Mzalendo Savings & Credit Society Limited v Simiyu & 3 others [2024] KECPT 72 (KLR)

Mzalendo Savings & Credit Society Limited v Simiyu & 3 others (Tribunal Case 187 of 2020) [2024] KECPT 72 (KLR) (29 January 2024) (Ruling)

Neutral citation: [2024] KECPT 72 (KLR)

Republic of Kenya

In the Cooperative Tribunal

Tribunal Case 187 of 2020

BM Kimemia, Chair, B Sawe, F Lotuiya, P. Gichuki, M Chesikaw & PO Aol, Members

January 29, 2024

Between

Mzalendo Savings & Credit Society Limited

Claimant

and

Vincent Simiyu

1st Respondent

Festus Rokwaro

2nd Respondent

Winfred Jackson

3rd Respondent

Justus Kisilu

4th Respondent

Ruling

Facts of the Case 1. In 2019, the claimant’s sacco started having problems with members unable to access loans due to unavailability of funds. They initiated an audit and discovered that its executive committee, the defendants in this suit, had been embezzling funds resulting in members not being able to access loans.The claimants through their internal processes, terminated the services of the respondents and wrote letters of demand for the respondents to refund the claimant sacco a combined sum of Kes 11,062,208/= which the audit revealed had been misappropriated.When the respondents failed to pay the said sum, the claimant sacco in 2020 filed this suit in this tribunal for recovery of the said sum plus interest.

2. Initially, the respondents filed their defences and admitted to the jurisdiction of this court and did not raise any issue as to whether the suit was filed properly before this Tribunal.On June 20, 2023, the 1st defendant filed a notice of preliminary objection stating among others that:i.This tribunal does not have jurisdiction as under section 73 and 74 of the Cooperatives Societies Act, this suit is incompetent and irregular, as the case is an attempt to usurp the process of the law.ii.The process of surcharging or conducting audits within cooperative societies is clear and mandatory and this tribunal’s jurisdiction is appellate, a process that has not been followed rendering the whole suit per incuriam.Notice of preliminary objection as to the process of surcharge and the audit leading to the surcharge before filing this suit.

3. The supreme court in IEBC v Jane Cheperenger & 2others [2015]eKLR stated that the purpose of Preliminary Objections:“…is first to serve as a shield for the originator of the objection - against profligate deployment of time and other resources, and second, it services a public cause of sparing scarce judicial time, for the same to only be committed to deserving cases of dispute settlement”.

4. In this particular case, our first task as a tribunal will be to establish whether the grounds outlined in the preliminary objection have met the threshold of raising points of law which may have implications on how this suit is disposed of to serve the dual purpose of saving judicial time and shielding the respondents against the profligate deployment of time and resources.

5. As to whether this suit offends clear and mandatory provisions of the law and as such denying this tribunal jurisdiction, invites us to look at the relevant sections of the Cooperatives Societies Act relating to surcharge. Those relevant sections are sections 73,58, 59 and 60.

6. Part XII of the Cooperatives Societies Act deal with the question and procedure of inquiry and inspection of books of Cooperative Societies. That power of inspection whichever the means through which it is initiated either by the Minister or members, is bestowed, on the Commissioner of Cooperatives. The Commissioner may do that work through his office or through a person directed by his office.

7. Section 58 is also clear that its only the commissioner of cooperatives who can report the findings of his Inquiry and give directions for the implementation of the recommendations of the Inquiry Report.

8. Section 60 read together with section 73 gives guidance into apportioning of expenses and surcharge and answer the question on who can order a member, either current or former, to pay expenses or any amount and how much to pay.

9. It is our considered position that the Cooperatives Societies Act provides a rigid framework that does not allow for discretion on how to seek redress in the event of mismanagement or inquiry/audit within a cooperative society. From facts presented, it is clear that the laid procedure culminating into surcharging the respondents and seeking recovery before this tribunal either as a result of an honest mistake and/or inadvertence was not followed and as such, this suit is not properly before this tribunal at this stage.

Final Orders:i.The preliminary objection dated April 15, 2023 filed on June 20, 2023 is upheld, the claim is hereby dismissed with each party to bear their own costs.

RULING SIGNED, DATED AND DELIVERED VIRTUALLY AT NAIROBI THIS 29TH DAY OF JANUARY, 2024. HON. BEATRICE KIMEMIA CHAIRPERSON SIGNED 29. 1.2024HON. BEATRICE SAWE MEMBER SIGNED 29. 1.2024HON. FRIDAH LOTUIYA MEMBER SIGNED 29. 1.2024HON. PHILIP GICHUKI MEMBER SIGNED 29. 1.2024HON. MICHAEL CHESIKAW MEMBER SIGNED 29. 1.2024HON. PAUL AOL MEMBER SIGNED 29. 1.2024Tribunal Clerk JemimahMuchiri for 1st Respondent and holding brief for Achoka for 2nd RespondentMiss Bwari for ClaimantAhmed holding brief for Akanga for 3rd RespondentRuling delivered.HON. BEATRICE KIMEMIA CHAIRPERSON SIGNED 29. 1.2024