full disclosure of his financial affairs including full particulars of his debtors and creditors. This requirement is underpinned by Regulation 18 of the Insolvency Regulations, 2016 which requires that the petition shall be accompanied by the following documents:a.an affidavit to the petition which shall be in Form 8 set out in the First Schedule;b.statement of debtors financial position, which shall be called a “statement of affairs”, and shall be in Form 11 set out in the First Schedule; andc.application for appointment of trustee which shall be in Form 9 of the First Schedule
5. A cursory look at Form 11 show that it is a very detailed form in which a debtor is required to state its assets, liabilities, personal information concerning the debtor and its affairs, budget information and reasons for the insolvency. The Debtor’s petition in this case is not accompanied by the “statement of affairs” and an application for appointment of a trustee. The provisions support the requirement for full disclosure if a debtor is to benefit from the incidents of the Insolvency Act which enable him discharge his debt and have a fresh start (see Re James Maina Kabatha NKU IC No. 4 of 2019 [2020]eKLR).
6. In view of the clear non-compliance with the mandatory provisions of the Insolvency Act and Insolvency Regulations, I am unable to grant the orders sought by the Debtor. I therefore dismiss the application dated 5th May 2022.
7. The Debtor is however granted leave to comply with the Insolvency Regulations within thirty (30) days from the date hereof.
DATED ANDDELIVERED ATNAIROBI THIS13THDAY OF JUNE 2022. D. S. MAJANJAJUDGECourt Assistant: Mr M. OnyangoMr Odhiambo instructed by Mutisay and Company Advocates for the Debtor.Mr Achola instructed by Ochieng Opiyo and Company Advocates for the Creditor.