https://new.kenyalaw.org/akn/ke/judgment/keelrc/2026/1355

Ochanda v Agricultural Finance Corporation (Cause E880 of 2024) [2026] KEELRC 1355 (KLR) (21 May 2026) (Judgment) Neutral citation: [2026] KEELRC 1355 (KLR) Republic of Kenya In the Employment and Labour Relations Court at Nairobi Cause E880 of 2024 CN Baari, J May 21, 2026 Between Daniel Omondi Ochanda Claimant and Agricultural Finance Corporation Respondent Judgment Introduction 1.Before Court is the Claimant’s Statement of Claim dated 16th October, 2024, wherein the Claimant seeks the following reliefs against the Respondent: -a.Twelve (12) months ‘compensation of Kshs. 1,572,672.00b.Order of reinstatement of the claimantc.Certificate of serviced.Interest on (b) 2.The Respondent filed a Response to the Statement of Claim dated 27th November, 2024, denying the Claimant’s Claim. The Claimant subsequently filed a Reply to the Response. 3.The Claimant’s case was heard on 3rd June, 2025, when he testified in support of his case, adopted his witness statement, and produced a list and bundle of documents as exhibits in the matter. 4.The Respondent’s case was heard on 1st December, 2025, when one Lydia Mutembete testified in support of the Respondent’s case. She adopted her witness statement and produced the Respondent’s list and bundle of documents dated 27th November, 2024, as exhibits in the matter and were admitted as the Respondent’s exhibits No. 1-10. 5.Submissions were filed for both parties and have been duly considered. The Claimant’s Case 6.The Claimant’s case is that he was employed by the Respondent on or about 10th June 2014 as a Graduate Clerk and progressively rose through the ranks to the position of Branch Manager, earning a gross salary of Kshs.131,056. 7.The Claimant states that he served the Respondent for approximately 10 years, during which he performed his duties diligently, selflessly, and consistently met the required targets under the employment contract. 8.The Claimant further avers that Mpesa transactions were handled directly between the system administrator in Nairobi and the Mpesa agent at the branch, and that he was not wholly involved in the Mpesa business operations. 9.It is the Claimant’s case that on 13th June 2024, a staff member named Fatuma Zaina Issa, failed to return from banking duties as expected. He states that he made several attempts to contact her to ascertain her whereabouts, but his calls went unanswered. 10.The Claimant further avers that the situation was escalated on Friday, 14th June 2024, when Fatuma failed to report to work without permission and had not accounted for the cash she had taken to the bank the previous day. 11.The Claimant further avers that upon eventually contacting Fatuma Zaina Issa, she claimed to be unwell and stated that she was traveling to Nairobi to see a gynecologist. It is his case that this explanation could not easily be disputed in light of her past medical records, and that he instructed her to report back to work on Tuesday, 18th June 2024, with the banking slip and evidence of medical treatment, noting that Monday, 17th June 2024, was a public holiday. 12.The Claimant avers that Fatuma Zaina Issa failed to report back to work as agreed and instead continued calling him daily with excuses that she had not yet seen the doctor. He avers that she eventually reported for work on Tuesday, 25th June 2024, whereupon the credit officer and accountant requested that she hand over the Mpesa operations. It is his case that she arrogantly refused to do so and left the workplace, never to return. 13.The Claimant further states that on 28th June 2024, he received a call from a woman who identified herself as Fadhia, and who introduced herself as Fatuma’s sister. He avers that the said Fadhia informed him that Fatuma had disclosed that she had issues at work and that she would provide Fatuma with money to refund by Friday, 28th June 2024, but the refund was never made. 14.The Claimant states that Fatuma instead wrote to him, warning him against communicating with her family. 15.The Claimant states that he was unable to take immediate action regarding the matter as he was out of the office at the material time. He further avers that on 29th June 2024, he reported the matter to the police and proceeded to Fatuma Zaina Issa’s residence, only to find the house locked; thereafter, on 30th June 2024, he reported the incident to the Respondent. 16.The Claimant further states that on 11th July 2024, the Respondent issued him with a suspension letter on account of the unaccounted loss of Kshs. 299,400.00, contending that his response to the issue was not convincing and contained unresolved gaps. 17.It is his case that subsequently, on 28th August 2024, the Respondent wrote to him requiring him to provide a detailed explanation regarding the circumstances that led to the loss of the corporation’s money and the delay or lapse in reporting the matter, and to show cause why disciplinary action should not be taken against him. 18.The Claimant avers that the case concerning the fraud by Ms. Fatuma Zaina Issa was initially handled by Ms. Josyline K. Kanake, the Chief Human Capital and Administration Officer, who had a proper understanding of the circumstances surrounding the delay in reporting the fraud from the outset. The Claimant contends that the Acting Head of Human Capital and Training lacked a clear understanding of the matter from its inception, thereby rendering the response issued against him amateurish and ill-informed. 19.The Claimant further states that he is a person of good character who has consistently maintained the highest standards of integrity and honesty throughout his employment, with no prior criminal record, warning letters, or disciplinary proceedings. He denies any involvement in corruption, theft of public funds, or conduct causing loss to the Respondent. 20.The Claimant maintains that the loss of public funds and the delay in reporting the matter were solely occasioned by the actions of Ms. Fatuma Zaina Issa, whom he accuses of failing to uphold the expected standards of integrity and honesty in her duties and communications. According to the Claimant, the branch Mpesa phone, electronic money, and cash from deposits were under the custody and control of Ms. Fatuma Zaina Issa in her capacity as the official branch Mpesa agent, and she was solely responsible. 21.The Claimant avers that he had no faith in the Respondent’s internal appeal process, which he describes as subjective, unprocedural, unsubstantive, and tainted by ethnic discrimination from the outset. He contends that the allegations of fraud by Ms. Fatuma Zaina Issa were used as an opportunity to pursue a predetermined and discriminatory agenda against him, thereby compelling him to seek legal redress. 22.He contends that the disciplinary hearing was not properly convened in accordance with Clause 12.2.6(c) of the Staff Policies and Regulations Manual, which required the General Manager Human Resource and Administration (GMHRA) to convene the disciplinary hearing and act as the secretariat upon receipt of the officer’s response. Instead, the hearing was convened by the Acting Managing Director in contravention of the prescribed procedure. 23.It is his case that the suspension letter dated 11th July 2024 stated that he had already been called upon to address the fraud and that his response was unsatisfactory and unconvincing due to unresolved gaps. The Claimant argues that this assertion was false and premeditated because he was only formally requested to respond to the allegations later, through a letter dated 28th August 2024. He contends that this inconsistency demonstrated a witch-hunt and violated Section J, Subsections 12.2.6(a) and (b), and 12.3.4(i) of the Staff Policies and Regulations Manual. 24.The Claimant further states that he was initially invited to attend a disciplinary hearing scheduled for 26th August 2024 through a letter dated 14th August 2024, which was later postponed to 27th August 2024 through a letter dated 19th August 2024. He avers that although he attended the hearing, introduced himself, and signed the attendance register, he was sent away without being informed of the reasons, which subjected him to psychological torture, harassment, frustration, and intimidation, contrary to Section J, Subsection 12.2.6(c) of the Staff Policies and Regulations Manual. 25.The Claimant further avers that while still on suspension, he received another show cause letter dated 3rd September 2024 relating to a complaint by client ID 059070546, Mr. David Kariuki, whom the Claimant describes as a notorious loan defaulter at Mpeketoni Branch. The Claimant states that he had previously recommended the client’s property for advertisement and recovery proceedings, prompting the client to seek court intervention to stop the auction. 26.The Claimant contends that the Respondent revived and relied on this previously resolved issue during his suspension as part of a witch-hunt and ethnic discrimination campaign, despite the matter having been addressed comprehensively through his memo Ref. AFC/MPK/22.7 dated 12th March 2024. 27.It is his case that during the second disciplinary hearing held on 17th September 2024, he was harassed and ordered to switch off his phone and laptop after being accused of being notorious for recording proceedings because he possessed audio evidence. He contends that this denied him the opportunity to substantiate the steps he had taken to establish the true facts, motives, and root cause of the fraud allegedly committed by Ms. Fatuma Zaina Issa. 28.The Claimant states that he was never contacted by the Corporation’s Head of Finance Department on 25th June 2024 as alleged. He avers that the Mpesa Administrator and Senior Accountant contacted Ms. Fatuma Zaina Issa on Thursday, 27th June 2024, to follow up on the temporary float of Kshs. 100,000, which was overdue for banking back to the respective branches. 29.The Claimant further states that the Mpesa Administrator and Senior Accountant also contacted him to notify him that they had reached out to Ms. Fatuma Zaina Issa regarding the delayed banking of the temporary float and that the process was taking unusually long. He states that he informed them that he was out of the office at the time and would issue official communication once he resumed duty. 30.The Claimant avers that on Friday, 28th June 2024, Ms. Fatuma Zaina Issa fled from Mpeketoni and blocked his phone number, thereby frustrating any further communication. 31.The Claimant further states that the Mpesa system operated on a real-time Safaricom platform through which the Mpesa Administrator could monitor the electronic float against the cash position, thereby making concealment impossible. He avers that reports were ordinarily prepared by Ms. Fatuma Zaina Issa as the Mpesa agent, verified by the accountant, and subsequently by the Branch Manager. 32.He states that from 14th June 2024, the issue ceased being merely one of compliance and became a disciplinary matter against Ms. Fatuma Zaina Issa under the Staff Policy and Regulations Manual. He maintains that upon realizing disciplinary action was imminent, Ms. Fatuma Zaina Issa absconded from duty and fled from Mpeketoni. 33.The Claimant states that he never denied that the corporation had suffered financial loss. He contends, however, that the Respondent’s assertion that he admitted responsibility for the loss is misleading and unnecessary. The Claimant maintains that the Respondent failed to objectively consider the circumstances surrounding the delay in reporting the matter, which he states were fully explained in his response dated 28th August 2024. 34.On cross-examination, the Claimant told the Court that he was in charge of the Respondent’s Branch operations. He confirmed that he did not appeal against the termination. 35.It is testimony that the Branch did not conduct Mpesa transactions, but that the Respondent lost money through an employee, and that he discovered the loss on the night of 13th July, 2024. 36.The Claimant further told the court that he reported the loss to their head office via email on 30th June, 2024. He further confirmed that he received a termination letter dated 30th September, 2024, but maintains that he was not accorded fair process. 37.The Claimant prays that the Court allow his claim and grant him the orders sought. The Respondent’s Case 38.The Respondent states that it employed the Claimant and that he rose through the ranks to the position of Branch Manager at the Mpeketoni Branch. 39.The Respondent states that it is a statutory corporation established under Section 3 of the Agricultural Finance Corporation Act, Chapter 323 of the Laws of Kenya, and that its mandate is to facilitate the development of agriculture and agricultural industries by providing loans and financial support to farmers, cooperative societies, incorporated groups, private companies, public bodies, local authorities, and other persons engaged in the agricultural sector. 40.The Respondent avers that, as a financial institution serving the agricultural sector in Kenya, it requires the highest standards of integrity and honesty from its employees. It is its case that it maintains a zero-tolerance policy towards corruption, theft, or loss of public funds by staff members. 41.The Respondent further contends that the suit is incompetent on the grounds that the Claimant failed to exhaust the internal appeal mechanism provided under Clause 12.2.7(b) of the Staff Policies and Regulations Manual. The Respondent states further that the termination letter dated 30th September 2024 expressly informed the Claimant of his right to appeal to the Board of Directors of the Agricultural Finance Corporation, which it considers a mandatory step in the disciplinary process before instituting proceedings for unfair dismissal. 42.The Respondent maintains that the Claimant’s allegations of unfair dismissal are unfounded. The Respondent further avers that on 25th June 2024, the Head of the Finance Department discovered that the Mpeketoni Branch had not processed Mpesa transactions between 13th June 2024 and 25th June 2024, which prompted communication with the Claimant, who reportedly informed the Respondent that he was out of the office at the time. 43.It is the Respondent’s case that on 30th June 2024, the Claimant reported to the Respondent’s head office that a staff member, named Fatuma Issa, had disappeared with Mpesa cash amounting to Kshs.299,400.00, which was meant to be banked on 13th June 2024. 44.The Respondent states that the report to the head office was made only after the Claimant had been subjected to pressure as the Branch Manager to account for the missing cash. The Respondent further states that the report regarding the loss of funds was made 17 days after the incident, contrary to his job description, which requires him to report all financial transactions to the Head Office's Finance department weekly for accounting reconciliation. 45.The Respondent states that the Corporation’s Chief Audit and Quality Assurance Officer reviewed the incident and, through a memorandum dated 1st July 2024, submitted a preliminary report to the Respondent’s office outlining the recommended actions to be taken. It avers that on 2nd July 2024, the Chief Audit and Quality Assurance Officer dispatched an auditor to the Mpeketoni Branch to carry out a comprehensive investigation and review the handling of Mpesa float funds at the branch. 46.The Respondent further avers that, in order to safeguard the integrity of the investigations and pursuant to Section J, Subsection 12.3.4 of the Staff Policy and Regulations Manual, the Claimant was suspended from duty through a letter dated 11th July 2024. 47.It is the Respondent’s case that upon the conclusion of the investigations, significant discrepancies and operational failures were identified at the Mpeketoni Branch. It avers that it was found that the Mpesa limit for the Mpeketoni Branch was KShs. 200,000, yet the Claimant permitted a staff member to access Kshs. 299,000, which exceeded the prescribed limit. 48.The Respondent further asserts that, as Branch Manager, the Claimant bore sole responsibility for ensuring adequate operational controls at the branch, but he only reported the loss 17 days after its occurrence, which was contrary to the Corporation’s Cash Management Procedures. 49.The Respondent avers that the Claimant also took 16 days to report the incident of theft to the police, and that the delay was inordinate and unjustified in the circumstances. 50.The Respondent states that as a result of the identified discrepancies and operational failures, the Corporation issued a Show Cause letter to the Claimant dated 28th August 2024, which required him to provide a detailed explanation regarding the circumstances that led to the loss of funds. 51.The Respondent avers that the Claimant responded to the Show Cause letter through his reply dated 28th August 2024, wherein he admitted that the Corporation’s money had indeed been lost and further acknowledged that there was a delay in reporting the matter to his immediate supervisor, contrary to the applicable regulations and internal work procedures. 52.The Respondent states that, being dissatisfied with the Claimant’s explanation, it proceeded to constitute a Disciplinary Committee to further investigate and deliberate on the matter. It avers that subsequently, through a letter dated 6th September 2024, the Corporation invited the Claimant to attend a disciplinary hearing scheduled for 17th September 2024. 53.It avers further that in the invitation letter, the Claimant was informed of the purpose of the hearing and his procedural rights during the session, and was also advised that he was entitled to be accompanied by a colleague of his choice, to call witnesses, and to cross-examine witnesses presented during the proceedings. 54.The Respondent states that the Claimant elected to attend the disciplinary hearing alone, and that under Minute No. MIN/09/2024: Appearance Before The Committee, it is recorded that the Claimant chose not to be accompanied by any person during the proceedings. 55.The Respondent further avers that after hearing the Claimant, the Disciplinary Committee unanimously found that he had failed to satisfactorily explain the discrepancies and operational failures that led to the loss of funds, and consequently, the Committee resolved that his employment be terminated in accordance with Section J, Subsection 12.3.9 of the Staff Policies and Regulations Manual. 56.The Respondent contends that it fully complied with both the substantive and procedural requirements in effecting the termination of the Claimant’s employment. 57.On cross-examination, the Respondent’s witness (RW1) told the court that the Respondent’s Regulations were not changed to allow it to offer M-Pesa services. She confirmed that the Claimant’s role was to supervise and coordinate the branch, and was not specific to M-Pesa. 58.She states that the complaint was on loss of funds at the Mpeketoni branch, but the Claimant himself did not take the money. She further avers that the charge against the Claimant was that of unaccounted-for corporation funds, and that there was a complaint by a customer named Daniel Kamau Kariuki. She confirmed that the notice to show cause did not include the complainant by Daniel Kariuki. 59.It is RW1’s position that the Claimant was terminated on account of delayed reporting, giving false accounts, and failure to account for cash. 60.The Respondent prays that the Court dismiss the Claim with costs. Analysis and Determination 61.I have considered the pleadings herein, the witnesses' testimonies, and the rival submissions. The issues for determination are: -i.Whether the termination of the Claimant’s employment was fair and lawful.ii.Whether the Claimant is entitled to the reliefs sought. Whether the termination of the Claimant’s employment was fair and lawful 62.A termination of employment is considered fair and lawful where the employer adheres to the twin tenets of procedure and substantive fairness under Sections 41, 43, and 45 of the Employment Act, 2007. 63.The Claimant’s position is that he was initially invited to attend a disciplinary hearing scheduled for 26th August 2024 through a letter dated 14th August 2024, which was later postponed to 27th August 2024 through a letter dated 19th August 2024. He avers that although he attended the hearing, introduced himself, and signed the attendance register, he was sent away without being informed of the reasons for the hearing, which he contends subjected him to psychological torture, harassment, frustration, and intimidation. 64.The Claimant further contends that the disciplinary hearing was not properly convened in accordance with Clause 12.2.6(c) of the Staff Policies and Regulations Manual, which required the General Manager Human Resource and Administration (GMHRA) to convene the disciplinary hearing and act as the Secretariat upon receipt of the officer’s response. He asserts that the hearing was instead convened by the Acting Managing Director in contravention of the prescribed procedure. 65.Section 41 of the Employment Act requires that an employee be notified of the allegations against him in the presence of a representative, accorded an opportunity to respond to the charges, and a hearing in defense of the charges before termination. 66.The hearing of an employee prior to the termination of employment is both a statutory and a constitutional requirement. In Postal Corporation of Kenya v Andrew K. Tanui [2019] eKLR, the Court of Appeal set out the bare minimums of a fair hearing thus: -“Section 41 of the Employment Act, provides the minimum standards of a fair procedure that an employer ought to comply with. The Section provides for notification and hearing before termination on grounds of misconduct. The court stated that four elements must be discernable for the procedure to pass:a.an explanation of the grounds of termination in a language understood by the employee;b.the reason for which the employer is considering termination;c.entitlement of an employee to the presence of another employee of his choice when the explanation of grounds of termination is maded.hearing and considering any representation by the employee and the person chosen by the employee.” 67.The evidence before court shows that the Claimant was issued a Show Cause letter dated 28th August 2024, which he confirmed responding to. It is also not disputed that a disciplinary hearing was convened, and indeed the hearing was held on 17th September 2024, and the Claimant confirmed attendance though unaccompanied by choice. It is also not disputed that the termination of employment was communicated to the Claimant. 68.On the face of it, therefore, the Respondent complied with the requirements of Section 41. The Claimant, however, raised concerns regarding improper convening of the disciplinary committee, the exclusion from meaningful participation at hearing stages, and alleged premature conclusions. 69.In Anthony Mkala Chitavi v. Malindi Water & Sewerage Company Ltd [2013] eKLR, the Court had this to say on procedural fairness:-“The ingredients of procedural fairness as I understand it within the Kenyan situation is that the employer should inform the employee as to what charges the employer is contemplating using to dismiss the employee. This gives a concomitant statutory right to be informed to the employee.Secondly, it would follow naturally that if an employee has a right to be informed of the charges he has a right to a proper opportunity to prepare and to be heard and to present a defence/state his case in person, writing or through a representative or shop floor union representative if possible.Thirdly if it is a case of summary dismissal, there is an obligation on the employer to hear and consider any representations by the employee before making the decision to dismiss or give other sanction.” 70.It is evident that the Claimant was notified of the charges against him, that he responded to the charges, received an invitation to attend a disciplinary hearing with a representative of his choice, and finally that he attended the hearing without a representation on his own volition. 71.The foregoing, in my view, is a demonstration that the tenets of procedural fairness were generally satisfied. 72.The Court therefore finds that the Respondent substantially complied with Section 41 of the Employment Act, which renders the termination procedurally fair and lawful. 73.On substantive fairness, the test under Section 45(2) of the Employment Act is whether the employer had a valid and fair reason to terminate employment and whether the reason related to the employee’s conduct, capacity, or the employer’s operational requirements. The employer's obligation is to prove that it acted reasonably in the circumstances of the case. 74.In Kenya Revenue Authority v Reuwel Waithaka Gitahi & 2 Others [2019] KECA 300 (KLR, the Court of Appeal held that an employer must demonstrate both a valid reason and a fair procedure, and that the burden of proof lies on the employer under Sections 43, 45 and 47(5) of the Employment Act, 2007. 75.The Respondent’s grounds for terminating the Claimant’s services were essentially failure to account for Kshs. 299,400, delayed reporting of the said loss, and operational lapses in the supervision of the Mpesa float at the Respondent’s Mpeketoni branch, where the Claimant was the branch manager. 76.These are clearly reasons related to misconduct and negligence, which are valid reasons in law for termination of employment if proven. 77.The evidence shows that there was indeed a loss of funds, and the Claimant admitted that the loss occurred. The Claimant also admitted in part that there was a delay in reporting the loss to the Respondent’s head office. 78.There is no dispute that the Claimant was the Respondent’s Branch Manager with supervisory responsibility, and the Mpesa agent who occasioned the loss directly handled Mpesa transactions. It is also not lost on the court that the Claimant had oversight responsibility of the Respondent’s funds at the branch level. 79.In the circumstances of this case, the court must assess whether the Respondent proved culpable negligence or misconduct attributable to the Claimant, and not merely the occurrence of loss. 80.In my considered view, an employer must prove that the employee’s conduct materially contributed to the loss or breach. While the delay in reporting the incident and supervisory gaps were established, the Respondent did not sufficiently prove direct misappropriation or dishonest conduct by the Claimant or his intentional negligence, amounting to gross misconduct. 81.Further, RW1, during cross-examination, told the court that the complaint against the Claimant concerned loss of funds at the Mpeketoni branch, but admitted that the Claimant himself did not take the money. 82.The Court also notes the existence of conflicting responsibility structures between the Mpesa Administrator, the branch accountant, and the branch manager, creating ambiguity in accountability. 83.Accordingly, the Respondent’s reason was not proved to the standard required under Section 43 of the Employment Act as a valid and justified ground to terminate the Claimant’s employment. 84.I therefore find the Claimant’s termination from the service of the Respondent substantively unfair and unlawful. Whether the Claimant is entitled to the reliefs sought. Reinstatement 85.Reinstatement under Section 49(3)(a) of the Employment Act is an exceptional remedy that courts rarely grant so as not to compel parties to the employment contract to carry out the contract by order of specific performance. 86.Reinstatement is not a right of a party but a discretionary remedy that involves the balancing of the rights of the parties. Of importance to the court in a prayer for reinstatement is the practicability of the remedy. In Kenya Airways Ltd v Aviation & Allied Workers Union Kenya & 3 Others [2014] eKLR, the Court held that reinstatement is only granted where the employment relationship remains viable, trust has not broken down irreparably, and the circumstances of the case are exceptional. 87.In the instant case, there is evident loss of the Respondent’s funds, which, in my view, translates to a breakdown of trust, especially in the financial supervision, which is the role the Claimant held prior to his termination, leading me to the conclusion that reinstatement of the Claimant is not an appropriate remedy. 88.The prayer for reinstatement is therefore declined. Compensation for unfair termination 89.Having held the Claimant’s termination substantively unfair, entitles him to compensation pursuant to Sections 49 and 50 of the Employment Act, 2007. 90.The Claimant was in the service of the Respondent for over 10 years, and for the greater part had a clean record of service. However, considering his partial contribution to the termination and the Respondent's procedural compliance, I deem an award of six (6) months’ salary sufficient compensation for the unfair termination. Certificate of service 91.Issuance of a certificate of Service is mandatory under Section 51 of the Employment Act. 92.The prayer is merited and allowed as prayed. 93.In whole, the Claimant’s Claim succeeds in terms of the following orders: -a.A declaration that the termination of the Claimant’s employment was unfair.b.An order be and is hereby issued directing the Respondent to pay the Claimant six (6) months’ salary as compensation for the unfair termination at Kshs.786,336/-c.That the Respondent shall issue the Claimant a Certificate of Service within 14 days of this judgment.d.The Respondent will also bear the costs of the suit. 94.Judgment of the Court. SIGNED, DATED AND DELIVERED BY VIDEO-LINK AND IN COURT AT NAIROBI THIS 21ST DAY OF MAY, 2026.C. N. BAARIJUDGEAppearance:Mr. Ojienda present for the ClaimantMs. Otimbo h/b for Mr. Wanyama for the RespondentMs. Esther S- C/A