[2023] KEHC 25485 (KLR)

Vintage Liqour& Wine Ltd v Sewe Group Limited; Fort Investrust Holdings Limited (Interested Party) (Insolvency Cause E045 of 2022) [2023] KEHC 25485 (KLR) (Commercial and Tax) (20 November 2023) (Ruling)

Neutral citation: [2023] KEHC 25485 (KLR)

Republic of Kenya

In the High Court at Nairobi (Milimani Commercial Courts Commercial and Tax Division)

Commercial and Tax

Insolvency Cause E045 of 2022

A Mabeya, J

November 20, 2023

IN THE MATTER OF WINDING UP OF SEWE LIMITED

Between

Vintage Liqour& Wine Ltd

Creditor

and

The Sewe Group Limited

Debtor

and

Fort Investrust Holdings Limited

Interested Party

Ruling

1. This ruling determines the application dated 23/1/2023. The same was brought under sections 1A, 1B & 3A of the Civil Procedure Act and Order 51 of the Civil Procedure Rules. The application seeks the setting aside or variation of the orders that stayed the proceedings in HCC MISC E1292 OF 2022. The interested party also seeks to be enjoined in these proceedings.

2. The application was premised on the grounds set out on the face of it and on the supporting affidavit of Tony Njenga sworn on 23/1/2023.

3. The applicant contended that on 14/9/2020 an arbitral award was made in its favour and subsequently, it applied in HCCCMISC Number E1292 for the adoption of the award as a decree of the court. That subsequently, on 8/11/2022, this Court made an order staying those proceedings. That the same was prejudicial to the applicant and the applicant was suffering loses as the debtor had not settled the arbitral award. Further it was averred that no prejudice would be occasioned by the respondent if the orders sought were granted.

4. The application was opposed by the respondent vide grounds of opposition dated 10/4/2023. The respondent termed the application as an abuse of the court process as the orders sought offend the provisions of the Insolvency Act. That under sections 428 to 430, once a winding up petition has been presented, there is need to protect the assets of the debtor. That the applicant had not given reasons as to why the order of stay should be set aside or varied.

5. The application was canvassed by way of written submissions which I have considered. The respondent observed that it was not opposed to the interested party being enjoined in these proceedings. That the existence of insolvency proceedings did not operate as an automatic stay and therefore, the Court had to be moved. That the debtor moved the court for stay orders and the same were granted on 10/11/2022. That section 428 of the Insolvency Act was meant to ensure that there was equality of creditors pending hearing and determination of the liquidation proceedings.

6. Having considered the parties averments, the only issue for determination is whether a case has been made for vacating or varying the stay orders made herein on 8/11/2022.

7. It is not in dispute that on 14/9/2020, an award was delivered in favour of the applicant for Kshs 4,760,091. 45. The applicant applied for its adoption in HCC MISC E1292 of 2022. Then an Insolvency Petition was filed in this court by a creditor of the debtor for a debt of Kshs.119,864/-. The debtor company then applied for HCCCMISC 1292 OF 2020, HCCCMISC E558 OF 2020 and CMCC 5200 OF 2019. The Court acceded and gave those orders staying all legal proceedings against the debtor company pending the hearing and determination of the Insolvency petition.

8. Section 428 of the Insolvency Act gives the Court the power to stay legal proceedings against the debtor company. It provides that: -“428(1)At any time after the making of a liquidation application and before a liquidation order has been made the company, or any creditor or any contributory may –a)If legal proceedings against the company are pending in court – apply to the court for the proceedings to be stayed; andb)If proceedings relating to a matter are pending against the company in another court, apply to the court to restrain further proceedings in respect of the matter in the other court.(2)On the hearing of an application under sub-section 1(a) or (b), the court may make an order staying or restraining the proceedings on such terms as it considers appropriate

9. In Ndane Construction Company Limited v Spencon Kenya Limited[2016]eKLR, the court observed that: -“A rationale of the provisions of Section 225 of The Companies Act (and Section 430 of The Insolvency Act) is that once a Winding Up Petition is presented, the assets of the Company need to be protected as they are now subject to the Winding Up Cause and secondly no action that destabilizes the equality among Creditors of the same class is to be permitted. This Court cannot therefore, not make Orders that are voided by the provisions of Section 225. ”

10. In the present case, the order of stay was made to ensure that the assets of the company are protected and to give room for the petition to be heard. The reason advanced by the applicant in this matter is that it would be prejudiced if the orders for stay are not varied. The Court notes that allowing the application would amount to giving the applicant an advantage over the assets of the debtor company at the expense of the other creditors.

11. If the company is finally liquidated, all the creditors, the applicant included, will be entitled to appear before the Liquidator and prove their debts in the normal manner.

12. Accordingly, I find no reason to interfere with the stay orders made on 10/11/2022 and dismiss the application with costs.

It is so ordered.

DATED AND DELIVERED AT NAIROBI THIS 20TH NOVEMBER, 2023. A. MABEYA, FCI ArbJUDGE