[2021] KECPT 456 (KLR)

REPUBLIC OF KENYA

IN THE CO-OPERATIVE TRIBUNAL AT NAIROBI

TRIBUNAL APPEAL CASE NO.2 OF 2019

RICHARD OLENDO ......................................................1ST APPELLANT

DR. CONSTANTINE WASONGA ...............................2ND APPELLANT

LOI MUHUNJA KIRUI ...............................................3RD APPELLANT

VERSUS

COMMISSIONER FOR CO-OPERATIVE DEVELOPMENT,

MINISTRY OF INDUSTRY TRADE & CO-OPERATIVE .......1st RESPONDENT

MASENO UNIVERSITY SACCO

SOCIETY LIMITED ......................................................................2ND RESPONDENT

JUDGMENT

The matter for determination is a Memorandum of Appeal dated 1. 3.2019 filed on 8. 3.2019 based on the following grounds:

1. The Commissioner erred in fact and law in failing to find that the actions taken by the Appellants towards the sale of the Maseno University Sacco Class ‘A’ shares in Co-op Holdings was procedurally and substantively within their jurisdiction as the Management Committee.

2. The Commissioner erred in fact and law in failing to find that the sale of the Maseno University Sacco Limited class ‘A’ shares was procedurally approved by all the relevant organs of the Sacco through legitimate resolution and as such the Appellants were duly bound to implement the Resolutions.

3. The Commissioner erred in fact and law in finding that the appellants were negligent in execution of their duties to dispose of the Maseno University Sacco Limited class ‘A’ shares in Co-op Holdings yet all steps, process and documentations were procedurally and substantively complied with.

4. The Commissioner erred in fact and law in finding that the Appellants were negligent and fraudulent in engaging a third party agent Rapid Equities Limited to scout for interested buyers, for the class ‘A’ shares yet Section 28 (3) of the Co-operative Societies Act donates such powers to the Appellants as the Management Committee.

5. The Commissioner erred in fact and law in failing to understand and appreciate that the shares which were being sold are class ‘A’ and do not trade in the Stock market as ordinary shares and had to be disposed of in the manner done by the Appellants.

6. The Commissioner erred in fact and law in arriving at a decision which is contrary to the express provisions of the Article 47 of the Constitution, the fair Administrative Action Act and the Rules of Nature Justice as the Appellants were denied a chance to defend themselves before the impugned decision was made.

7. The Commissioner erred in law and fact in taking into account extraneous factors to arrive at its decision that the Appellants acted negligently and fraudulently in disposing the Maseno University Sacco Class ‘A’ shares yet no particulars of negligence nor fraud were itemized and proved.

8. The Commissioner erred in fact and law in misconstruing the law to make a finding that the Public Procurement and Disposal Act, applies to the Maseno University Sacco Limited without any evidence to support the assertion.

9. The Commissioner erred in fact and law in misapplying the law relating to the Public Procurement and Disposal Act which applies to Public Institutions funded from the exchequer yet the Maseno University Sacco Limited does not get any finding from the exchequer to bring it within the ambit of the public Procurement and Disposal Act.

10. The Commissioner erred in fact and law in failing to find that the Appellants as the Management Committee acted within the mandates conferred to them by the Co-operative Societies Act, its by-laws and General meeting Resolutions and could not be held personally liable.

11. The Commissioner erred in fact and law in finding that the Maseno Universities Sacco lost some Kshs.44,094,800/= yet no evidence was adduced to show any such loss.

12. The Commissioner erred in law and fact in misconstruing the instance of “use” of funds and ‘loss’ of funds and thus arriving at a decision not supported by evidence.

13. The Commissioner erred in fact and law in failing to find that the allegation that Rapid Equities Limited was paid before the transfer of shares to Stima Sacco limited yet no factual evidence supported the said allegations.

14. The Commissioner erred in fact and law in misinterpreting the law and agency and contract between the Appellants as the Management Committee and the Agent Rapid Equities Limited which provided for agency fees upon performance of their obligation and thus arrived at a wrong decision.

15. The Commissioner erred in fact and law in failing to evaluate the documentary evidence of the Maseno University Sacco Limited and wholly relying on unsubstantiated allegations and thus arrived at a wrong decision.

16. The Commissioner erred in law and fact in failing to appreciate that the facts in issue giving rise to the Inquiry were substantially in issue before the Co-operative Tribunal in Tribunal Case No. 32 of 2017, a competent body and revisiting the same issues amounted to Res judicata.

17. The Commissioner erred in fact and law in failing to find that Maseno University Sacco Limited is already in the High Court on Civil Appeal No. 4 of 2018 seeking for specific performance of the contract for sale of shares and is estopped form disowning the role of Rapid Equities Limited as its agent.

18. The Commissioner erred in fact and law in failing to find that the cost of inquiry had been settled by Maseno University Sacco Limited for which the Appellants are members and subjecting the Appellants to double surcharge amounted to double jeopardy.

19. The Commissioner erred in fact and law in failing to consider in totality the relevant evidence surrounding the sale of class ‘A’ shares by Maseno University Sacco Limited to Stima Sacco and the instruments executed to effectuate the same and thus arrived at a wrong decision.

20. The Commissioner erred in law and fact in arriving at an adverse finding against the Appellants without affording them an opportunity to be heard contrary to the Rules of natural Justice.

21. The Commissioner erred in law and fact in purporting to sit as an appellate body against issues of law and fact already determined by the Co-operative Tribunalyet he has no Appellate jurisdiction over the Tribunal.

The Appellants prays that the decision of Commissioner dated 5. 2.2019 pursuant to gazette Notice No. 3115 dated 7. 9.2018 being the Inquiry Report of Maseno University be set aside quashed, and substituted with a finding of no guilt on the part of the Appellants.

The matter was ordered to be dispensed with by way of written submissions. The Appellant filed their submissions on 25th January 2021, while 2nd Respondent filed their submissions on 1st February 2021.

Appellants Submissions

1. In the submissions the Appellant submitted that around January 2016 Maseno University Sacco Co-operative Limited (MUSCL) desired to sell its class A shares in Co-operative Holdings Co-operative Society to sell its class ‘A’ shares in Co-operative Holdings Co-operative society to improve its liquidity. That the entire Board of Directors on 19. 1.2016 agreed to appoint on sales agent and settled on a Company known as Rapid Equity Limited culminating to the agreement between the 2 parties signed on 19. 1.2016. That the Board of Director were lawfully authorized to transact and execute the agreement relating to sale of shares on behalf of the Sacco.

2. That a dispute arose in respect of sale of shares to Stima Sacco when new officials of Sacco were elected to replace the Appellants.

That there was a case filed a case CTC.NO.32 of 2017 where it was held the sale of class ‘A’ shares was procedural and lawfully entered into.

3. That thereafter an appeal was filed CA.NO. 4 of 2018 in High Court seeking to enforce sale of shares and for Stima Sacco to pay balance. It was held that the sale and lawful and procedural and directed Stima Sacco to complete the transaction and settle the purchase price.

4. That a suit was instituted in Co-operative Tribunal CTC.NO. 32 OF 2017 after non-payment of Kshs.108 Million by Stima Sacco and it was held that Stima Sacco was to pay Kshs.2. 5Million as General Damages being dissatisfied with the judgment they filed Memorandum of Appeal in CA.NO.4 of 2018 at High Court and the orders of 15th September were substituted.

5. That following an Annual General Meeting held on 12. 5.2018 a new board of directors was appointed and petitioned for an Inquiry to be conducted. The Commissioner presented the Inquiry Report dated 23. 11. 2018 which is the subject of this Appeal.

The appellants submitted that the Commissioner erred in law and fact in its Inquiry Report and prayed for it to be set aside, quashed an substituted.

Respondent’s submissions

6. The 2nd Respondent submitted that the Commissioner invoked his powers pursuant to Section 58 read with Section 73 Co-operative Society Act and appointed officers to inquire into the affairs of the 2nd Respondent.

That the findings were tabled before Special General Meeting on 24. 11. 2018 when the same was adopted and recommendations adopted for the implementation of the report.

Thereafter the Commissioner issued a notice of intention to surcharge dated 5. 2.2019 to the Appellants to show cause why they should not be surcharged for Kshs.4,8,877,200/= each for the three Appellants.

7. That it is not disputed that the Appellants personally appeared before the Inquiry Officers and signed an acknowledgement of being interviewed as contained in page 14-23 in the documents filed and it was also not disputed that the Appellants were in attendance of the Annual General Meeting of 24. 11. 2018 when the Inquiry Report and recommendations therein were adopted by the members.

That the Appellants were served with the Inquiry Report and acknowledged receipt of the same.

8. That the Tribunal therefore has no power to re-open the inquiry since this is a power/duty reserved to the Commissioner.

That the issue of quashing the report is the jurisdiction reserved to the High Court through a Constitutional Review Process and not this Tribunal.

That the Appellants have therefore have not laid any legal basis for the Tribunal to interfere with Inquiry and Surcharge Order. Therefore the Appeal must fail.

Issues

Issue one:

Jurisdiction to entertain the Appeal

(1) The Appellants are challenging the decision of the Commissioner to surcharge them. That the Commissioner erred in fact and law in failing to appreciate the facts giving rise to the inquiry and appreciate that the same had already been determined before the Tribunal.

(2) The substance of Appeal is that the decision of the Commissioner dated 5. 2.2019 being the Surcharge Order pursuant to the gazette Notice No. .3115 dated 7. 9.2018 being the Inquiry Report set aside.

(3) Under section 58 Co-operative Society Act the Commissioner is mandated to carry out an inquiry into the by-laws, working and financial conditions of Co-operatives Societies either on his own accord at the direction of the Minister or on the Application with no less than 1/3 of members present.

(4) When performing this duty the Commissioner has the powers to inquire into the affairs of the Co-operative Society and thereafter to report the findings of the inquiry at a General Meeting of the society and give directions for the implementation of the recommendation of the inquiry Report.

(5) Under Section 59 Co-operative Societies Act the Commissioner is also mandated to inspect the books of the society under section 60 Co-operative Societies Act the Commissioner is also mandated by a certificate to make an order apportioning the expenses of the Inquiry and his decision thereof is final.

(6) On the adoption of the Inquiry Report the Commissioner is also mandated to issue an Order (Surcharge Order) requiring the person to repay or restore any money property or any part thereof together with interest and set such rate the commissioner thinks just or to contribute such sum to the asset of Cooperatives as the Commissioner deems fit this is provided for under Section 73 Co-operative Societies Act.

(7) Under Section 74 (1) Cooperative Societies Act if any person is aggrieved by an Order of Commissioner under Section 73 (1) Co-operative Societies Act may Appeal within 30 day to the Tribunal.

The procedure for Inquiry Inspection and Surcharge are provided for in the Co-operative Societies Act as there above and this is the mandate and/or power of the Commissioner.

(8) In this matter the Commissioner gazetted the Inquiry Order dated 29. 8.2018 on 7. 9.2018 and appointed Inquiry Officers who performed their duties as mandated and came up with the Inquiry Report dated 23. 11. 2018.

(9) They issued a Notice to show cause and intention to Surcharge dated 14. 12. 2018 to the Appellants who gave their responses on the same.

The 3rd Appellants response is dated 31. 12. 2018, the 2nd Appellant response is dated 21. 12. 2018. Thereafter at Special General Meeting convened on 24. 11. 18 the Respondent the inquiry report it was deliberated and adopted.

(10) It is not disputed the Appellant appeared personally before the inquiry officers and were interviewed as per the acknowledgment.

They were also in attendance of the special General Meeting, when the inquiry report was presented and adopted.

(11) Any party aggrieved by the order to Surcharge has a right of Appeal against the Surcharge Order under Section 73 Cooperative Societies Act.

(12) We find that the commissioner performed his duties under Section 58 and 73. These duties are Administrative Duties and we note that the procedure was followed in accordance to the said Act.

(13) The jurisdiction of the Tribunal is invoked under Section 74 (1) against the procedure followed under the Act culminating into a surcharge order. The Tribunal does not get into the process of the inquiry and the performance of the functions of the Commissioner as an administrative body.

(14) Under section 3 Co-operative Societies Act provides for – “functions, duties to be exercised by the office of Commissioner for Co-operatives.” This is an administrative action attached to that office and any decisions made are administrative decisions of the said office. The said administrative decisions can only be challenged under Article 47 of the Constitution and under Section 3 of Fair Administrative Actions Act.

(15) The Tribunal therefore is not required to investigate the administrative action of the Commissioner and this mandate lies with the High Court in a suit for Judicial Review as provided for under Section 7 (2) Fair Administrative Action Act and Article 165 (3) (b) of the Constitution of Kenya .

(16) The jurisdiction of the Tribunal under section 74 (1) lies only in the procedure culminating to the issuance of the surcharge orders. The Tribunal does not open up the inquiry report to inquire on its merit, fairness and accuracy of the report.

Once the Tribunal is satisfied that the procedure was adhered to and that the appeal was filed within time the jurisdiction of the Tribunal is exhausted.

(17) In the instant Appeal the Appellants have invited for the Tribunal to set aside, quash and substitute verdict of Inquiry Report hence challenging the powers, functions and duties of the Administrative office of the Commissioner of Co-operative Development.

(18) The Respondent rightly submitted that this is the purview and jurisdiction of the High Court and the Tribunal has no jurisdiction to delve into any denial, violation or infringement of, or threat to a right of a fundamental freedom in the Bills of Rights.

The Tribunal is a Subordinate Court and therefore has no jurisdiction under Article 25 (a and b) of the Constitution.

(19) In conclusion we find that the Appeal has no merits owing to the lack of jurisdiction.

The Appeal is dismissed.

The Appellants to pay the costs of the 2nd Respondent.

Judgment signed, dated and delivered virtually this 27thday of May, 2021.

Hon. B. Kimemia Chairperson Signed 27. 5.2021

Hon. J. Mwatsama Deputy Chairperson Signed 27. 5.2021

Mr. P. Gichuki Member Signed 27. 5.2021

Tribunal Clerk R. Leweri

Getange Advocate for 2nd Respondent: Present

Ajiki holding brief for Merichi for Appellant: Present

Hon. B. Kimemia Chairperson Signed 27. 5.2021