https://new.kenyalaw.org/akn/ke/judgment/kehc/2026/7981

**REPUBLIC OF KENYA** **IN THE HIGH COURT OF KENYA AT NAIROBI** **COMMERCIAL AND TAX DIVISION** **INSOLVENCY CAUSE NO. E167 OF 2024** **PAPERMAT [E.A] LIMITED…………………………………………..APPLICANT** **-VERSUS-** **PHOENIX PROPERTIES LIMITED………………………………. RESPONDENT** **RULING** 1. This Ruling is in respect of an application by the debtor/Applicant seeking to set aside a statutory demand. **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 strike out the Statutory Demand dated 1st August 2024 issued by the Respondent against the Applicant, forthwith.* 3. *The Honourable Court be pleased to declare that the Statutory Demand is invalid, unlawful and incapable of enforcement on the grounds that the Applicant company was dissolved on 26th June 2007 pursuant to Section 339(5) of the Companies Act (Cap 486) (repealed).* 4. *The Honourable Court be pleased to issue an order barring the Respondent from taking any further insolvency proceedings against the Applicant.* 5. *The costs of this application be borne by the Respondent.* 3. The Application was supported by the grounds on the face of it and by the Affidavit of **Divyesh Indubhai Patel.** He deponedthat the Applicant was dissolved on 26th June, 2007 under **Section 339(5) of the repealed Companies Act (Cap 486)** and has not been reinstated. That therefore, pursuant to **Section 400 of the Companies Act, 2015**, it no longer exists as a legal entity capable of being subjected to any legal or insolvency proceedings. Despite this, the Respondent has unlawfully issued a statutory demand against the Applicant, rendering the demand a nullity *ab initio* and unenforceable. Consequently, any attempt to proceed with liquidation against the non-existent entity would occasion irreparable harm to the Applicant. 4. In response, the Respondent filed the Replying Affidavit sworn on 24th April, 2025. The Respondent stated that the Applicant seeks to set aside a statutory demand dated 1st August, 2024 on the basis that it was dissolved in 2007. However, the application is incompetent and time-barred, having been filed outside the twenty-one (21) days required under the Insolvency Regulations. This is despite evidence showing the Applicant was served on 19th August, 2024. The Applicant is further accused of failing to comply with procedural requirements, including properly supporting the application with necessary documentation, and deliberately omitting proof of service. 5. On the merits, the Respondent argued that dissolution does not extinguish the Applicant’s liabilities. This is as the law permits enforcement against a struck-off company and allows the Court to wind it up. The Respondent also relied on a prior Court judgment in its favour arising from a lease dispute. The Applicant participated in proceedings and was found liable for substantial sums, including rent arrears, mesne profits, and costs. Accordingly, the Respondent maintained that the Applicant’s obligations remain enforceable notwithstanding its dissolution. **Issues for determination** 6. The court has carefully considered the Application, the response, and the Applicant’s written submissions, and the issue for determination is; 1. *Whether the Statutory Demand should be set aside.* **Analysis** 7. 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: *a. the debtor appears to have a counterclaim, set-off, or cross-demand equal to or exceeding the amount demanded;* *b. the debt is disputed on grounds which appear to the Court to be substantial;* *c. the creditor holds security whose value equals or exceeds the debt; or* *d. the Court is satisfied, on other grounds, that the demand ought to be set aside.* 8. Further, **Regulation 16(1) of the Insolvency Regulations, 2016** provides that a debtor may apply to set aside a statutory demand. This is within twenty-one (21) days from the date of service of the demand, or where the demand has been advertised, from the date of the advertisement’s first appearance. 9. It is clear that the Regulation confines the Court’s jurisdiction to setting aside a statutory demand to four grounds only, namely: where there is a counterclaim/set‑off/cross‑demand equal to or exceeding the debt; or where a debt is genuinely disputed on substantial grounds; or where security equal to or exceeding the debt; or where other sufficient reason. 10. Before delving any further into the merit of the Application, it is notable that the Respondent pointed out that the Application was filed out of time. This is contrary to **Regulation 16(1) of the Insolvency Regulations**, as 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. 11. 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. 12. The Court has perused the Court record and particularly on 18th March, 2025. Notably, the Applicant did not mention the issue of seeking leave and the record itself doesn’t indicate that the same was discussed. **Hon. Noelle Kyanya** Deputy Registrar simply placed the matter before **Hon. Adisa** 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”* 13. **Regulation 16 of the Insolvency Regulations, 2016**, provides as follows: - ***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 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, whichever is 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 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 Frist 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.*** ***c. Annex a copy of the statutory demand.*** 14. The Court observed that indeed the Applicant has not disclosed when it received the statutory demand. As pointed out by the Respondent, it has also not stated why it did not file the application to set aside the statutory demand within 21 days, as provided in **Regulation 16(1)(a) of the Insolvency Regulations**. 15. The Statutory Demand is dated 1st August, 2024 and was served on 19th August, 2024. Therefore, the Application to set aside should have been made around 22nd August, 2024 or 9th September, at the latest. 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. 16. The Applicant also contended that it was lawfully dissolved and struck off the register on 26th June, 2007 under **Section 339(5) of the repealed Companies Ac**t, as confirmed by Gazette Notice No. 6030, a fact not disputed by the Respondent. On this basis, the Applicant argued that upon dissolution, it ceased to exist as a legal entity and therefore lacks the capacity to be sued or subjected to any legal or insolvency proceedings. 17. Accordingly, the Applicant submitted that the statutory demand issued in 2024 is legally untenable, as the Insolvency Regulations presuppose the existence of a debtor company capable of receiving and responding to such demand. A company that ceased to exist in 2007 cannot validly be served or engaged in legal processes, and the law does not recognize actions taken against a non-existent entity. 18. In contrast, the Respondent in its Affidavit opined that although the Applicant was struck off under **Section 339(5) of the Companies Act**, such striking off does not discharge the company or its members, directors and officers from any existing liability prior to the striking off. In fact, the proviso to **Section 339(5)(i)** **of the Companies Act (repealed)** permits the enforcement of such liability as if the Company had not been struck off the Register. This is reserved under **Section 894(7)(a) of the Companies Act, 2015**. 19. **Section 339(5) of the Companies Act (repealed)** provides; ***“At the expiration of the time mentioned in the notice the Registrar may, unless cause to the contrary is previously shown by the company, or the liquidator, as the case may be, strike the name of the company off the register, and shall publish notice thereof in the Gazette, and on the publication in the Gazette of this notice the company shall be dissolved:*** ***Provided that –*** ***(i) Liability, if any, of every director, officer and member of the company shall continue and may be enforced as if the company had not been dissolved;*** ***(ii) nothing in this subsection shall affect the power of the court to wind up a company the name of which has been struck off the register.”*** 20. As stated above, the striking off does not discharge the company or its members, directors and officers from any existing liability prior to the striking off. 21. The above notwithstanding, the Applicant, having not even attempted to seek leave to file the Application out of time before filing the application to set aside the statutory demand, there is no competent application before the court seeking to set aside the statutory demand. 22. The Application fails. 23. The Application fails. 24. 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** 25. The Applicant’s Application by way of a Notice of Motion dated 18th March, 2025 is HEREBY struck out. 26. The Respondent is awarded the costs thereof. 27. 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.