[2024] KECPT 1495 (KLR)

PCEA Ruiru Co-operative Savings and Credit Society Limited v Kenya Union of Savings and Credit Cooperative Limited (Tribunal Case 151/E226 of 2024) [2024] KECPT 1495 (KLR) (5 September 2024) (Ruling)

Neutral citation: [2024] KECPT 1495 (KLR)

Republic of Kenya

In the Cooperative Tribunal

Tribunal Case 151/E226 of 2024

BM Kimemia, Chair, J. Mwatsama, Vice Chair, B Sawe, F Lotuiya, P. Gichuki, M Chesikaw & PO Aol, Members

September 5, 2024

Between

PCEA Ruiru Co-operative Savings and Credit Society Limited

Claimant

and

Kenya Union of Savings and Credit Cooperative Limited

Respondent

Ruling

1. In its Ruling delivered on 25/7/2024, the Tribunal held that the Respondents herein had failed to comply with the orders of the Tribunal issued in this matter on 19/4/2024, and that no reasonable explanation had been given as to why the orders had not been complied with. Consequently, order ‘b’ of the said ruling issued requiring the Chairperson, Vice-chairperson and the Board of Directors of the Respondent to show cause why they should not be committed to Civil Jail for failure to comply with the orders of 19/4/2024; particularly the order requiring the Respondent to pay into the joint Escrow account the sum of Kshs. 95,041,078/= within the required period.

2. As per the Tribunal’s orders, summons issued accordingly to the Interim Chairperson, Vice-chairperson and the Interim Board of Directors of the Respondent to appear at the Tribunal and show cause why they should not be committed to civil jail in terms of the ruling. The Board Chairman and the Chief Executive Officer appeared before the Tribunal.

Respondent’s Submissions. 3. In showing cause, the Respondent Officials submitted that the Respondent is in dire financial condition, hence it has not been able to deposit any money; that funds are unavailable; that the Respondent’s debt portfolio is Kshs. 6,000,000,000/=. That the Chairman and Board members as well as the Senior Management of the Respondent are all recent appointees who were not present at the time the Claimant’s investment was received and later renewed in 2022/23 and did not oversee the Respondent’s finances, hence they were not involved in the mismanagement of the Respondent and the inability to honor the contractual obligations. That they were appointed to resolve the financial situation and implement a recovery mechanism which will lead to the payment of the obligation.

4. The officials of the Respondent finally asked for the Tribunal’s leniency stating that the debt is not denied. Further, the Officials sought for time to implement the recovery process stating that they had proposed 12 months to be in a position to pay the debt due to the Claimant depositors; and asked for leniency and non-custodial sentence of reprimand.

Claimant’s Submissions 5. The Claimant submitted on the financial situation of the Respondent. That the Respondent runs several Bank accounts which should be disclosed together with the list of assets. That there is evidence to the effect that the Respondent has been making payments to other depositors, despite stating that its statement is negative and questioned why the Claimant was not being paid its refund. That the Respondent was disposing assets in Kitengela and it was not clear where the proceeds of the sale are being taken. That the Respondent is not making any effort to comply with the orders. That the Tribunal should find out if any of the newly appointed Board members served in the previous Board and part of the embezzlement.

6. On the issue of the request by the officials to be given more time, the Claimant states that there is time period cited for purposes of commitment. That the debt is not disputed. That the issue of payment is what is in question since the Claimant is yet to pay its members dividends. That as the Tribunal decides, it should consider the Claimant. That Court orders are not to be made in vain.

Analysis And Determination. 7. We have considered the submissions of the Advocates for the Respondent and the Claimant. We have also considered the submissions of the Respondent’s Chairperson Mr. Mategwa and the Chief Executive Officer Mr. Arnold Munene and find that: -a.We note that the Respondent is indebted to the Claimant, however, we note that the Respondent has submitted that they are experiencing liquidity issues.b.We note that the Respondent is still in operation, albeit with financial challenges which led to appointment of the Interim Committee Members by the Government and who have started a recovery process.c.That though the Respondent is in serious financial challenges, it has however continued to make payments to some of its depositors, payments which the Respondent defended as being payments to small Saccos with deposits not exceeding Kshs. 5,000,000/=.d.The Respondent has submitted that they run more than one Bank account, having supplied to the Tribunal confidential Bank statements in accordance to the orders of 8. 8.2024, the Tribunal has established thereupon that the Respondent is not liquid enough to pay off the Claimant’s refund in one lumpsome payment.e.We note that it would have been prudent for the Respondent, in view of its circumstances to solid proposal in compliance with the orders of the Tribunal. However, they sought time to implement the recovery process.

8. We have considered the public interest of all the other 188 Co-operative Societies who have invested with the Respondent and who may panic and request for en-masse withdrawal of investments to the detriment of the entire Co-operative movement, the Claimant included.

9. We have also considered the interest of the Claimant and note that they will not be greatly prejudiced vis-à-vis the other over 188 investors/depositors who have over Kshs.12. 4 Billion in terms of deposits.

10. In a bid to balance the interest of the Claimant without prejudicing the Respondent who requires the compliance of the orders of the tribunal, noting the financial situation of the Respondent and noting that the Tribunal should not make orders in vain, and in accordance to Rule 3 and 4 Cooperative Tribunal (Practice and Procedure) Rules 2009 Rev. 2014, we hereby issue the following orders: -i.That the Respondent’s Interim Committee Members have shown sufficient cause why they should not be committed to civil jail for failing to comply with the Tribunal’s orders made on 19/4/2024. ii.That a stern warning is issued to the Interim Committee Members to ensure that any further orders of the Tribunal should be complied to, the latter.iii.We note that the main claim has already been heard, each party has closed their cases and have duly filed their written submissions. The main claim is pending judgment on 26. 9.2024. We therefore order for the Respondent, in demonstration of good will, to deposit a sum of Kshs. 1,000,000/= on or before 26. 9.2024 into the joint Escrow Account of Respondent and claimant advocate. In the meantime, its ordered that any other proceedings are hereby to await the determination of the main claim.iv.The Bank statements produced to the Tribunal in confidence and in compliance to the orders of 8. 8.2024 will continue to remain confidential and under ‘lock and key’ and will not form part of the records for disclosure the same having not been supplied to the Claimant.

RULING SIGNED, DATED AND DELIVERED VIRTUALLY AT NAIROBI THIS 5TH DAY OF SEPTEMBER, 2024. Hon. B. Kimemia Chairperson Signed 5. 9.2024Hon. J. Mwatsama Deputy Chairperson Signed 5. 9.2024Hon. Beatrice Sawe Member Signed 5. 9.2024Hon. Fridah Lotuiya Member Signed 5. 9.2024Hon. Philip Gichuki Member Signed 5. 9.2024Hon. Michael Chesikaw Member Signed 5. 9.2024Hon. Paul Aol Member Signed 5. 9.2024Tribunal Clerk JemimahMr. Mahinda Wairoto advocate for Respondent with Mr. Kamau advocate.Mr. Kwendu advocate and Ms. Wainaina advocate for the Claimant.Mr. Wairoto advocate for Respondent : In court present are members of the board.Mrs. Jennifer Mburu- Vice ChairmanMr. Joel Gachari – DirectorMr. Arnold Munene- Board Secretary and group Chief Executive OfficerMs. Kwendu advocate for claimantMr. Francis Mwai - Chief Executive OfficerMr. Edward Gacheru - TreasurerMr. Wairoto advocate for Respondent – We pray for a copy of the ruling.Ms. Wainaina advocate for Claimant- The Respondent Paid Kshs.1,000,000/= to the Claimant yesterday into the Respondents account.Mr. Wairoto advocate for Respondent: We are ready to also comply with the orders of the Tribunal.Order: The Kshs. 1,000,000/= deposited into the account of the Claimant on 4. 9.2024 is duly acknowledge. The Respondent to further comply to the orders of today, this being a different issue.The Respondent to supply the details of the said joint account by close of business today.The copy of certified Ruling to be availed to the parties on payment.Judgment on 26. 9.2024. Hon. B. Kimemia Chairperson Signed 5. 9.2024