[2003] KECMT 1 (KLR)

Shah Munge & Partners Limited & 4 others v Capital Markets Authority (Appeal 1 & 2 of 2002 (Consolidated)) [2003] KECMT 1 (KLR) (18 November 2003) (Award)

Neutral citation: [2003] KECMT 1 (KLR)

Republic of Kenya

In the Capital Markets Tribunal

Appeal 1 & 2 of 2002 (Consolidated)

L. Njagi, Chair, A Mohammed, N. Kaburu & T. Davidson, Members

November 18, 2003

Between

Shah Munge & Partners Limited

Appellant

and

The Capital Markets Authority

Respondent

As consolidated with

Appeal 2 of 2002

Between

Franklin Karuiki Kiriga

1st Appellant

Arthur Runyenje Namu

2nd Appellant

John Paul Munge

3rd Appellant

Paul Anthony Spence

4th Appellant

and

The Capital Markets Authority

Respondent

Award

Award 1. Shah Munge and Partners and its Directors (hereinafter referred to as ‘the appellant’) have filed two Appeal to the Capital Markets Tribunal (hereinafter referred to as the Tribunal) against the decision and sanctions imposed by the Capital Markets Authority (hereinafter referred to as ‘the respondent’) dated October 17, 2002. The decision, and sanctions the subject of the appeals were, it was common ground contained in the respondent letter to the appellants dated October 17, 2002. It was reived by the appellants on the same date as appear from the Shah,

2. These two appeals were, by consent of counsel for the appellant and the respondent, consolidated for purposes of the hearing and the appellant notice of motion application dated November 6, 2002and lodged with the Tribunal on the same date.The appellants /applicants sought interim orders pending the hearing and the determination of their appeals in the following terms:a.The decisions, findings and sanctions of the Authority dated October 17, 2002to be suspended pending the determining of the two appeals filed by the Appellant and its Director.b.The decisions findings and sanctions of the Authority dated October 17, 2002and the implementation and /or execution thereof suspended and/or stayed pending the determination of the two appeals filed by the Appellant and its directors.c.The status Quo ante imposition of sanctions by (the) said decision and findings be maintained pending determination of the said two appeals of the Appellant and its directors.

3. There was no prayer for an order for the cost of the application. Mr Mutula Kilonzo, learned counsel for the appellants urged the view, inter alia, that the appellants had good appeals with good chances of success, that the sanctions were imposed immediately without due regard to the appellant right of appeal, that the appeal would be rendered nugatory, that the appellant would suffer irreparable damage and that this was not the intention of the Capital Markets Act(Chapter 485A laws of Kenya, hereinafter referred to “ the Act”) it was further submitted for the appellants that the regulatory sanctions were arrived at through a process which breached the rules of natural justice in that the appellant were condemned unheard and harsh sentences imposed on persons who were not heard in their defence.

4. The Appellant’s position was that the Tribunal had jurisdiction to grant the orders sought. The Appellants submitted further that the existence of a right of appeal meant that the sanctions should not have been implemented immediately and that no action pursuant to the Authority’s sanctions should have been taken until the fifteen days period allowed within to lodge an appeal had lapsed. The also submitted that parliament gave an appellant 100% chances of success, and that the Authority had no jurisdiction over transaction. In the Appellants view, status quo provided for the Act meant status quo ante the sanctions. The Tribunal was taken through the grounds of application, the supporting and further affidavits.i.The intentions of Parliament.ii.Viewing the whole Act and rules taking care not to limit one provision, clause, sentence, or word as to render it to be superfluous void or insignificant.iii.Policy dictating the enactment of the legislation.iv.History of the legislation, the Bill, Commentaries on the legislation or comparable enactment.v.The Mischief rule.vi.Words and phrases to be given their natural meaning and to give effect and not to negate the purpose of the legislation.

5. The above parameters were restated by the Court of appeal in the case of Leisure lodge Ltd -vs- Yashvin A. shretta- Civil Appeal No. of 1997 (unreported)The Capital markets Authority was established by the Act for the purpose of;Promoting regulating and facilitating the development of an orderly, fair and efficient Capital Markets in Kenya…”

5. Its principal objectives are set out in section 11 of the Act. It is empowered to make rules, regulations, and guidelines under section 12 of the Act. Pursuant thereto, it has made the Capital Markets Authority Rules,1992(as amended from time to time) it has also made the:i.Capital Markets Collective Investment Scheme Regulations, 2001ii.Capital Markets (Securities) (public offers Listing and Disclosure) Regulations ,2002iii.Capital Markets Licensing Requirements (General) Regulations .2002iv.Capital Markets (Take -over And Mergers) Regulations, 2002v.Capital Markets (foreign Investor) Regulations,2002vi.Guidelines on Corporate Governance practices by public listed Companies in Kenya.vii.Guidelines on the Approval and registration of Credit Ratings Agencies

6These are not mere rules of regulations. They are given the force of law and sanctions in breach thereof by section 25 of the Act which provides, under subsection 4, that where the Authority is satisfied that a licensed person has:a.Acted in contravention of any provision of this Act, or any rules or regulations made thereunder….b.….c.…., the authority may made and subject thereto, the provisions of the Civil Procedure Act shall apply as if the matter appealed against were a decree of a Subordinate Court exercising original jurisdiction.

7. On considered interpretation of the above provision is that it relates only to procedure on appeals and does not create or confer any new jurisdiction or powers on the Tribunal. Under section 37 the provisions of the Act are made superior to any other law in case that other written law is in conflict with Act.We, therefore, agree that Mr Oraro that the provisions of the Civil Procedure Act apply only in relation to procedure on appeals and we further hold that such application is only transitory in nature. We also find and hold that the provisions of the Act constitute “special jurisdiction or power conferred” as envisaged by section 3 of the civil procedure Act. And it follows that when the Chief Justice makes rules as stated hereinabove, those rules shall be special form of procedure under the said section. Under section 35A (13) of the Act, the Tribunal may regulate its own procedure.

8. A careful look at the jurisdiction created by section shows that the word “appeal” is used in the section seventeen times. However there does not appear to be any express provision covering an application of this nature.Further, and this was the crux of the application, it is enacted a at section 35A (17) that: -Upon any appeal to the Tribunal under this section the status quo of any matter or activity which is the subject of the appeal, shall be maintained until the appeal is determined”.

9. This subsection is, firstly, couched in mandatory terms and it does not require the making of an application, and thereon, for status quo to be maintained.it is a command predicated on the fact of lodging an appeal. It is automatic.We find that had parliament intended that a formal application be made, and the Tribunal can make orders under that subsection, nothing would have been easier than to say so expressly. Parliament could have legislated, for instance, that that upon any appeal, the Tribunal may make such orders as it deems just, or such words like” unless the tribunal so orders” Such jurisdiction is given to the High Court and the Subordinate courts under order XLI (41) of the Civil procedure and to the Court of Appeal under rule 5 (2) (b) of that Court’s Rules.Under section 33A (7) of the Act, parliament has enacted that pending an appeal from a decision of the Authority made under section “the order or removal situation whereby decisions of the Authority, which are regulatory in nature, would be rendered ineffective by the mere act, if we may call it so, of lodging an appeal. A party aggrieved would simply lodge an appeal and continue as if no regulatory decision had been made. That kind of scenario would not protect investors against malfeasance by licences of the Authority. The Authority is expected to make fair and just decisions which parliament has protected until the Tribunal, or the High Court holds otherwise. For example, if the Authority refuses to grant a licence to an applicant, can the applicant proceed to trade unlicenced pending a final determination of the appeal? So, to hod would be an affront to reason and good sense.

10. Under section 35(1) any person aggrieved by a decision by a decision by the authority may appeal to the appeal to the Tribunal against such directions, refusal, limitations or restrictions, cancellations, suspensions, or removal as the case may be.” The status quo to be maintained under subsection 17 is “any matter or activity which is the subject of the appeal.” We therefore find that the status quo to be maintained is the directions, refusal, limitations or cancellation, suspension, or removal as the case may be of the Authority.Under the circumstances we find that we have no jurisdiction to order status quo ante. Where there is no jurisdiction, in the words of the court of appeal in the ‘Mama Otan’ case full citation being Roy Shipping S. A and all other persons interested in the Ship ‘Mama Otan’ vs Dodoma fishing Company Ltd- Civil. Appeal No. 238 of 1997(unreported), court or indeed a tribunal, must “down tools.”The Honourable Judge of Appeal, Gicheru, quoted with approval, Nyarangi J.A in the case of The Owners of Motors vessel ‘ Lilian S’ vs Caltex Oil (Kenya) LtdCivil Appeal No. 50 of 1989,( unreported) where the latter said-Jurisdiction is everything. Without it, a court has no power to make one more step. Where a court has no jurisdiction, there would be no basis for a continuation of the proceedings pending other evidence. A court of law downs tools in respect of the matter before it the moment it holds the opinion that it is without jurisdiction.”

11. We hold that we have no jurisdiction to interfere with the Mandatory status quo enshrined in section 35A (17). We, accordingly, down our tools with respect to the notice of motion application herein. Ww ill pick them up dealing with the substantive appeal.No Party prayed for cost we decline to make any award thereon.This is the award of this Tribunal.In conclusion, we must thank the advocates of both sides who have robustly canvassed various positions before us.

MADE THIS 18TH DAY OF NOVEMBER 2003. Hon.justice Leonard Njagi - Chairman…………………………Adan Mohammed - Member ………………………….Nelson Kaburu -Member…………………………...Terry Davidson -Member……………………………