https://new.kenyalaw.org/akn/ke/judgment/keelrc/2026/2411

**REPUBLIC OF KENYA** **IN THE EMPLOYMENT AND LABOUR RELATIONS COURT AT NAIROBI** **CAUSE NO. E695 OF 2020** **JULIUS SHIMANYULA……………………………. CLAIMANT** **VERSUS** **KENYA INDUSTRIAL ESTATES LIMITED……… RESPONDENT** **JUDGMENT** The Respondent employed the claimant in 1987, and he served until 15 May 2019 when his employment was terminated through summary dismissal. At the time, he was serving as a Project Officer earning a monthly salary of Kshs. 65,000. The claim is that in November 2018, while the claimant was stationed at the Respondent's Bungoma Branch, one Martin Shikuku Osore, trading as Cremar Ceramics, applied for a loan of Kshs. 1,000,000. The intended borrower submitted the loan application documents, including identification documents, business registration documents, permits, bank statements, audited accounts, guarantors' particulars and security documents. Upon appraisal of the application, the Claimant and the Branch Manager recommended the loan for consideration and forwarded the application to the Respondent's Head Office for further appraisal and approval. By a letter dated 28 March 2019, the Bungoma Branch Manager accused the Claimant of attempting to defraud the Respondent through the borrower. Subsequently, by a letter dated 8 May 2019, the claimant was invited to attend disciplinary proceedings at the Respondent's Head Office on 13 May 2019 to answer allegations of attempted fraud. According to the Claimant, he attended the disciplinary hearing as required but was not afforded adequate time or opportunity to prepare his defence. Following the hearing, he was summarily dismissed by a letter dated 15 May 2019. The claim is that, under the Respondent's Human Resource Policy, the claimant lodged an appeal against his dismissal with the Managing Director by letter dated 26 May 2019. The appeal was never determined. It is the Claimant's case that the allegations of attempted fraud were unfounded, the disciplinary process was procedurally unfair, and the summary dismissal was unlawful and without valid cause. The Claimant is seeking the following: 1. Compensation of 12 Months' Salary for unfair dismissal Kshs. 780,000/=. 2. Interest thereon at Court rates till payment in full; 3. Costs of this claim. In evidence, the Claimant testified that he served as a Credit Officer before his dismissal. He denied falsifying photographs relating to the intended borrower's business and maintained that the photographs produced were of the borrower's business premises in Nairobi and not Bungoma. He admitted that he was issued with a notice to show cause alleging falsification of photographs, to which he responded. He further confirmed that he attended the disciplinary hearing held on 13 May 2019, which he described as brief, and stated that he had been informed of his right to be accompanied by a fellow employee. In response, the Respondent admitted that the Claimant was its employee and that the Claimant served as a Project Officer. His duties included sourcing prospective borrowers, receiving and reviewing loan applications and supporting documentation, conducting site visits to verify the existence and authenticity of borrowers' businesses, preparing appraisal reports and forwarding duly appraised applications to the Head Office for consideration and approval. The Respondent avers that the Claimant handled the loan application of Mr Martin Shikuku, who sought a loan facility of Kshs. 1,000,000. In the appraisal documents prepared and signed by the Claimant, he represented that the borrower operated a metal workshop along Makhatsu Street in Bungoma Town and nowhere else, and confirmed that the information gathered during the appraisal corresponded to the documents submitted in support of the application. For the Respondent, the Claimant was required to provide current photographs of the borrower's business premises, as well as photographs of the borrower conducting business operations. Thus, the Claimant knowingly submitted photographs of an unrelated business situated in Utawala, Nairobi, falsely representing them as depicting the borrower's business in Bungoma. The Respondent maintains that the borrower did not operate the business described by the Claimant and that the information contained in the appraisal documents was false. The Respondent further stated that the Claimant executed a commitment from dated 8 November 2018, confirming that the loan application was genuine and undertaking personal responsibility for the accuracy of the information and documents submitted. It contends that the Claimant breached the Respondent's policies by knowingly misrepresenting material facts, thereby exposing the Respondent to an attempted fraud involving Kshs. 1,000,000. Upon discovering the alleged irregularities, the Respondent issued the Claimant with a notice to show cause dated 28 March 2019. The Claimant responded to the allegations and admitted having provided false information contrary to the Respondent's policies. Thereafter, he was invited to a disciplinary hearing by a letter dated 8 May 2019 and informed of his right to be accompanied by a representative of his choice. The Claimant attended the disciplinary hearing on 13 May 2019, where he was accorded an opportunity to present his defence. The response is that after the Respondent considered the Claimant's explanation, it found him culpable of gross misconduct and summarily dismissed him from employment with due process. The Claimant's appeal against the dismissal was scheduled for hearing on 7 August 2019, but he failed to attend. The Respondent therefore denies that the appeal was ignored and maintains that both the disciplinary process and the decision to dismiss the Claimant were lawful, fair and justified. The Claim be dismissed with costs. In evidence, the Respondent called two witnesses. Teobard Karimi Mugo, the Internal Auditor, testified that investigations conducted by the Respondent established that the loan application processed by the Claimant contained false information. The Claimant had confirmed that the intended borrower, Martin Shikuku, operated a business in Bungoma, yet upon investigation and a site visit, it was established that no such business existed. The supporting documents submitted with the loan application were false, and the Claimant's conduct constituted an attempt to defraud the Respondent. Ms. Theresa Mbula, the Respondent's Human Resources and Administration Manager, testified that although she joined the Respondent after the Claimant's employment had been terminated, she was conversant with the matter from the Respondent's records. The Claimant, then serving as a Credit Officer, initiated and processed the loan application and presented false information to the Credit Committee by representing that the borrower operated a business in Bungoma, even though no such business existed. It was her evidence that this constituted a serious irregularity on the Claimant's part and justified the disciplinary action taken against him. The Claimant submitted that his summary dismissal was unlawful and unfair as the Respondent had failed to establish a valid and fair reason for terminating his employment. He argued that the allegation that he negligently appraised a loan application was misplaced since the appraisal of loan applications at the branch level was the collective responsibility of the Branch Project Appraisal Committee (PAC), of which he was only a member. He maintained that the Branch Manager and the other members of the committee equally participated in the appraisal process. Therefore, the Respondent could not lawfully attribute the responsibility to him alone. The Claimant further submitted that the borrower supplied the information contained in the loan application forms and that any inconsistencies or irregularities therein could not be blamed on him. He contended that the evidence on record confirmed that the borrower's business actually existed. In this regard, he relied on the Branch Manager's report confirming that he had visited the business and on the Respondent's own witness, who likewise acknowledged the business's existence. He therefore argued that the allegation of gross misconduct was unsupported by the evidence. With respect to the allegation that he had committed a criminal offence against the Respondent, the Claimant submitted that no evidence had been adduced to demonstrate any intention to defraud the Respondent. He argued that the proposed loan was secured, that the recommendation of the Branch PAC was merely advisory and subject to approval by the Head Office, and that there was no evidence that he stood to gain personally from the transaction. The Claimant relied on sections 43, 45 and 47(5) of the Employment Act, as well as the decision in **Kenya Petroleum Oil Workers Union v Kenya Petroleum Refineries Ltd [2013] eKLR**, to submit that the Respondent bore the burden of proving valid and fair reasons for the dismissal, a burden which it failed to discharge. On the issue of remedies, the Claimant prayed for one month's salary instead of notice in the sum of Kshs. 65,000, twelve months' salary as compensation for unfair termination amounting to Kshs. 780,000, interest on the awards at court rates until payment in full, and the costs of the suit. The Respondent submitted that the dismissal satisfied the requirements of Sections 43 and 45 of the Act, arguing that it genuinely believed the Claimant had engaged in misconduct by providing misleading information regarding the loan application of Martin Shikuku Osore and acting dishonestly with the intention of defrauding the Respondent. It was submitted that, as a Credit Officer, the Claimant was responsible for verifying the existence of borrowers' businesses and preparing accurate loan appraisal reports in accordance with the Respondent's Policy Manual. Investigations allegedly established that the business described in the appraisal did not exist at the stated location, that the submitted photographs were false, that the business permit contained inconsistent information, and that the appraisal contained fictitious details. The Respondent further argued that the Claimant admitted in his responses to the show cause letter that he had used photographs taken in Nairobi, failed to disclose the alleged Nairobi branch in the appraisal, and had not verified the authenticity of the business licence. It maintained that these admissions, together with the investigation findings, demonstrated dishonesty and justified summary dismissal under Section 44(4)(c) of the Act for gross misconduct. On procedural fairness, the Respondent submitted that it complied with Section 41 of the Employment Act by issuing the Claimant with a show cause letter, considering his written response, inviting him to a disciplinary hearing with the option of being accompanied by a representative, hearing his defence, and thereafter issuing the termination letter. It further noted that although the Claimant appealed, he failed to attend the appeal hearing. The Respondent relied on **Opiyo v AAR Healthcare Kenya Limited (Civil Appeal E126 of 2021) [2025] KECA 1408 (KLR)**in support of its submission that the disciplinary process complied with Section 41 of the Act. On the reliefs sought, the Respondent submitted that compensation under Section 49(1)(c) of the Employment Act is only available where termination is found to be unfair. Since it had established valid reasons for dismissal and complied with due process, it urged the Court to dismiss the claim with costs. **Determination** From the pleadings, evidence, and written submissions, the issues that emerge for determination are whether there was a valid and fair reason for summary dismissal and whether the Claimant is entitled to the reliefs sought. By a notice dated 15 May 2019, the respondent terminated the claimant's employment by summary dismissal for providing misleading information and fabricating a loan project of Kshs. 1,000,000. He supported the loan application for Martin Shikuku Osore t/a Cremar Ceramics with knowledge that there was no such project in Bungoma and that he was dishonest and had intentions to defraud the Respondent by submitting photographs that did not belong to the Borrower’s business in Bungoma. This was held to be an offence against the employer, amounting to gross misconduct, and fell within Section 44(4)(c) and (g) of the Employment Act (the Act) and the KIE Human Resource Policy, allowing summary dismissal. In his defence, the claimant argued that the allegations of attempted fraud were unfounded, the disciplinary process was procedurally unfair, and the summary dismissal was unlawful and without valid cause. Upon the notice to show cause dated 28 March 2019, the Claimant responded to the allegations and admitted having provided false information in the loan application for Martin Shikuku contrary to the Respondent's policies. Sections 44(3) and 44(4) of the Act allow the employer to sanction summary dismissal where the employee is in breach of the employment contract or commits gross misconduct. However, before invoking such right, the employer must have a genuine reason to support the sanction for summary dismissal under section 43 of the Act, and the dismissal must abide by fair procedure as contemplated under Section 41(2) of the Act and as held in **Walter Ogal Anuro v Teachers Service Commission [2013] eKLR.** This position is reiterated in **Pius Machafu Isindu v Lavington Security Guards Limited [2017] KECA 225 (KLR)**, where the court held: *[The Employment Act] places heavy legal obligations on employers in matters of summary dismissal for breach of employment contract and unfair termination involving breach of statutory law. The employer must prove the reasons for termination/dismissal (section 43); prove the reasons are valid and fair (section 45); prove that the grounds are justified (section 47 (5), amongst other provisions. A mandatory and elaborate process is then set up under section 41, requiring notification and a hearing before termination. …* In this case, the Respondent asserted that the Claimant, being the Credit Project Officer, was responsible for appraising the intended borrower, Martin Shikuku t/a Cremar Ceramics, application. The Claimant falsely represented that the said borrower operated a metal workshop in Bungoma Town, submitted photographs belonging to a different business situated in Nairobi, and forwarded the application for approval, knowing that the information contained in the appraisal documents was false. The Claimant, on the other hand, maintained that the intended borrower had an existing business and denied any intention to defraud the Respondent. He explained that the borrower operated businesses in Bungoma, Makunga, and Nairobi, and that the submitted photographs related to the Nairobi business. In response to the Notice to show cause, the claimant admitted to giving falsified information on the loan application form for Martin Shikuku. Upon this admission, the respondent, as the employer, was at liberty to sanction him as held in **Simon Karuga Waweru v Twiga Stationers Limited [2019] KEELRC 1773 (KLR).** The court emphasised that an employee who has admitted to his misconduct or gross misconduct leaves the employer with the options to take against him, including termination of employment or summary dismissal. This position is reiterated in **Ayuka v Nova Pioneer, Kenya [2026] KEELRC 932 (KLR).** The option to take the employee through the disciplinary hearing is commendable. This demonstrates the need to adhere to due process and ensure the process is complete. It is undisputed that the Claimant was the officer who sourced the borrower, conducted the appraisal, and completed the Appraisal Summary. It is equally not disputed that the Appraisal report prepared and signed by the Claimant described the borrower's business as a metal workshop situated along Makhatsu Street in Bungoma Town. The document further confirmed that the information obtained during the appraisal tallied with the supporting documentation and that the business was capable of supporting the loan sought. Upon investigation, the respondent established that no such business existed at the stated location in Bungoma. The Internal Auditor testified that he personally travelled to Bungoma to verify the existence of the business and found no business belonging to Martin Shikuku at the location described in the appraisal documents. His investigation further revealed that the photographs submitted in support of the application did not depict the Bungoma business but were photographs of an unrelated business situated in Utawala, Nairobi. The Claimant did not deny during the disciplinary process that the photographs attached to the appraisal were taken in Nairobi. He explained that they related to the borrower's business in Nairobi. This explanation is difficult to reconcile with the appraisal documents, which required the Claimant to disclose the location of the borrower's business and the number of branches it operated. Instead, the appraisal misrepresented the borrower's business as located in Bungoma Town, along Makhatsu Street. No reference was made to any branch in Nairobi or Makunga. The photographs submitted were presented as depicting the business appraised in Bungoma. The inconsistency becomes more apparent from the Claimant's subsequent explanations. In response to the notice to show cause, he asserted that the borrower operated businesses in Bungoma, Makunga and Nairobi. During the disciplinary hearing, he reiterated that position. These explanations are not consistent with the contents of the appraisal report prepared by the Claimant. In **Judicial Service Commission v Gladys Boss Shollei & another [2014] eKLR,** the Court held: *A court should, therefore, not lightly interfere with the sanction imposed by the employer unless the employer acted unfairly in imposing the sanction. The question is not whether the court would have imposed the sanction imposed by the employer, but whether in the circumstances of the case the sanction was reasonable.* In the present case, despite the Claimant’s admission of wrongdoing and the use of information unrelated to the customer appraisal summary, the Respondent undertook investigations after inconsistencies were identified in the loan documentation. Those investigations established discrepancies regarding the location of the borrower's business, the photographs relied upon and the information contained in the appraisal documents. The Claimant himself admitted that the photographs submitted related to Nairobi and that he had not disclosed that fact in the appraisal report. The Court finds the Respondent had reasonable grounds to question the integrity of the information presented by the Claimant in support of the loan application. The inconsistencies in the appraisal documentation, coupled with the Claimant's admissions concerning the photographs, provided a factual basis upon which the Respondent could honestly conclude that the Claimant had failed to discharge his responsibilities with the degree of care and honesty expected of a Credit Officer. There were thus valid reasons leading to summary dismissal. The requirements of procedural fairness are anchored under Section 41(2) of the Employment Act which provides that: ***41. Notification and hearing before termination on grounds of misconduct*** ***(2) Notwithstanding any other provision of this Part, an employer shall, before terminating the employment of an employee or summarily dismissing an employee under section 44(3) or (4), hear and consider any representations which the employee may make on the grounds of misconduct or poor performance, and the person, if any, chosen by the employee within subsection (1) make.*** In this case, the claimant was issued a notice, responded to the notice to show cause, and attended a disciplinary hearing. In **Barclays Bank of Kenya Limited v Banking Insurance & Finance Union [2026] KECA 851 (KLR**) and the case of **Bamburi Cement Limited v William Kilonzi [2016] KECA 546 (KLR).** The court held that due process in employment relations is imperative. Although in this case the claimant had admitted to his gross misconduct, where the respondent opted to take him through the due process, the provisions of section 41 of the Act were adhered to as held in **Standard Group Limited v Jenny Luesby [2018] KECA 353 (KLR);** the court emphasised that, where the employee is found guilty of gross misconduct. The employer invites the employee to a hearing and finds no justification for the misconduct, the sanction of summary dismissal is justified. The Claimant also appealed against the decision to summarily dismiss him through a letter dated 26 May, 2019. The Claimant's letter dated 4 September 2019 shows that an appeal hearing had been scheduled for 7 August 2019, but the Claimant failed to attend. While the Claimant maintains that his appeal was never heard, the correspondence scheduling the appeal lends credence to the Respondent's assertion that it arranged to hear the appeal. Accordingly, the Court finds that the Respondent has discharged its burden of demonstrating that the termination of the Claimant's employment was substantively justified and procedurally fair in terms of Sections 41, 43, 44 and 45 of the Act. The compensation claim is available. The claim for costs is without merit, and the respondent is entitled to costs. **Accordingly, the Claim is dismissed with costs to the respondent.** **Delivered in open court this 14th day of August 2026** **M. MBARŨ** **JUDGE** **In the presence of:** Court Assistant: Kemboi ……………………………………………… and …………………………………..………