Kibos Sugar and Allied Industries Limited v Agriculture and Food Authority & Commodities Fund [2021] KEHC 8132 (KLR) | Credit Reference Bureaus | Esheria

Kibos Sugar and Allied Industries Limited v Agriculture and Food Authority & Commodities Fund [2021] KEHC 8132 (KLR)

Full Case Text

REPUBLIC OF KENYA

IN THE HIGH COURT OF KENYA AT KISUMU

PETITION NO. 19 OF 2019

IN THE MATTER OF ARTICLES 3 (1), 10, 22 (1) & 165 (3) OF

THE CONSTITUTION OF KENYA

AND

IN THE MATTER OF FEARED CONTRAVENTION OF

RIGHTS ANDFUNDAMENTAL FREEDOMS UNDERS

ARTICLES 19, 20, 21 (1), 40 (1) AS READ WITH 260 OF

THE CONSTITUTION OF KENYA

AND

IN THE MATTER OF SECTION 9, 10 OF THE CROPS ACT, 2013

BETWEEN

KIBOS SUGAR AND ALLIED INDUSTRIES LIMITED................PETITIONER

VERSUS

AGRICULTURE AND FOOD AUTHORITY...........................1ST RESPONDENT

COMMODITIES FUND............................................................2ND RESPONDENT

RULING

The application dated 10th September 2020 was filed by the Petitioner, KIBOS SUGAR & ALLIED INDUSTRIES LIMITEDseeking 3 substantive reliefs which can be summarized as follows;

(a) The name of the Petitioner be immediately removed and expunged from the record ofdebtors, in the database of the METROPOL CORPORATION LIMITED, a Credit ReferenceBureau and any other Credit ReferenceBureau by whatever name called.

(b)An injunction do issue against the 2nd Respondent, THE COMMODITIES FUND,restraining it from forwarding, causingto be forwarded, requesting, seeking and/or asking for the listing of the Petitioneras a debtor in the database of theMETROPOL CORPORATION or any otherCredit Reference Bureau by whatever name called.

(c)The 2nd Respondent be ordered to enter appearance within a specified time, andto respond to the Petition.

1. As the application was instituted under a Certificate ofUrgency, it was first placed before the court on 14th September 2020. The court proceeded to hear theapplication exparte, in the first instance.

2. The court felt persuaded that

“potential prejudice that can be caused by any delay may be monumental if somemeasure of interim relief is not accordedforthwith.”

3. In the light of that considered opinion, the court directed that the name of the Petitioner be immediately removed from the record of defaulting debtors in the database of Metropol Corporation Limited.

4. The court expressed the view that the existence of thispetition, which was filed in court on 27thSeptember 2019, was prima facie evidence that there was a legitimate dispute regarding the alleged debt which appeared to be the basis upon which the Petitioner was perceived to be a defaulter.

5. However, even whilst giving that order, the court wascognizant of the fact that, at that stage, its view of thematter was based only on the material provided by thePetitioner. It is in that context that the court said;

“6. THAT being alive to the fact that there are normally two sides toevery story, this Court grantsliberty to the Respondents toapply, if they believe that theremoval of the Petitioner’s namefrom the list of defaulting debtorswas wrongful.”

6. In answer to the application the 1st Respondent,AGRICULTURE AND FOOD AUTHORITYfiled Grounds of Opposition on 4thNovember 2020, raising the followingissues;

“1. That the Orders sought, requiring the alteration of records of theMetropol Corporation Limited, byremoval and expunction of thePetitioner’s name from such recordsmay not properly, fairly lie in theabsence of the said MetropolCorporation Limited as a substantiveparty to the proceedings and theApplication, and if so granted wouldbe in a Constitutional violation of theCompany’s right to a hearing.

The non-joinder of the said Metropol Corporation Limited, in so far as itviolates its fundamental

Constitutional rights to a hearing is  fatal to the Application.

2. That the Orders sought in the Notice of Motion are besides thepleadings in the Petition dated24th September 2019 and aretherefore outside the jurisdictionof the Honourable Court to grant.

3. That the Petitioner asseverates in the Petition (paragraph 52 of thePetition) that ‘the 2nd Respondenthas not been established as aParastatal or Legal Person at all.

The Crops Act does not establish the 2nd Respondent as a bodyCorporate with capacity to sue orbe sued, or with capacity to ownproperty;’ that pleading binds thePetitioner and negates the Orderssought against the 2nd Respondentin the said Notice of Motion.

4. That the Honourable Court does not act in vain and has no jurisdictionto grant orders against any entitypleaded in the Petition to lackcapacity of suing or being sued inits own name.

5. That the Notice of Motion does not satisfy the criteria or conditions forthe grant of restraining Orders asset out in the case of Giella VsCessman Brown & Company Ltd [1973]E A 358 and in the circumstances ofthe Petition, the Notice of Motion is anabuse of the process of the Court,misconceived, bad in law and withoutmerit.”

7. Meanwhile, the 2nd Respondent filed a “Reply to Notice of Motion Application and Petition.” The said “Reply” was drawn in the nature of an Affidavit, which was sworn by NANCY CHELANGAT CHERUIYOT, who is ManagingTrustee for the Commodities Fund.

8. First, she deponed that the 2nd Respondent is a legal entity and a state agency which had been established underSection 9of theCrops Act No. 16 of 2013.

9. The 2nd Respondent conceded that it had not given a loan to the Petitioner. However, it emphasized that;

“……. the loan of Kshs 133,972,375. 00 was advanced by the former Kenya SugarBoard, whose lending arm under legislationnow rests with the Commodities Fund underthe new legislations specifically the CropsAct No. 13 of 2013 (along with thesubsequent amendments).”

10. At paragraph 14 of her affidavit, Ms Cheruiyotacknowledged having listed the Petitioner for non-payment of the outstanding loan balance.

11. Thereafter, at paragraph 17, Ms Cheruiyot said;

“THAT the Fund has however de-listed the Petitioner from the records of theMetropol Credit Reference Bureautemporarily, in adherence to the CourtOrders.”

12. At the hearing of the application, the 2nd Respondent did not file any submissions, however, both the Petitioner and the 1st Respondent filed their respective submissions.

13. The 1st Respondent urged the Court to revisit the issuance of the order for the removal of the Petitioner’s name from the list of loan defaulters at Metropol Corporation Limited.

14. It was the submission of the 1st Respondent that it was only Metropol Corporation Limited that had the power to remove the name of the creditor from its database. Therefore, as the said Credit Reference Bureau was not a party to these proceedings, the 1st Respondent submitted it would be an act in futility if the Court were to give orders directed at a person who was not a party to these proceedings.

15. As the 1st Respondent pointed out, Regulation 28 (0)of the Credit Reference Bureau Regulationsplaces theresponsibility for the maintenance of a database, upon the Credit Reference Bureau.

16. However, pursuant to Regulation 25of the CreditReference Bureau Regualtions, it is the 2ndRespondent herein who is the“Credit Information Provider”, which is the person who furnishes credit information to the Bureau.

17. I believe that it is because the 2nd Respondent whichprovided the credit information which was then entered into the database of the Credit Reference Bureau, that the 2ndRespondent was able to have the Petitioner de-listed.

18. The fact that the de-listing was carried out when theMetropol Corporation Limited was not a party to theseproceedings demonstrates that the Metropol Corporation Limited was not a necessary party to the proceedings.

19. I hold the considered view that the Credit Reference Bureau cannot insist on maintaining in its database, suchInformation as the Credit Information Provider hasinformed it, to have changed.

Sugar Development Levy

20. It was the Petitioner’s case that the Sugar Development Levy, was abolished by the provisions of Section 42 (2) (d), of the Crops Act, 2013. Therefore, the Petitionerreasoned that that Levy was not payable since February 2015.

21. As the Petitioner had continued to remit payments inrespect to the Levy, it was the Petitioner’s case that the 1stRespondent should refund the sum of Kshs 114,069,064/=to the Petitioner. Thereafter, the Petitioner says that it would top up the said refund, and then pay to the 1st Respondent the sum of Kshs 133,972,375.

22. In the Petition, the first prayer was for a declaration that the 2nd Respondent had no right to demand payment for the loans which had been advanced to the Petitioner by the Kenya Sugar Board.

23. At paragraph 14 of the Affidavit sworn by NANCYCHELANGAT CHERUIYOT, the 2ndRespondentacknowledged having listed the Petitioner for the non-payment of the outstanding loan.

24. Meanwhile, at paragraph 8 of her affidavit, Ms Cheruiyot confirmed that the 2nd Respondent had not loaned thePetitioner, the money in issue.

25. Meanwhile, the AGRICULTURE AND FOODS ACT 2013 was enacted to consolidate numerous pieces of legislation within the Agricultural Sector, with a view to addressing the overlap of functions; to address obsolete legislation; and to facilitate the synchronization of systems that would enhance benefits from economies of scale.

26. Section 3 (3)of the Agriculture and Foods Act (‘AFA”)provides as follows;

“The Authority (which is the 1st Respondent herein) shall be the successor to theinstitutions established by the Actsrepealed under Section 41 existingimmediately before the commencement ofthis Act, the Crops Act, respectively.”

27. If the 1st Respondent was the successor to the institutions established by the Acts which have been repealed under Section 41, it would appear, on a prima facie basis, that it is the said Respondent who would have stepped into the shoes of the Kenya Sugar Board.

28. At paragraph 4 of the 1st Respondent’s Response to thePetition & Cross Petition, it is stated as follows;

“The 1st Respondent admits that paragraph 7 of the first Schedule to the Agricultureand Food Authority Act, No. 13 of 2013provides that every Agreement, Deed, Bondor other instrument executed by a formerinstitution such as the Kenya Sugar Boardestablished under the repealed Sugar ActNo. 10 of 2001, shall have effect as if the1st Respondent were a party theretoinstead of the former institution.”

29. I hold the considered view that if it is the 1st Respondent that is deemed to be a party to such Agreement, Deed, Bond or other instrument that was executed by the Kenya Sugar Board, it would imply, on a prima facie basis, that it ought to be the said 1st Respondent that would have the right to demand payments of the loan which the Kenya Sugar Board had advanced to the Petitioner.

30. Indeed, at paragraph 20 of the 1st Respondent’s Response to the Petition, the said Respondent asserts that it;

“……… is entitled to enforce or realize the charge by exercising all or any ofits powers under paragraph 10 of theCharge ……….”

31. By suggesting that the 2nd Respondent also had a legal right to demand that the Petitioner should repay the loan, the Respondents appear to be assigning to 2 entities, the authority to recover the same loan.

32. I find that the Petitioner has established a prima facie case concerning the doubt of the legal right of the 2nd Respondent to demand the loan repayment from the Petitioner. And if there is no clarity on that issue, it follows that arises a real issue as to whether or not the 2nd Respondent was entitled to forward to Metropol Corporation Limited, the credit informationconcerning the Petitioner.

33. I further hold that the “negative information”concerning the Petitioner has the potential of causing irreparable loss to the Petitioner, if the Court does not issue appropriate orders. I so find because the Petitioner has demonstrated, on a prima facie basis, that its bankers would most probably stop extendingfinancial facilities to the Petitioner, if the negative information remained in place.

34. Accordingly prayer (b) of the application is granted, and shall remain in force until the petition is heard and determined.

35. The costs of the application dated 10th September 2020 shall be paid by the Respondents, to the Petitioner.

DATED, SIGNED AND DELIVERED AT KISUMU THIS 11TH DAY OF MARCH 2021

FRED A. OCHIENG

JUDGE