https://new.kenyalaw.org/akn/ke/judgment/kehc/2026/12329

**REPUBLIC OF KENYA** **IN THE HIGH COURT OF KENYA AT NAIROBI** **COMMERCIAL AND TAX DIVISION** **CIVIL SUIT NO. E142 OF 2020** **STICHTING MEDICAL CREDIT FUND…PLAINTIFF/RESPONDENT** **VERSUS** **SBM BANK KENYA LIMITED……………..DEFENDANT/APPLICANT** **AND** **KENYA DEPOSIT INSURANCE** **CORPORATION (KDIC)……………………PROPOSED THIRD PARTY** **RULING** 1. This ruling is in respect of the Chamber Summons application dated 21st November 2025, brought under Sections 1A, 1B, & 3A of the Civil Procedure Act, Order 1 Rule 15, Order 8 Rule 3(1) & Rule 5 and Order 51 Rule 1 of the Civil Procedure Rules 2010. The Applicant seeks the following orders: 2. *Leave be granted to the Defendant/applicant to issue a third-party notice to Kenya Deposit Insurance Corporation, and time be fixed to serve the third-party notice.* 3. *That leave be granted to the proposed third party to fully participate in the proceedings herein and file such pleadings, affidavits, submissions and other documents subsequent to joinder.* 4. *Leave be granted to the Defendant to amend its statement of defence dated 18th June 2020 in terms of the draft Amended Statement of Defence annexed hereto.* 5. *That the Amended Statement of Defence be filed and served within 7 days and the Plaintiff be granted corresponding leave to amend and file responsive pleadings if need be.* 6. *Costs of the application be in the cause.* 7. The application is based on the record and supported by Kelvin Njiru's affidavit, a Senior Legal Officer for the Defendant. He states that Chase Bank (Kenya) Limited was put under receivership by the Central Bank of Kenya on April 7, 2016, with the Kenya Deposit Insurance Corporation (KDIC) acting as receiver-manager. Later, on April 16, 2021, it was put into liquidation, making KDIC its liquidator. He also notes that the Gazette Notice appointing the liquidator instructed that all claims related to Chase Bank be directed to KDIC. 8. He further states that SBM only took responsibility for 75% of the deposits under moratorium, while the remaining 25%, along with the related assets and liabilities, stayed with Chase Bank under KDIC's control. He argues that SBM fulfilled all obligations concerning the 75% it assumed, whereas the 25% was still managed by KDIC for recovery. Therefore, any claim by the Plaintiff falls under KDIC's liabilities, meaning SBM has no further obligation. 9. He also argues that the draft amended statement of Defence accurately shows the scope of its assumed liabilities and the context of the Plaintiff’s claim. 10. The Third Party opposed the application through a replying affidavit sworn by David G. Irungu on 23rd February 2026. He confirms that Chase Bank (Kenya) Limited was placed under receivership on 7th April 2016 and subsequently under liquidation on 16th April 2021, upon which KDIC was appointed receiver and later liquidator under the Kenya Deposit Insurance Act. 11. He however, contends that KDIC's appointment as receiver and subsequently as liquidator did not have the legal effect of transferring the liabilities and obligations of Chase Bank to KDIC. He avers that, under section 45(5) of the Kenya Deposit Insurance Act, KDIC acts merely as an agent of the institution in receivership and cannot be deemed to have assumed or incurred the institution's liabilities in its own capacity. He further asserts that section 56(1) of the Act prohibits the maintenance of causes of action against a liquidator in respect of claims that arose before liquidation. 12. He further states that KDIC is not a proper party to the proceedings, as Chase Bank (Kenya) Limited (In Liquidation) remains a distinct legal entity capable of suing and being sued notwithstanding the liquidation. He maintains that the relationship between KDIC and Chase Bank is one of agent and disclosed principal, with KDIC acting solely in its statutory capacity as agent. Accordingly, he avers that joinder of KDIC would be contrary to sections 45(5), 50(5) and 55(1)(o) of the Kenya Deposit Insurance Act and would improperly seek relief against both a disclosed principal and its agent. 13. The application was heard by way of written submission. The Defendant/applicant filed submissions dated 18th March 2026, while the proposed third-party submissions are dated 18th March 2026. **Analysis and determination** 1. I have considered the application, the affidavits on record, the rival submissions by counsel and the applicable law. In my view, the issues arising for determination are: 1. *Whether the Defendant has satisfied the threshold for leave to issue a Third-Party Notice against the Kenya Deposit Insurance Corporation (KDIC).* 2. *Whether the Defendant should be granted leave to amend its Statement of Defence.* *Whether KDIC should be joined as a third party* 1. The jurisdiction to join a third party is governed by Order 1 Rule 15 of the Civil Procedure Rules, 2010. which provides that: * 1. ***Where a defendant claims as against any other person not already a party to the suit (hereinafter called the third party)—*** 1. ***that he is entitled to contribution or indemnity; or*** 2. ***that he is entitled to any relief or remedy relating to or connected with the original subject-matter of the suit and substantially the same as some relief or remedy claimed by the plaintiff; or*** 3. ***that any question or issue relating to or connected with the said subject-matter is substantially the same question or issue arising between the plaintiff and the defendant and should properly be determined not only as between the plaintiff and the defendant but as between the plaintiff and defendant and the third party or between any or either of them,*** ***…*** 1. The Defendant’s application is anchored on the contention that the Plaintiff’s claim falls within the 25% of the liabilities that were retained by Chase Bank and are now under the management of KDIC as liquidator. The Defendant therefore implies that, should any liability be established, it is entitled to be indemnified by or to pass liability to KDIC. 2. KDIC, in opposition, asserts that it is merely an agent of Chase Bank (In Liquidation) and has not incurred personal liability. The resolution of this contest requires an examination of the statutory regime governing KDIC’s role. 3. The **Kenya Deposit Insurance Act, 2012**, provides a comprehensive framework for the receivership and liquidation of deposit-taking institutions. **Section 45(5)** of the Act stipulates that: ***(*5*) Where the Corporation or the appointed person has assumed control of an institution, the Corporation or the appointed person shall—*** * + - * 1. ***be deemed to be acting as the agent of the institution in carrying on the businesses and managing the assets, liabilities and affairs of the institution or in carrying out any transaction relating to the institution or its assets, businesses and affairs, including disposal of assets; and*** 2. ***not, by reason of having assumed control of the institution or any action taken by it, be held to have assumed or incurred any obligation or liability of the institution for its own account.*** 1. The law is clear that once KDIC has been appointed as a receiver or liquidator of an institution, it becomes an agent of that institution. The law then protects it from assuming any obligations or liability of the institution for its own account as per the provisions of **Section 50(5)**, which stipulates: ***(5) Where the Corporation exercises one or more powers under this section, the Corporation shall not, by reason of the exercise of such powers, be held to have assumed or incurred any obligation or liability of the institution for its own account.*** 1. The only instance where the corporation can be sued for damages is where any person has sustained losses as a result of any action of the corporation. 2. In the instant case, the Applicant is seeking to join KIDC in these proceedings on the assertion that it obtained 25% of liabilities from Chase Bank. 3. In **Atul R. Shah & another v Imperial Bank Limited & another [2021] KEHC 7923 (KLR)**it was held that: ***“The upshot of the foregoing is that, when the 2nd Defendant is appointed as receiver of any entity, it acts as an agent of such entity. It assumes no liability such entity at all. Its liability is restricted to damages suffered by any party as a result of its own actions.”*** (See also **Andrew Muma and Charles Kanjama Trading as Muma & Kanjama Advocates & another v others vs Deloitte & Touche East Africa & 5 others (2020) eKLR**). 1. Further, **Section 46** of the same Act provides: ***(1) Where the Corporation or the appointed person, as the case may be, has assumed control of an institution under section 44(2)(b)—*** ***a. no injunction may be brought or any other action or civil proceeding commenced against the Corporation or the appointed person in respect of the assumption of control;*** ***b. no creditor has any right of set-off against the institution, which for greater certainty, does not include the consolidation of accounts maintained in the normal course for the purpose of providing clearing and settlement services or other services referred to in section 48; and*** ***c. no person may terminate or amend any agreement with the institution or claim an accelerated payment under any such agreement with the institution by reason only of—*** ***i. the insolvency of the institution;*** ***ii. a default, before the assumption of control under section 44(2)(b) by the Corporation or the appointed person, as the case may be, takes effect, by the institution in the performance of its obligations under the agreement; or*** ***iii. assumption of control under section 44(2)(b) by the Corporation or the appointed person, as the case may be, as from the date of the assumption of control of the institution.*** ***(2) Subsection (1) shall not prevent any person who sustains losses from any action of the Corporation or the appointed person from instituting an action for damages for the losses suffered by such person.*** 1. This Court aligns with the principle that a statutory agent cannot be sued in place of its principal for obligations incurred by the principal. Accordingly, the proper party to answer a claim arising from pre-receivership or pre-liquidation liabilities is the institution itself, namely Chase Bank (Kenya) Limited (In Liquidation), not KDIC in its corporate capacity. 2. In the result, I find the prayers for leave to issue a third-party notice to KDIC and for leave to join KDIC as a third party are therefore unmeritorious and are declined. *Whether leave to amend the Statement of Defence should be granted* 1. The Defendant also seeks leave to amend its Statement of Defence pursuant to Order 8 Rules 3 and 5 of the Civil Procedure Rules. 2. The principles governing amendment of pleadings are well settled. Amendments should generally be freely allowed where they are necessary for determining the real questions in controversy, are made in good faith and do not occasion prejudice to the opposite party. 3. In this case, the proposed amendments are closely connected to the Defendant's planned third-party proceedings against the Kenya Deposit Insurance Corporation. Their main aim is to include pleadings about the alleged allocation of liabilities between the Defendant and the proposed Third Party, and to establish the basis for a future claim for contribution or indemnity. 4. Having found that KDIC is not a proper party to these proceedings and consequently declined leave to issue a Third-Party Notice, the basis upon which the proposed amendments are predicated falls away. Permitting the amendments in those circumstances would serve no useful purpose and would unnecessarily complicate the issues for determination. 5. Consequently, the Chamber Summons dated 21st November 2025 is without merit and is dismissed with costs It is so ordered. **RULING** delivered virtually, dated and signed at **NAIROBI** This **31st** day of **July** 2026. **PETER M. MULWA** **JUDGE** **In the presence of:** *Mr. Echesa* for Plaintiff *Ms. Naomi Mutisya* for Defendant *Mr. Ranja* for Proposed Third Party Court Assistant*: Lispa*