[2022] KEHC 3138 (KLR)
The court held that, given the appellant is under a Company Voluntary Arrangement (CVA) ratified by the court, and in the absence of updated information on the appellant's financial position or the status of the CVA, it would be inappropriate to grant or deny the stay of execution at this stage. The court emphasized...
Source-derived case information.
- Citation
- [2022] KEHC 3138 (KLR)
- Parties
- Appellant: Uchumi Supermarket Limited; Respondent: Commissioner of Domestic Taxes
- Court
- High Court
- Court Station
- High Court at Nairobi (Milimani Commercial Courts)
- Jurisdiction
- Kenya
- Case Number
- Tax Appeal E002 of 2022
- Procedural Posture
- Tax Appeal / Ruling on Application for Stay of Execution Pending Appeal
- Outcome
- Application for stay of execution adjourned; status quo maintained.
- Judges
- DAS Majanja
- Legal Topics
- Capital Gains Tax, Stay of Execution, Company Voluntary Arrangement, Insolvency Proceedings
- Source Language
- en
Source-derived case record
Summary, issues, holding and outcome
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Parties
Uchumi Supermarket Limited
Appellant
Commissioner of Domestic Taxes
Respondent
Procedural Posture
Tax Appeal / Ruling on Application for Stay of Execution Pending Appeal
Legal Issues
- 1 Whether the court should grant a stay of execution of the Tax Appeals Tribunal judgment pending appeal.
- 2 Whether the existence of a Company Voluntary Arrangement (CVA) under the Insolvency Act protects the appellant from execution or security orders by the respondent.
Ratio Decidendi
The court held that, given the appellant is under a Company Voluntary Arrangement (CVA) ratified by the court, and in the absence of updated information on the appellant's financial position or the status of the CVA, it would be inappropriate to grant or deny the stay of execution at this stage. The court emphasized that the appellant bears the burden of providing all relevant material to support its application for stay. However, since the respondent does not dispute the existence of the CVA and execution or security orders could disrupt the arrangement to the detriment of all creditors, the court decided to adjourn the application to allow the appellant to provide the necessary...
Court Disposition
Application for stay of execution adjourned; status quo maintained.
Orders
- The application dated January 7, 2022 is adjourned to enable the appellant to provide the necessary information for the court to make an informed decision.
- The status quo in force shall be maintained until then.
Full Case Text
Judgment text and source record
24 paragraphs
Uchumi Supermarket Limited v Commissioner of Domestic Taxes (Tax Appeal E002 of 2022) [2022] KEHC 3138 (KLR) (Commercial and Tax) (13 May 2022) (Ruling)
Neutral citation: [2022] KEHC 3138 (KLR)
Republic of Kenya
In the High Court at Nairobi (Milimani Commercial Courts Commercial and Tax Division)
Commercial and Tax
Tax Appeal E002 of 2022
DAS Majanja, J
May 13, 2022
Between
Uchumi Supermarket Limited
Appellant
and
Commissioner of Domestic Taxes
Respondent
(Being an appeal from the Judgment of the Tax Appeals Tribunal at Nairobi dated 23rd December 2021 in Tax Appeal Tribunal Appeal No. 43 of 2017)
Ruling
1. Before the court for determination is an application by the Appellant brought by way of a Notice of Motion dated 7th January 2022 and made, inter alia, under Order 42 Rule 6 of the Civil Procedure Rules. The Appellant seeks a stay of execution of the judgment of the Tax Appeals Tribunal (“the Tribunal”) dated December 23, 2021 where the Tribunal upheld the Respondent’s (“the Commissioner”) Objection Decision dated February 2, 2017 in which it demanded KES 64,313,678. 00 from the Appellant in respect of Capital Gains Tax.
2. The application is supported by the affidavit of Lawrence Ngao, the Appellant’s Chief Finance Officer, sworn on January 7, 2022. The counsel on record made brief oral submissions on the matter. The matter in dispute revolved around the nature of the security to be provided by the Appellant pending the appeal.
3. From its deposition, the Appellant avers that it went into Company Voluntary Arrangement (‘’CVA’’) under section 624 - 635 of the Insolvency Act, 2015, as an alternative to insolvency and that the Court In The Matter of Uchumi Supermarkets PLC Insolvency Petition No. 25 of 2018 (‘’Re Uchumi Supermarkets PLC’’) ratified the CVA and in the ruling set aside all pending execution proceedings including proclamations of attachment, sequestrations, exercise of statutory power of sale, distress for rent, or eviction from premises occupied by the Company and any other form of execution proceedings against the company.
4. According to the Appellant, the court order effectively protected it from actions that would jeopardize the rights and Interests of all creditors, and/or the operations of the company, which have the effect of defeating the purpose of the CVA. It states the creditors including the Commissioner were invited to a meeting which took place on 30th March 2020 where the creditors voted in favour of the CVA. The CVA was intended to keep the Appellant as a going concern, as well as give it time to make good fortune and start the process paying its debts.
5. Even though the Appellant has attempted to put forth a case that its financial position may be hanging in the balance, it has not supplied the court with updated information on its position since entering into the CVA. The order in Re Uchumi Supermarkets PLC, made 2 years ago, was subject to review every six months through a meeting of creditors. The Appellant has not stated whether subsequent meetings have been held, whether the CVA has been reviewed, whether it has been settling its debts and whether its financial position has improved.
6. At the end of the day, it is the obligation of the Appellant who seeks an order of stay to provide the court with all relevant material to enable it exercise discretion in its favour. On the other hand, the Respondent does not deny that the Appellants affairs are under the CVA. To allow execution or order security would likely upend the arrangement in place to the detriment of all creditors. In view of the objects of the Insolvency Act, that is to enable the company to continue to operate as going concern so that ultimately it may be able to meet its financial obligations to its creditors, this court would rather err in caution.
7. In the circumstance, I adjourn the application dated January 7, 2022 to enable the Appellant provide the necessary information for the court to make an informed decision. The status quo in force shall be maintained until then.
DATED AND DELIVERED AT NAIROBI THIS 13TH DAY OF MAY 2022D. S. MAJANJAJUDGEMs Matata instructed by Kibet Rop and Company Advocates for the Appellant.Mr Ochieng, Advocate instructed by Kenya Revenue Authority for the Commissioner of Domestic Taxes.