Imaran Limited & 9 others v Central Bank of Kenya Limited & 4 others [2022] KEHC 16582 (KLR)

Imaran Limited & 9 others v Central Bank of Kenya Limited & 4 others (Civil Case E131 of 2018) [2022] KEHC 16582 (KLR) (Commercial and Tax) (8 December 2022) (Ruling)

Neutral citation: [2022] KEHC 16582 (KLR)

Republic of Kenya

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

Commercial and Tax

Civil Case E131 of 2018

WA Okwany, J

December 8, 2022

Between

Imaran Limited

1st Plaintiff

Reynolds & Company Limited

2nd Plaintiff

Momentum Holdings Limited

3rd Plaintiff

Investments Limited

4th Plaintiff

Kenblest Limited

5th Plaintiff

Alnashir Popat

6th Plaintiff

Anwar Hajee

7th Plaintiff

Jinit Shah

8th Plaintiff

Hanif Mohammed Amiralji Somji

9th Plaintiff

Mukesh Kumar Patel

10th Plaintiff

and

Central Bank of Kenya Limited

1st Defendant

Kenya Deposit Insuarance Corporation

2nd Defendant

Dr. Patrick Njoroge

3rd Defendant

Sheila M'mbijiwe

4th Defendant

Mohamud Mohammed

5th Defendant

Ruling

1. The 1st and 2nd defendants filed the application dated November 26, 2020 seeking the following orders:-1)Spent.

2)That this Honourable Court be pleased to strike out the names of the 1st and 2nd Defendants from the suit herein.

3)That this Honourable Court be pleased to stay further proceedings in this case pending the hearing and determination of HCCC No 392 of 2016Imperial Bank Limited (in Receivership) & 2 Others v Alnashir Popat & 16 Others.

4)The costs of this application be borne by the Plaintiffs.

2. The application is supported by the affidavit sworn by Kennedy Kaunda Abuga and is based on the following grounds:-a)The 1st and 2nd Defendants are the Governor and Deputy Governor of the Central Bank of Kenya, the 4th Defendant herein and were appointed to those positions pursuant to the provisions of Section 13 and 13B of the Central Bank of Kenya Act in June 2015. b)The 1st and 2nd Defendants discharge their statutory duties as prescribed in Sections 13 and 13B of the Central Bank of Kenya Act in good faith, with utmost diligence and in the best interest of the banking Sector.c)The 1st and 2nd Defendants do not play any role in respect to supervision and regulation of banks in Kenya, a mandate exclusively vested in the 4th Defendant herein under the Banking Act and the Central Bank of Kenya Act.d)The 1st and 2nd Defendants have only interacted with Imperial Bank Limited (in Receivership) in their official capacities as Governor and Board Member of the 5th Defendant herein and the Deputy Governor of the Central Bank of Kenya, respectively.e)In so far as the 1st and 2nd Defendants discharge their statutory obligations in their official capacities, their actions are protected from liability under Section 33M of the Central Bank of Kenya Act; Section 34(8) of the Banking Act and Section 13 of the Kenya Deposit Insurance Act.f)Consequently, no liability attaches to the 1st and 2nd Defendants herein for actions done by themselves in their official capacities.g)In any event, the plaint does not raise any reasonable cause of action against the 1st and 2nd Defendants herein.h)The suit herein is scandalous, frivolous, vexatious, spiteful, mala fides and is intended to bully the 1st 2nd, and 4th Defendants to yield to the Plaintiffs' demands in respect to the receivership of Imperial Bank Limited (In Receivership).i)The Plaintiffs' suit is otherwise an abuse of the Court process and ought to be struck out with costs.j)The parties herein are also parties to HCCC No 392 of 2016- Imperial Bank Limited (in Receivership) & 2 Others v Alnashir Popat & 16 Others instituted by the 4th and 5th Defendants in this matter vide a Plaint dated September 30, 2016 against the 1st to 5th Defendants herein where the 1st to 5th Plaintiffs herein have sued the 4th and 5th Defendants herein and their employees vide a Defence and Counterclaim dated December 9, 2016 for alleged breaches of statutory duty of supervision and regulation of Imperial Bank Limited (in Receivership), fraud, misfeasance in public office, negligence, deceit and conspiracy. The Plaintiffs herein claim that they are both shareholders and depositors holding funds in Imperial Bank Limited (in Receivership).k)In paragraphs 81-109 (inclusive) of the Counterclaim dated December 9, 2016, the 1st - 5th Plaintiffs herein have sued the 4th Defendant herein for alleged breaches of statutory duties by the 1st and 2nd Defendants herein in their capacities as the Governor and Deputy Governor of the Central Bank of Kenya. This is an acknowledgement that the 1st and 2nd Defendant ought not to be sued in their personal capacities as is in this case where the same allegations are made against them for alleged breach of statutory duties, misfeasance of public office and alleged failure to act on whistleblower reports, alleged exclusion of the Plaintiffs' proposal in respect to restructuring of Imperial Bank Limited (in Receivership).l)In the present claim, the Plaintiffs herein have sued the 1st and 2nd Defendants herein for, inter alia, misfeasance in public office, breach of statutory duty, conspiracy to injure, negligence, unlawful means conspiracy, deceit and fraud as captured in paragraphs 59 and 93-166 of the Plaint.m)The remedies sought by the Plaintiffs herein against the 1st and 2nd Defendants as captured in paragraph 167 of the Plaint include declarations that they have acted in misfeasance of public office, that they have acted in excess of their powers as relates to the receivership of Imperial Bank Limited (in Receivership) and that they have discriminated against the Plaintiffs herein. The Plaintiffs further seek general and aggravated damages for misfeasance of public duty, breach of statutory duty, negligence, unlawful means conspiracy, deceit, malicious falsehoods, amongst others.n)The same remedies are sought in the Plaintiffs' Counterclaim in HCCC 392 of 2016 where they seek, inter alia, general, and aggravated damages for misfeasance of public office, breach of statutory duty, negligence, unlawful means conspiracy, deceit, and negligent misstatements.o)In the circumstances, the parties in the two suits, the issues raised in the two suits and the remedies sought are all the same against the Defendants herein.p)The Plaintiffs herein are aware of HCCC No 392 of 2016 and have indeed admitted as much in paragraph 166(a) of the Plaint yet they insist on prosecuting this same case.q)The continued prosecution of this case is inimical to the overriding objective under Sections IA and 1B of the Civil Procedure Act and is an abuse of the judicial process if the Plaintiffs in this matter are allowed to institute a similar suit while there is another one currently before the High Court.r)It is in the interest of justice to stay the legal proceedings instituted by the Plaintiffs in Civil Case 131 of 2018 herein and allow the High Court to determine the issues herein as filed in HCCC No 392 of 2016 which is pending before the High Court.

3. The respondents opposed the application through the replying affidavit sworn by the 7th respondent, Mr Anwar Hajee, who states that 1st and 2nd defendants had, in exercising their duties, failed to act diligently and in good faith in the best interest of the Banking industry. He contends that the 1st and 2nd defendants were not precluded from liability under Section 33M of the Central Bank Act and Section 13 of the Kenya Deposit Insurance Act when they act in a manner that is negligent or conspire to injure and deceive.

4. He further states that the plaintiff filed a counterclaim in HCCC No 392 of 2016 but that the defendant had, on numerous occasions, failed to comply with the orders of the court requiring them to furnish the applicants with the particulars of their claim. He avers that the issues raised in the suit had been the subject of determination in JR No 43 of 2016, Republic v Central Bank of Kenya Exparte, Alnashir Popat and Others and High court Petition No 119 of 2017 Kimani Waweru & 4 others v Central Bank of Kenya & 7 Others.

5. The application was canvassed by way of written submissions which I have considered. The main issue for determination is whether the applicants have made out a case for striking the 1st and 2nd defendant from the plaintiff’s suit.

6. Order 1 Rule 10 (2) of the Civil Procedure Rulesprovides as follows:-'(2)The Court may at any stage of the proceedings, either upon or without the application of either party, and on such terms as may appear to the court to be just, order that the name of any party improperly joined, whether as plaintiff or defendant, be struck out, and that the name of any person who ought to have been joined, whether as plaintiff or defendant, or whose presence before the court may be necessary in order to enable the court effectually and completely to adjudicate upon and settle all questions involved in the suit be added'

7. Order 2 Rule 15, sub-rule1 (a) states that at any stage of the proceedings the court may order to be struck out or amended any pleading on the ground that it discloses no reasonable cause of action or defence in law.

8. In the case ofDT Dobie and Company (K) Ltd v Joseph Mbaria Muchina& Another [1982] KLR 1 the court stated that:-'The power to strike out should be exercised only after the court has considered all the facts, but it must not embark on the merits of the case itself as this is solely reserved for the trial judge. On an application to strike out pleadings, no opinion should be expressed as this would prejudice fair trial and would restrict the freedom of the trial judge in disposing the case.'

9. The Court inAmon vs Raphael Tuck & Sons Ltd [1956] 1 All ER 273, cited in Pizza Harvest Limited v Felix Midigo [2013] eKLR sought to establish who a necessary party is. Devlin, J held at p 286-287:-'What makes a person a necessary party? It is not of course, merely that he has relevant evidence to give on some of the questions involved; that would only make him a necessary witness. It is not merely that he has an interest in the correct solution of some question involved and has thought of relevant arguments to advance and is afraid that the existing parties may not advance them adequately the Court might often think it convenient or desirable that some of such persons should be heard so that the court could be sure that it had found the complete answer, but no one would suggest that it would be necessary to hear them for that purpose. The only reason which makes it necessary to make a person a party to an action is so that he should be bound by the result of the action, and the question to be settled, therefore, must be a question in the action which cannot be effectually and completely settled unless he is a party.'

10. The principle emerging from the above cited case is that the striking out of a party to a suit should be approached with caution. The 1st and 2nd defendant’s application is grounded on the claim that they interacted with Imperial Bank Limited in their official capacities and that they were protected from liability under section 33M of the Central Bank of Kenya Act, Section 34(8) of the Banking Act and Section 13 of the Kenya Deposit Insurance Act.

11. Section 33M of the central Bank of Kenya Act provides:-Neither the Bank nor any officer or employee thereof nor any other person appointed by the Bank under the provisions of this Part shall be liable in respect of any act or omission done in good faith by such officer, employee or other person in the execution of the duties undertaken by him.

12. Section 34(8) of the Banking Act.(8)Neither the Central Bank nor any officer or employee thereof nor any manager nor any other person appointed, designated or approved by the Central Bank under the provisions of this Part shall be liable in respect of any act or omission done in good faith by such officer, employee, manager or other person in the execution of the duties undertaken by him.

13. Section 13 of the Kenya Deposit Insurance Act.13. (1)No act or omission by any member of the Board or by any officer, employee, agent or servant of the Corporation shall, if the act or omission was done bona-fide for the purposes of executing a function, power or duty under the Act render such member, officer, employee, agent or servant personally liable to any action, claim or demand whatsoever.

14. The foregoing provisions are clear that any employee, board member or officer working in their official capacity in good faith shall not be found personally liable to any action. It was the respondent’s contention that the acts performed by the 1st and 2nd defendant were not in good faith and thus were not protected by the aforementioned law.

15. I have examined the pleadings filed herein and I note that the plaintiff stated that the defendants were bound, by a fiduciary duty, to act in the best interest of its customers and to exercise a duty of care to protect its customers. From the contents of the plaint, it is evident that the plaintiff faults the defendants for acts or omissions committed in their official capacity as officers. I find no evidence, from the pleadings, to show that the 1st and 2nd defendant acted in their personal capacity. In this regard, there is no cause of action against the 1st and 2nd defendants as their actions were in their capacity as the officials in the respective offices that they held.

16. On whether the present suit should be stayed pending the hearing and determination of HCCC No 392 of 2016, the applicant’s contended that the plaintiffs had sued the defendants through a defence and counterclaim for breaches of statutory duty of supervision and regulation of imperial bank, misfeasance in public office, negligence, deceit and conspiracy. The plaintiffs, on the other hand, stated that while it was true that the plaintiffs filed a defence and counterclaim in the said suit, the court stayed the proceedings therein and that it had been difficult to get orders in various applications. The Plaintiff further avers that the defendants had continued to conduct themselves in a manner that is unlawful and negligent.

17. In Re Global Tours & Travel Ltd HCWC No 43 of 2000 Ringera, J (as he then was) held that:-'As I understand the law, whether or not to grant a stay of proceedings or further proceedings on a decree or order appealed from is a matter of judicial discretion to be exercised in the interest of justice .The sole question is whether it is in the interest of justice to order a stay of proceedings and if it is, on what terms it should be granted. In deciding whether to order a stay, the court should essentially weigh the pros and cons of granting or not granting the order. And in considering those matter, it should bear in mind such factors as the need for expeditious disposal of case, the prima facie merits of the intended appeal, in the sense of not whether it will probably succeed or not but whether it is an arguable one, the scarcity and optimum utilization of judicial time and whether the application has been brought expeditiously.'

18. I have considered the rival arguments over the issue of stay and I find that it would be premature to stay the proceedings at this stage. This court has not had the advantage of perusing the other files in order to determine if the cause of action is the same. It is my finding that it would be in the interest of justice that the plaintiff’s suit continues as scheduled and that the parties are at liberty to seek the consolidation of the suits if they deem it necessary.

19. In the upshot the application succeeds in respect to the 2nd prayer and I therefore make the following orders:-

1. The 1st and 2nd defendants are hereby struck out as parties herein.

2. Costs to be in the cause.

DATED, SIGNED AND DELIVERED VIRTUALLY AT NAIROBI THIS 8TH DAY OF DECEMBER 2022. W. A. OKWANYJUDGEIn the presence of: -Mr Karani for Wandabwa for plaintiffs.Mr. Rabut for Oraro Senior Counsel for 3rd and 5th defendantsMr. Ouma for 1st and 2nd defendants.Mr. Chege for 4th defendant.Court Assistant- Sylvia