https://new.kenyalaw.org/akn/ke/judgment/keca/2026/1256

Sagoo v Nanak Crankshaft Grinders & 7 others (Civil Appeal 44 of 2020) [2026] KECA 1256 (KLR) (3 July 2026) (Judgment) Neutral citation: [2026] KECA 1256 (KLR) Republic of Kenya In the Court of Appeal at Nairobi Civil Appeal 44 of 2020 PO Kiage, LA Achode & WK Korir, JJA July 3, 2026 Between Talwinder Singh Sagoo Appellant and Nanak Crankshaft Grinders 1st Respondent Avtar Kaur Sagoo 2nd Respondent Jaswinder Kaur Sagoo 3rd Respondent Manjit Kaur Sagoo 4th Respondent Diptinder Kaur Sagoo 5th Respondent Harvinder Kaur Dadhial 6th Respondent Ashwin Brothers 7th Respondent Alexander Registrars 8th Respondent (Being an appeal against the judgment of the High Court of Kenya at Nairobi (Tuiyott J) dated 29th November 2019 in Nairobi HCC Case No. 7 of 2018) Judgment 1.Talvinder Singh Sagoo, the appellant is aggrieved by the judgment of Tuiyott J (as he then was), dated 29th November 2019 which found in favour of Nanak Crankshaft Grinders Limited, Avtar Kaur Sagoo, Jaswinder Kaur Sagoo, Diptinder Kaur Sagoo, Ashwin Brothers and Alexander Registrars, the 1st, 2nd, 3rd, 5th, 7th and 8th respondents, respectively. 2.The appellant commenced the suit before the High Court by a Plaint dated 5th January, 2018 in which he averred that the 1st respondent, being a family company in financial distress, requested for financial assistance from him in March 2012. On 23rd March, 2012 he advanced to the company a loan of Kshs.42,000,000 by transferring the said amount from his personal account into the company’s account at I & M Bank. On behalf of the respondent company, the transfer was overseen by the 7th and 8th respondents, who were the company’s auditors and registrars. According to the appellant, the parties agreed that the amount would be repaid together with interest at the rate of 14% per annum. The company later failed and/or neglected to repay the loan despite demand. 3.The appellant further pleaded that the 2nd to 5th respondents, being majority shareholders and directors of the company, conducted the affairs of the company in a manner that was oppressive and prejudicial to his interests and those of the 6th respondent (Harvinder Kaur Dadhial). In that regard, he alleged that the 2nd and 5th respondents: excluded the 6th respondent from the management of the company; convened meetings on short notice with the intention of removing her as a director; threatened to transfer company assets without her consent; and, failed to adhere to the company’s Memorandum and Articles of Association. 4.Based on the foregoing pleadings, the appellant sought judgment against the respondents jointly and severally for Kshs.82,824,000 being the principal sum, accrued interest and VAT; interest thereon at 14% per annum until payment in full; damages for breach of agreement; and, in the alternative, compensation by way of shares equivalent to the amount owed. He further sought various permanent injunctive orders restraining the respondents from, inter alia, disposing of company assets, altering the company’s shareholding and directorship structure, operating the company’s bank accounts, transferring shares, appointing or removing directors, and otherwise interfering with the affairs and management of the company pending determination of the dispute. 5.The 1st, 2nd, 3rd, 5th, 7th and 8th respondents filed a joint Statement of Defence dated 14th August, 2018. The 1st, 2nd, 3rd and 5th respondents denied that the sum of Kshs.42,000,000 constituted a loan advanced by the appellant to the 1st respondent company. Their case was that the company obtained an overdraft facility of Kshs.42,000,000 from I & M Bank secured, inter alia, by assets held under the Khanda Trust established by the company’s deceased founders, Balwant Singh Sagoo and Gurdip Kaur Sagoo. They pleaded that following the company’s financial difficulties and threats by the bank to invoke the guarantee securing the facility, Gurdip Kaur Sagoo instructed the trustees of the Trust to transfer £300,000 for purposes of repaying the company’s indebtedness. 6.The respondents averred that the said funds were transferred to the appellant merely as a conduit to facilitate settlement of the company’s liabilities, and not as a gift, nor was it a loan from him personally. They averred that the appellant subsequently transferred Kshs.42,000,000 into the company’s account on 22nd March, 2012 after temporarily placing the funds in a fixed deposit account for his own benefit. The appellant retained the interest earned from the fixed deposit and failed to account for it despite demand. 7.It was therefore, the respondents’ case that the company neither borrowed money from the appellant, nor owed him the sums claimed in the suit. In the alternative, they pleaded that if any loan had been advanced by the appellant, the same was unenforceable for want of a resolution of the company’s board authorizing the borrowing. They further contended that no such loan appeared in the company’s audited accounts as a debt owed to the appellant personally, notwithstanding that the appellant himself had signed the accounts in his capacity as director. 8.The 7th and 8th respondents denied any involvement in effecting or supervising the transfer of the monies. They maintained that their functions as auditors and company secretaries were limited to implementing board resolutions and examining the company’s books of account. 9.Regarding the treatment of the Kshs.42,000,000 in the company accounts, the respondents asserted that the directors resolved to classify it as shareholders’ funds, since the monies originated from the Trust, whose beneficiaries were also shareholders of the company. In their view, the payment represented additional capital injected into the company by the shareholders through the Trust. 10.The 7th and 8th respondents disputed the appellant’s complaints relating to the management of the company and the alleged exclusion of the 6th respondent from its affairs. They contended that the appellant lacked locus standi to agitate grievances on behalf of the 6th respondent, who was herself a party to the proceedings and at liberty to pursue any remedies available to her in law. They stated that the court ought not to interfere with the internal management of the company, which was governed by its Articles of Association and applicable company law principles. 11.During trial, the appellant and the 6th respondent testified in support of the appellant’s case, while the defence case was advanced through the evidence of the 5th respondent. 12.The appellant’s evidence was that the company was experiencing financial difficulties and that he transferred Kshs.42,000,000 from his personal fixed deposit account, to the company’s account to rescue it from its indebtedness to I & M Bank. He maintained that the money constituted a loan advanced by him personally to the company and was repayable with interest. The appellant asserted that although the money initially originated from his grandmother, Gurdip Kaur Sagoo, it was given to him personally and the source of the funds was immaterial, so long as the transfer into the company’s account emanated from his own account. Concerning his grandmother, the appellant stated as follows:she “gave me the money to sort myself out” and denied that the money belonged to the Trust. 13.During cross-examination however, the appellant was confronted with correspondence dated 23rd August, 2011 addressed to I & M Bank in which he acknowledged receipt of £300,000 and stated that it was: “from my grandfather‟s Trust to be used for facilities granted to the account of Nanak Crankshaft Ltd.” His explanation of the inconsistency was that reference to the Trust was merely a formality for the bank and that the money had, in fact, come from his grandmother personally. 14.The appellant also acknowledged that the company’s audited accounts for the year ending 31st December 2012, which he had signed as a director, reflected the Kshs.42,000,000 as shareholders’ loan. He nevertheless stated that he was not aware that the amount had been allocated to the shareholders’ account. He later conceded in evidence that the accounts constituted an acknowledgment of the funds “as shareholders‟ loan.” 15.The 6th respondent, one of the directors of the 1st respondent, supported the appellant’s case stating that her mother, Gurdip Kaur Sagoo, gave gifts to all her children and grand daughters-in-law, so that the gift of £300,000 to the appellant was not unusual. She stated that she was aware that the 1st respondent borrowed money from I & M bank in the year 2006 and that her mother gave security from Khanda Trust and all the directors knew that upon default, the guarantor would pay. 16.The 6th respondent’s testimony was that in 2011, the 1st respondent failed to service the loan owed to I &M Bank and the appellant obtained money from her mother to repay it. The money was to be reimbursed because it came from his account and had been given to him as a gift by her mother. She confirmed that she did not authorize the borrowing from the appellant, and did not know whether the other directors authorized the borrowing, or whether there was a board resolution to allow the borrowing. She acknowledged that the money lent to the 1st respondent was captured as shareholders’ loan and that the appellant was aware of this. 17.In response, the 5th respondent testified that the impugned funds originated from the Trust and were intended solely, to redeem the company’s liabilities with I & M Bank after the bank threatened to invoke the guarantee securing the overdraft facility. She stated that the company’s accountant, auditors and directors agreed to classify the Kshs.42,000,000 as shareholders’ funds in the audited accounts and the appellant, being a director of the company, signed the said accounts with full knowledge of that treatment. 18.The 5th respondent referred to correspondence from Gurdip Kaur Sagoo and the trustees of the Trust, showing that the £300,000 distribution was expressly intended “for the purpose of repaying a loan secured by assets held within the trust.” That unlike other documented transfers expressly described as gifts, the impugned transfer was not characterized as a gift to the appellant personally. 19.Upon considering the matter before him, the learned trial Judge found no merit in the appellant’s claim and dismissed the suit with costs to the respondents. 20.Aggrieved by the judgment, the appellant filed this appeal and advanced twelve grounds in the memorandum of appeal dated 7th February 2020. In sum the appellant faults the trial Judge for:i.Finding that the appellant had not advanced a loan of Kshs.42,000,000 to the 1st respondent despite evidence to the contrary.ii.Failure to find that the respondents had breached the agreement by refusing to repay the loan.iii.Holding that the funds originated from the Trust and not from the appellant personally.iv.Wrong conclusion that the appellant had acknowledged the sum as shareholders‟ funds rather than a personal loan.v.Failure to restrain alleged oppressive interference with the company‟s shareholding, directorship and assets.vi.Misapprehension of the evidence, ignoring of the appellant‟s submissions and authorities, consideration of irrelevant matters, and thereby reaching an erroneous and biased decision. 21.The firm of M/s Gichuki King’ara & Co. Advocates filed submissions dated 18th November 2020, on behalf of the appellant, stating that the learned Judge erred both in law and fact in finding that he had not advanced a loan of Kshs.42,000,000 to the 1st respondent, and in failing to find that the company had sought financial assistance from him during a period of financial distress. He argues that at the material time he was the Managing Director of the company and, upon learning of the company’s financial difficulties and the recall of its overdraft facility by I & M Bank, he approached his grandmother, Gurdip Kaur Sagoo, who gifted him the funds which he in turn advanced to the company as a loan. 22.In addition, he urges that documentary evidence, including bank statements and correspondence from the company’s auditors, demonstrated that the funds were transferred from his personal account to the company’s account and were recorded in the company’s books as a loan. He contends that the learned Judge failed to properly consider this evidence and ignored the fact that the company had admitted that it received the funds at a time when it urgently required financial assistance. 23.Counsel for the appellant further submits that as Managing Director and a fiduciary of the company, the appellant acted in good faith and in the interests of the company and its creditors by injecting his personal funds into the company to avert financial collapse. In support of this position, reliance is placed on section 143 of the Companies Act regarding directors’ duties, as well as the decisions in Colin Gwyer & Associates Ltd v London Wharf (Limehouse) Ltd [2003] 2 BCLC 153 on directors’ duties to creditors; Githere v Kimungu [1976–1985] EA 101 on procedural rules being hand maidens of justice; Re Coles [1907] 1 KB 1; and Article 159 (2) (d) of the Constitution on the need to give substantive justice without undue regard to technicalities. 24.Lastly, the appellant contends that the trial court failed to properly evaluate the evidence, disregarded his submissions and supporting testimony, and thereby reached an erroneous decision dismissing the suit. Reliance is also placed on Peters v Sunday Post Limited [1958] EA 424 on the duty of an appellate court to re-evaluate evidence. The appellant therefore, urges this Court to set aside the judgment of the High Court and allow the claim as pleaded in the Plaint. 25.The firm of M/s Gichuki Kimere & Company Advocates filed submissions dated 17th December 2020 for the 4th and 6th respondents. 26.The 4th and 6th respondents support the appeal and fully associate themselves with the appellant’s submissions. They contend that the learned Judge erred in finding that the appellant had not advanced a loan of Kshs.42,000,000 to the 1st respondent, despite the presence of evidence that the monies were transferred from the appellant’s account, utilized to settle the company’s debt, and recorded in the company books with the knowledge and approval of the directors and shareholders. 27.The 4th and 6th respondents maintain that the absence of a formal board resolution did not negate the existence of the loan since the family company routinely conducted its affairs informally, including borrowing monies without resolutions. They contend that the company was estopped from denying the loan after accepting and benefiting from the funds and urge this Court to allow the appeal. 28.The 1st, 2nd, 3rd, 5th, 7th and 8th respondents oppose the appeal and support the judgment of the High Court dismissing the appellant’s suit. Their position is prosecuted through the submissions dated 16th December 2020 filed by their counsel, P.S. Kisaka. They urge this Court, in its 1st appellate capacity, to exercise caution before interfering with the findings of the trial court. They urge the Court to bear in mind the holding in Kiruga v Kiruga & Another [1988] KLR 348 and Mbogo v Shah (1968) EA 93 on the principles governing appellate interference with findings of fact and the exercise of discretion by a trial court. 29.The respondents maintain that the evidence clearly demonstrates that the sum of £300,000 transferred to the appellant originated from the Khanda Trust and was specifically intended to offset the 1st respondent’s indebtedness to I & M Bank. They rely on correspondence from Gurdip Kaur Sagoo to the Trustees directing that the funds be released “for the purpose of repaying a loan secured by assets held within the trust,” as well as the appellant’s own letter to the bank acknowledging receipt of the monies from the Trust to be utilized for the company’s banking facilities. According to the respondents, the documentary trail left no doubt that the monies were Trust funds and were intended to rescue the company. They were not a personal loan advanced by the appellant. 30.The respondents further contend that the appellant cannot rely on oral evidence to contradict documentary evidence and audited accounts that he signed as a director of the company. They argue that the company’s audited accounts expressly classified the Kshs.42,000,000 as shareholders’ loans and not as a debt owed personally to the appellant. They point out that the appellant signed the directors’ statement to confirm that the financial statements gave a true and fair view of the company’s affairs and could not subsequently disown the contents thereof. To emphasize the parole evidence rule, they refer to the decisions in Housing Finance Company of Kenya Ltd v Palm Homes Ltd & 2 Others [2002] 2 KLR, Jacobs v Batavia & General Plantations Ltd [1924] 1 Ch D 287, and Robin v Gerson Berger Association Ltd [1986] WLR 526, and state that extrinsic evidence cannot be admitted to vary or contradict written instruments. 31.The respondents also argue that there was no evidence of: a board resolution authorizing the alleged loan; a written agreement setting out the terms of the borrowing; and, evidence showing that the company had borrowed funds from the appellant personally. They maintain that compliance with company procedures regarding borrowing was a legal safeguard intended to protect the company and its shareholders from unauthorized liabilities. In their view, any alleged loan advanced without compliance with those requirements was unenforceable against the company. 32.Lastly, the respondents dismissed the appellant’s contention that the company’s informal family structure excused the absence of formal resolutions. They argue that the appellant together with the 4th and 6th respondents, were attempting to improperly attribute liabilities to the company through informal dealings unsupported by proper corporate authorization. They, therefore, urge this Court to uphold the findings of the High Court and dismiss the appeal with costs. 33.The appeal came before Court for plenary hearing on 9th February, 2026 and the appearance of learned counsel was as follows: Mr. Mirie for the appellant, Mr. Kisaka for the 1st 2nd 3rd 5th 7th and 8th respondents, and Mr. Gichuki for the 4th and 6th respondents. They each placed reliance on their submissions and made brief highlights. 34.Mr. Mirie urged that the subject matter was loaned to the company by the appellant, who got it from his grandmother and that if it had been meant to be a loan, the grandmother would have paid it directly into the company. Further, that this was a family business and it was operated without formalities. Mr. Kisaka urged that the Trust was the guarantor and Gurdip Kaur Sagoo was the settlor. That the appellant himself wrote to the bank intimating that he was in receipt of £300,000 for repayment of the loan. Mr. Gichuki submitted that no resolution was passed for a loan to be taken, or for the subject money received to repay the loan. 35.As stated earlier, this is the first appeal and our duty as stipulated under rule 31 of the Court of Appeal Rules 2022, is to re-appraise and consider the evidence tendered before the trial court afresh, and come to our own independent conclusion. Simply stated, an appeal to this Court from a trial by the High Court is by way of retrial and the principles upon which this Court acts in such an appeal are well settled. Briefly put, they are that this court must reconsider the evidence, evaluate it itself and draw its own conclusions though it should always bear in mind that it has neither seen nor heard the witnesses and should make due allowances in this respect. (See - Gitobu Imanyara & 2 others v Attorney General [2016] eKLR). 36.Having considered the record of appeal, supplementary record of appeal and the rival submissions, and bearing in mind our duty as stated in Gitobu Imanyara & 2 others supra, we perceive that the three issues for determination are whether the learned Judge:i.Erred in finding that the appellant did not advance a loan to the 1st respondent.ii.Erred in finding that the appellant received 300,000 pounds to hold in trust for the 1st respondent.iii.Failed to consider all the evidence tendered before him. 37.It is common cause that the subject money came to the appellant from the Khanda Trust Fund on 17th August, 2011, and on 22nd March 2012 it was transferred from a fixed deposit account held in his name and paid into the company’s account domiciled in I & M Bank. The dispute turns on the characterization of these funds namely; whether they constitute a personal loan advanced by the appellant as he asserts, or they were Trust funds applied for the benefit of the company as the respondents hold. 38.On whom does the burden of proof lie in these circumstances? 39.The provision of Section 107(1) of the Evidence Act which deals with the burden of proof stipulates that:“1)Whoever desires any court to give judgment as to any legal right or liability dependent on the existence of facts which he asserts must prove that those facts exist.2)When a person is bound to prove the existence of any fact it is said that the burden of proof lies on that person.” 40.Halsbury’s Laws of England, 4th Edition, Volume 17, at paras 13 and 14: describes the burden of proof thus:“The legal burden is the burden of proof which remains constant throughout a trial; it is the burden of establishing the facts and contentions which will support a party’s case. If at the conclusion of the trial he has failed to establish these to the appropriate standard, he will lose.14.The legal burden of proof normally rests upon the party desiring the court to take action; thus a claimant must satisfy the court or tribunal that the conditions which entitle him to an award have been satisfied. In respect of a particular allegation, the burden lies upon the party for whom substantiation of that particular allegation is an essential of his case. There may therefore be separate burdens in a case with separate issues.” (emphasis added) 41.In Jennifer Nyambura Kamau v Humphrey Mbaka Nandi [2013] KECA 423 (KLR) adverted to the burden thus:Section 107 of the Evidence Act provides that: “whoever desires any court to give judgment as to any legal right or liability dependent on the existence of facts which he asserts must prove that those facts exist.” Section 109 stipulates that the burden of proof as to any particular fact lies on the person who wishes the court to believe in its existence. If an expert witness was necessary, the evidential burden of proof was on the appellant to call the expert witness. The appellant did not discharge the burden and as Section 108 of the Evidence Act provides, the burden lies on that person who would fail if no evidence at all were given on either side.” 42.The appellant’s case herein is that the company was in financial distress following the recall of its overdraft facility by I & M Bank, and as the Managing Director, he obtained financial assistance from his grandmother, Gurdip Kaur Sagoo, which he thereafter, lent to the company. On the other hand, the respondents maintain that the monies originated from the Khanda Trust and were specifically intended to redeem the company’s liabilities with I & M Bank. 43.In finding that the money was from the Trust and was intended to settle the company loan, the trial court held that:“36.The contents of this letter are at odds with what Talvinder told the Court. In this letter he informs the Bank that the money was received from his “grandfather‟s Trust” (the Trust), while to Court he had testified that the money was from his grandmother and not the Trust. Confronted with this inconsistency he answered;This was just a formality for the Bank. The money came from my grandmother not the Trust‟.37.What Talvinder did not and has not explained to Court is why the formality to the Bank required that it be disclosed that the money was from his grandmother and not the Trust. Without any explanation, the Court concludes that Talvinder was well aware that the money was from the Trust. Talvinder was simply relaying true and accurate information to the Bank.” 44.The principles set out for the first appellate court are that a first appellate court will not normally interfere with a finding of fact by the trial court, unless it is based on no evidence, or on a misapprehension of the evidence, or the Judge is shown, demonstrably, to have acted on wrong principles in reaching the findings he did. See - Mwangi & another v Wambugu [1984] KECA 13 (KLR). 45.In Mati v Returning Officer Mwingi North Constituency & 2 others [2018] KECA 700 (KLR) this Court held that:“As far as facts are concerned, our engagement with them is limited to background and context and to satisfy ourselves, when the issue is raised, whether the conclusions of the trial judge are based on the evidence on record or whether they are so perverse that no reasonable tribunal would have arrived at them. We cannot be drawn into considerations of the credibility of witnesses or which witnesses are more believable than others; by law that is the province of the trial court. (See Gatirau Peter Munya v. Dickson Mwenda Kithinji & 2 Others [2014] eKLR.” 46.We, therefore, find no reason to depart from the learned Judge’s conclusion that the monies were not a personal loan from the appellant but rather, Trust funds utilized to rescue the company. We find that his conclusion was grounded on contemporaneous correspondence, audited accounts, and the conduct of the parties. As such, it cannot be said that the trial court misapprehended the evidence, or applied wrong legal principles to justify our interference with its findings of fact. 47.On the second issue, it is argued that the learned Judge erred in finding that the appellant received 300,000 pounds to hold in trust for the 1st respondent. Having found that the appellant did not personally advance a loan to the company, we observe that the correspondence dated 23rd August 2011 by the appellant to I & M Bank indicates where the monies came from and for what purposes. In the appellant’s own words, he states that:“I wish to confirm that I have received £300,000 from my grandfather‟s Trust to be used for facilities granted to the account of Nanak Crankshaft Ltd, as the company requires working capital” 48.With the foregoing declaration by the appellant himself, we find no basis to fault the trial court for concluding that the appellant received the funds from Khanda Trust, for the specific purpose of redeeming the company’s indebtedness. The contemporaneous correspondence clearly linked the monies to the repayment of the company’s liabilities and not to an outright personal gift to the appellant. 49.Regarding the final issue, it is contended that the learned Judge failed to properly evaluate and consider the entirety of the evidence tendered before him and consequently arrived at an erroneous conclusion dismissing the suit. In particular, the appellant argues that the court ignored evidence showing that the 1st respondent was in financial distress, that funds were transferred from the appellant’s personal account into the company account, and that the company’s auditors had acknowledged the transaction in the company records. Further that the testimony of the 6th respondent corroborated his evidence that the monies advanced constituted a loan recoverable from the company. 50.In response, the 1st, 2nd, 3rd, 5th, 7th and 8th respondents argue that the learned Judge fully considered and properly analyzed all the oral and documentary evidence before him and arrived at the proper conclusion. 51.Upon considering the impugned judgment, we find that the learned Judge specifically addressed the appellant’s contention that the monies were a personal gift from his grandmother and contrasted that assertion with the contemporaneous correspondence indicating that the funds were intended to repay the company’s indebtedness. The learned Judge also considered the fact that the audited accounts categorized the amount as shareholders’ loans and not as a personal debt owed to the appellant. 52.Accordingly, we find that the trial Judge evaluated both the oral and documentary evidence and preferred the documentary trail and audited accounts, over the appellant’s oral and contradictory explanations. 53.In the end, we find that the appellant has failed to discharge the burden of proof. The appeal is found to be devoid of merit and is dismissed with costs to the 1st, 2nd, 3rd, 5th, 7th and 8th respondents. DATED AND DELIVERED AT NAIROBI THIS 3RD DAY OF JULY 2026.P. O. KIAGE...........................JUDGE OF APPEALL. ACHODE..............................JUDGE OF APPEALW. KORIR………………………JUDGE OF APPEALI certify that this is a true copy of the originalSignedDEPUTY REGISTRAR