[2021] KEHC 2490 (KLR)
The court found that the petitioner had not complied with the mandatory statutory requirements for a debtor-initiated bankruptcy petition, specifically the failure to disclose all material information in the statement of affairs and the failure to publish notice in the Kenya Gazette as required by Regulation 18(4)...
Source-derived case information.
- Citation
- [2021] KEHC 2490 (KLR)
- Parties
- Petitioner: Peter Kisembe Lubonga; Respondent: Faulu Microfinance Bank Limited
- Court
- High Court
- Court Station
- High Court at Bungoma
- Jurisdiction
- Kenya
- Case Number
- Insolvency Cause E001 of 2020
- Procedural Posture
- Insolvency Cause / Ruling on Compliance With Statutory Requirements for Bankruptcy Petition
- Outcome
- Petitioner granted 45 days to comply with statutory requirements; petition to stand dismissed if not complied within 45 days; no order as to costs.
- Legal Topics
- Bankruptcy Petitions, Debtor Initiated Insolvency, Compliance With Insolvency Regulations
- Source Language
- en
Source-derived case record
Summary, issues, holding and outcome
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Parties
Peter Kisembe Lubonga
Petitioner
Faulu Microfinance Bank Limited
Respondent
Procedural Posture
Insolvency Cause / Ruling on Compliance With Statutory Requirements for Bankruptcy Petition
Legal Issues
- 1 Whether the petitioner has complied with the statutory requirements for filing a bankruptcy petition under the Insolvency Act and Regulations.
- 2 Whether failure to publish notice in the Kenya Gazette and omission of material information in the statement of affairs is fatal to the petition.
Ratio Decidendi
The court found that the petitioner had not complied with the mandatory statutory requirements for a debtor-initiated bankruptcy petition, specifically the failure to disclose all material information in the statement of affairs and the failure to publish notice in the Kenya Gazette as required by Regulation 18(4) of the Insolvency Regulations 2016. However, rather than dismissing the petition outright, the court exercised discretion in the interest of justice, granting the petitioner 45 days to comply with the regulations. If compliance is not achieved within this period, the petition will stand dismissed. No order as to costs was made.
Court Disposition
Petitioner granted 45 days to comply with statutory requirements; petition to stand dismissed if not complied within 45 days; no order as to costs.
Orders
- Petitioner to comply with the Insolvency Regulations within 45 days from the date of the ruling and move the court accordingly.
- In default of compliance within 45 days, the petition will stand dismissed.
Full Case Text
Judgment text and source record
32 paragraphs
REPUBLIC OF KENYA
IN THE HIGH COURT AT BUNGOMA
INSOLVENCY CAUSE NO. E001 OF 2020
PETER KISEMBE LUBONGA............................................... PETITIONER
VERSUS
FAULU MICROFINANCE BANK LIMITED......................RESPONDENT
RULING.
The petitioner, a resident of Maliki Township in Bungoma County petitioned this court to make a bankruptcy order in respect of his estate and he be adjudged bankrupt on the grounds that he is unable to pay the sum of Kshs 684, 655. 41/= due and owing to the respondent.
In his affidavit accompanying the petition, he depones that he borrowed the money from the respondent in the year 2018 to boost a business he was running which subsequently collapsed in 2019 after he had supplied timber worth over Kshs 2,000,000/= to a businessman in Lodwar who later allegedly relocated to South Sudan and could not be reached. That as matters stand, he has no other means or source of livelihood.
The respondent opposed the petition and filed a Replying affidavit through its Legal Officer who depones that the petitioner has not complied with the requirements of Sections 15(b) and 32 of the Insolvency Act. She depones that the loan was secured by a charge over land parcel Bungoma/Kamakoiwa/4338 registered on 13/11/2018 and upon default, the respondent moved in to realize the security before the petitioner filed the instant petition. That the petitioner has not disclosed any attempts made at collecting the debt allegedly owed by one Hamed Abdi since the said debt is not included in the statement of affairs.
The matter was disposed of by way of written submissions. Only the petitioner complied.
Submitting on Section 32(1), 33 of the Insolvency Act and Regulation 19 of the Insolvency Regulations 2016, the petitioner submits that he has met the threshold for a grant of the orders.
The petitioner in buttressing his case relied on the decisions in Rajendra Ratilal Sanghani Vs Schoon Ahmed Nurani (2018)eKLR and in the matter of Jitesh Dhirajal Malde Insolvency Cause E159/2019.
The first step the court ought to determine is to ascertain whether the petitioner has complied with the procedure set out by the law in filing of the petition.
Section 32 of the Insolvency Act, 2015 is the first port of call. The Section provides as follows;
(1) A debtor may make an application to the Court for an order 2adjudging 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.
The court has carefully perused the statement of affairs accompanying the petition and finds that the same falls short of the threshold. Under Regulation 18(3) of the Insolvency Regulations 2016, there are material information which must be disclosed by the petitioner which this court finds have not been disclosed.
Under regulation 18(4) the petitioner is required to publish the notice in the Kenya Gazette. No such notice has been exhibited in these proceedings.
This point was considered in In re James Maina Kabatha (Debtor/Applicant) [2020] eKLR where it was held;
In addition, as per Regulation 18(4), in addition to publication of a notice in a newspaper of regional publication as required under section 32(4) of the Insolvency Act, the debtor is also required to arrange for publication of his Statement of Financial Position in the Kenya Gazette. This has not happened here.
In the circumstances of the case, I find that the petitioner has not complied with this requirement, which is a mandatory requirement. However I find that the interest justice in this petition will not be served by a dismissal of the petition l therefore direct the parties to comply and move the court properly. Accordingly the petitioner to comply with the regulations within 45 days from the date hereof and move the court accordingly. In default, of compliance within 45 days the Petition will stand dismissed. There shall be no order as to cost
DATED AT BUNGOMA THIS 29TH DAY OF OCTOBER, 2021.
S.N. RIECHI.
JUDGE.