Richard Olendo, Constantine Wasonga & Loi Muhunja Kirui v Commissioner for Co-Operative Development, Ministry of Industry Trade & Co-Operative & Maseno University Sacco Society Limited [2021] KECPT 456 (KLR)

REPUBLIC OF KENYA

IN THE CO-OPERATIVE TRIBUNAL AT NAIROBI

TRIBUNAL APPEAL CASE NO.2 OF 2019

RICHARD  OLENDO ......................................................1ST APPELLANT

DR.  CONSTANTINE  WASONGA ...............................2ND APPELLANT

LOI  MUHUNJA  KIRUI ...............................................3RD  APPELLANT

VERSUS

COMMISSIONER  FOR CO-OPERATIVE  DEVELOPMENT,

MINISTRY  OF INDUSTRY  TRADE  & CO-OPERATIVE .......1st RESPONDENT

MASENO  UNIVERSITY  SACCO

SOCIETY  LIMITED  ......................................................................2ND RESPONDENT

JUDGMENT

The matter for determination  is a Memorandum of Appeal dated  1. 3.2019 filed on  8. 3.2019 based  on the following  grounds:

1.  The Commissioner  erred  in fact and law in failing  to find  that the actions taken  by the Appellants  towards  the sale of  the Maseno  University  Sacco  Class ‘A’ shares  in Co-op Holdings  was procedurally and substantively  within their  jurisdiction  as the Management Committee.

2.  The Commissioner erred  in fact and  law in  failing to find that the sale  of the Maseno  University  Sacco Limited  class ‘A’ shares  was procedurally  approved  by all the  relevant  organs  of the Sacco  through  legitimate  resolution  and as  such  the Appellants  were duly  bound  to implement  the Resolutions.

3.  The Commissioner  erred in fact and law  in finding  that the appellants  were  negligent  in execution  of their duties  to dispose  of the Maseno  University  Sacco  Limited  class  ‘A’ shares  in Co-op Holdings yet all  steps, process and documentations  were procedurally  and substantively  complied  with.

4.  The Commissioner  erred  in fact  and law in  finding  that the  Appellants  were  negligent  and fraudulent in  engaging  a third  party agent  Rapid  Equities  Limited  to  scout  for interested  buyers, for the class ‘A’ shares yet  Section  28  (3)  of the Co-operative Societies  Act donates  such powers  to the Appellants as the Management Committee.

5. The Commissioner  erred  in fact  and law  in failing  to understand  and appreciate  that the shares  which were  being  sold are class ‘A’ and do not  trade  in the Stock  market  as ordinary  shares  and had  to be disposed  of in the manner  done by  the Appellants.

6. The Commissioner  erred in fact and  law in arriving  at a decision  which is  contrary  to the express  provisions  of the Article  47  of the Constitution, the fair Administrative  Action Act and the Rules  of  Nature  Justice  as the Appellants  were  denied  a chance  to defend  themselves  before  the impugned  decision  was made.

7.  The Commissioner  erred  in law and  fact in  taking  into account  extraneous  factors  to  arrive  at its decision  that the Appellants  acted negligently  and fraudulently in disposing the Maseno University  Sacco Class ‘A’ shares yet no particulars of  negligence  nor fraud  were  itemized  and proved.

8. The Commissioner erred in fact and law in misconstruing  the law  to make  a finding  that  the Public Procurement  and Disposal  Act,  applies  to the Maseno  University  Sacco Limited  without  any evidence  to support  the assertion.

9.  The Commissioner  erred  in fact  and law in  misapplying  the law  relating  to the  Public Procurement  and Disposal  Act which  applies  to Public  Institutions funded  from the exchequer yet the Maseno University  Sacco Limited  does not get any  finding  from the exchequer to bring it  within  the ambit  of  the public  Procurement and Disposal  Act.

10. The Commissioner erred  in fact and law  in failing  to find that  the Appellants  as the  Management  Committee  acted within  the mandates  conferred  to them  by the  Co-operative Societies  Act,  its by-laws  and General  meeting  Resolutions  and could  not be  held personally  liable.

11. The Commissioner  erred in fact and law  in finding  that the Maseno  Universities  Sacco lost  some Kshs.44,094,800/= yet  no evidence  was adduced  to show  any such loss.

12. The Commissioner  erred  in law  and fact in  misconstruing  the instance  of “use” of funds  and ‘loss’ of funds  and thus arriving  at  a decision  not supported  by evidence.

13. The Commissioner  erred  in fact  and law  in failing  to find  that  the allegation  that Rapid  Equities Limited  was paid  before  the transfer  of shares  to Stima Sacco  limited  yet  no factual  evidence  supported  the said  allegations.

14. The Commissioner  erred in fact and  law  in  misinterpreting  the law and  agency  and contract  between  the Appellants  as  the Management  Committee  and the Agent  Rapid  Equities Limited  which provided  for agency  fees  upon performance  of their  obligation  and thus arrived  at a wrong  decision.

15. The Commissioner  erred  in fact  and  law in failing  to evaluate  the documentary  evidence  of the Maseno  University  Sacco  Limited  and wholly  relying  on  unsubstantiated  allegations  and thus  arrived  at a wrong  decision.

16. The Commissioner  erred in  law and fact  in failing  to appreciate  that the  facts  in  issue  giving  rise  to the  Inquiry were  substantially  in issue  before  the Co-operative  Tribunal  in Tribunal  Case No. 32 of  2017, a competent  body and  revisiting  the same issues  amounted  to Res judicata.

17. The Commissioner  erred  in fact and law  in failing  to find  that  Maseno  University  Sacco Limited  is already  in the High Court on Civil  Appeal  No.  4 of 2018 seeking  for specific  performance  of the contract  for sale  of shares  and is estopped  form  disowning  the role  of  Rapid  Equities  Limited  as its agent.

18. The Commissioner  erred in fact and law  in failing  to find  that the cost  of inquiry  had been  settled  by Maseno  University  Sacco Limited  for which  the Appellants  are members  and subjecting  the Appellants  to double surcharge amounted  to double  jeopardy.

19. The Commissioner erred in fact and law  in failing  to consider  in totality  the relevant  evidence  surrounding  the sale  of class ‘A’ shares  by Maseno  University  Sacco  Limited  to Stima Sacco  and the instruments  executed  to effectuate  the same  and  thus arrived  at a wrong  decision.

20. The Commissioner  erred in law  and fact  in arriving  at an adverse  finding against  the Appellants  without  affording  them an opportunity  to be heard  contrary  to the Rules  of natural  Justice.

21. The Commissioner  erred in  law and  fact in  purporting  to sit  as an  appellate body  against  issues  of law and  fact already  determined  by the Co-operative  Tribunalyet he  has no Appellate jurisdiction  over the Tribunal.

The Appellants  prays that  the decision  of Commissioner  dated  5. 2.2019 pursuant to gazette Notice No. 3115  dated  7. 9.2018 being the Inquiry  Report of  Maseno  University  be set aside  quashed,  and substituted  with a finding  of no  guilt on the part  of the Appellants.

The matter  was ordered  to  be  dispensed  with  by way of  written submissions. The Appellant filed their  submissions  on 25th  January  2021,  while  2nd Respondent  filed  their  submissions  on  1st February  2021.

Appellants  Submissions

1.  In the submissions  the Appellant submitted  that around  January 2016 Maseno  University  Sacco  Co-operative  Limited (MUSCL) desired  to sell its  class A shares in Co-operative  Holdings  Co-operative  Society to sell  its  class  ‘A’ shares in Co-operative  Holdings  Co-operative  society  to improve  its liquidity. That  the entire  Board of Directors   on  19. 1.2016 agreed  to appoint on sales  agent and settled  on a Company known as Rapid  Equity  Limited  culminating  to the agreement  between  the  2 parties  signed  on 19. 1.2016.  That the Board of Director  were lawfully  authorized  to transact  and execute  the agreement  relating  to sale  of shares  on behalf of the Sacco.

2.  That  a dispute  arose  in respect  of sale of shares  to  Stima  Sacco  when new officials  of Sacco  were elected  to replace  the Appellants.

That  there  was a case  filed  a  case CTC.NO.32 of  2017 where it  was  held  the sale of class ‘A’ shares was procedural  and lawfully  entered  into.

3.  That thereafter   an appeal was filed CA.NO. 4 of 2018 in High Court  seeking  to enforce sale of shares  and for Stima  Sacco  to  pay balance. It was  held that the  sale  and lawful  and procedural  and directed  Stima Sacco  to complete  the transaction  and settle  the purchase  price.

4.  That a suit was instituted in Co-operative  Tribunal  CTC.NO. 32 OF 2017 after  non-payment  of Kshs.108 Million by Stima Sacco and it  was  held  that Stima  Sacco  was to pay  Kshs.2. 5Million  as General Damages being  dissatisfied  with the judgment  they filed  Memorandum  of Appeal in  CA.NO.4 of 2018 at High Court and the orders  of 15th  September were substituted.

5.  That  following  an Annual General  Meeting  held  on 12. 5.2018 a new  board  of directors  was appointed  and petitioned  for an Inquiry  to be conducted. The Commissioner  presented  the Inquiry   Report  dated 23. 11. 2018 which  is the subject  of this Appeal.

The appellants  submitted  that the  Commissioner  erred  in law and  fact  in its Inquiry  Report and  prayed  for it  to be set  aside,  quashed  an substituted.

Respondent’s submissions

6.  The 2nd Respondent  submitted   that the Commissioner  invoked  his  powers  pursuant  to Section  58  read with Section  73  Co-operative  Society Act and  appointed  officers  to inquire  into  the affairs  of the 2nd Respondent.

That  the findings  were tabled  before  Special General  Meeting  on  24. 11. 2018 when the  same was adopted  and recommendations adopted  for the implementation of the report.

Thereafter  the Commissioner  issued a notice  of intention  to surcharge dated 5. 2.2019 to the  Appellants  to show cause why  they  should not  be surcharged for Kshs.4,8,877,200/= each for the three Appellants.

7. That it is  not disputed  that the Appellants  personally  appeared before the Inquiry Officers and signed an acknowledgement  of  being  interviewed  as contained  in page  14-23 in the documents  filed  and  it was also  not disputed  that the Appellants  were in  attendance  of the Annual General  Meeting  of 24. 11. 2018 when  the Inquiry Report  and recommendations  therein  were adopted  by the members.

That  the Appellants  were served  with the  Inquiry  Report  and  acknowledged  receipt  of the same.

8. That  the Tribunal therefore has no power  to re-open  the inquiry since  this is a power/duty reserved  to the Commissioner.

That  the issue  of quashing  the report  is the jurisdiction  reserved  to the High Court  through  a Constitutional  Review  Process and  not  this Tribunal.

That the Appellants  have therefore  have not  laid  any legal basis  for the Tribunal  to interfere  with Inquiry  and Surcharge  Order.  Therefore the Appeal  must fail.

Issues

Issue one:

Jurisdiction  to entertain the  Appeal

(1) The Appellants are challenging the decision of the Commissioner to surcharge them. That the Commissioner  erred  in fact and law  in failing  to  appreciate  the facts  giving  rise to  the inquiry  and appreciate  that  the same  had already been  determined  before  the Tribunal.

(2) The substance of  Appeal  is that  the decision  of the Commissioner  dated 5. 2.2019 being  the Surcharge  Order pursuant  to the gazette  Notice  No. .3115 dated  7. 9.2018 being  the Inquiry  Report  set aside.

(3) Under  section  58  Co-operative Society Act  the Commissioner  is mandated  to carry out  an inquiry  into  the by-laws, working and  financial conditions  of Co-operatives  Societies  either  on his  own accord  at the direction  of the Minister  or  on the Application  with no less  than  1/3  of members  present.

(4)  When performing  this duty the Commissioner  has the powers  to  inquire  into  the affairs  of the Co-operative  Society  and  thereafter  to report  the findings  of the inquiry  at a General  Meeting  of the society  and give directions  for the  implementation  of the recommendation  of the  inquiry  Report.

(5) Under  Section  59  Co-operative Societies  Act  the Commissioner  is also  mandated  to inspect  the books  of the society  under  section  60  Co-operative  Societies  Act the Commissioner  is also  mandated  by  a certificate  to make  an order  apportioning  the expenses  of the Inquiry  and his decision  thereof  is final.

(6)  On the adoption  of the Inquiry  Report  the Commissioner  is also  mandated  to issue  an Order (Surcharge  Order) requiring  the person  to repay  or restore  any money  property or any part  thereof  together  with interest  and set such  rate the  commissioner  thinks just  or to contribute  such sum  to the asset  of Cooperatives  as  the Commissioner  deems fit  this is provided for under  Section  73  Co-operative  Societies  Act.

(7)   Under  Section  74 (1) Cooperative  Societies  Act  if any person  is aggrieved  by an  Order of  Commissioner  under Section  73 (1)  Co-operative Societies Act  may Appeal  within  30 day  to the  Tribunal.

The procedure  for Inquiry  Inspection and  Surcharge  are provided  for in the Co-operative  Societies Act  as there above and  this is  the mandate  and/or power  of the Commissioner.

(8)  In this matter  the Commissioner  gazetted   the Inquiry  Order  dated  29. 8.2018 on 7. 9.2018  and appointed  Inquiry Officers  who performed  their  duties  as mandated  and  came up  with the Inquiry Report dated 23. 11. 2018.

(9) They  issued  a Notice to show  cause and  intention to Surcharge  dated  14. 12. 2018  to the Appellants  who gave  their responses on the same.

The 3rd Appellants response is dated 31. 12. 2018, the 2nd Appellant  response  is dated  21. 12. 2018. Thereafter at Special  General  Meeting  convened  on 24. 11. 18 the Respondent  the inquiry  report  it was deliberated  and adopted.

(10)  It is  not disputed  the Appellant  appeared  personally  before the  inquiry officers  and were  interviewed  as per the  acknowledgment.

They were also  in attendance  of the special General Meeting,  when the  inquiry report  was presented and adopted.

(11)  Any party  aggrieved  by the order  to Surcharge  has a right of Appeal  against  the Surcharge  Order  under  Section  73  Cooperative Societies  Act.

(12)  We find  that the  commissioner  performed  his duties under  Section  58  and 73.   These duties  are Administrative  Duties  and  we note  that the procedure  was followed  in accordance  to the said  Act.

(13)  The jurisdiction  of the Tribunal  is invoked  under  Section  74 (1) against  the procedure  followed  under  the Act  culminating  into a surcharge  order.  The Tribunal  does  not get  into  the process  of the inquiry  and  the performance  of the functions  of the Commissioner  as an administrative  body.

(14)  Under  section  3 Co-operative  Societies  Act  provides  for – “functions, duties  to be exercised  by the office of Commissioner  for Co-operatives.”  This  is an administrative  action  attached  to that  office and  any decisions  made are  administrative  decisions  of  the said  office. The  said administrative  decisions  can  only be  challenged  under Article  47  of the Constitution and under Section 3 of Fair  Administrative  Actions  Act.

(15)  The Tribunal  therefore  is not  required  to investigate  the  administrative  action  of the Commissioner  and this  mandate  lies with  the High Court  in a suit for  Judicial Review  as provided  for under  Section  7 (2)  Fair Administrative  Action  Act and Article  165 (3)  (b) of the  Constitution  of Kenya .

(16)  The jurisdiction  of the Tribunal  under  section  74  (1)  lies  only in the  procedure  culminating  to the issuance of  the  surcharge  orders.  The Tribunal  does not  open up  the inquiry report  to inquire  on its merit,  fairness and  accuracy   of the  report.

Once the  Tribunal  is satisfied  that the procedure  was adhered  to and that  the appeal  was filed  within time  the jurisdiction  of the Tribunal  is exhausted.

(17)  In the instant  Appeal  the Appellants  have invited  for the Tribunal  to set aside, quash  and substitute  verdict  of Inquiry  Report  hence challenging  the powers,  functions  and duties  of the Administrative  office of the Commissioner  of Co-operative  Development.

(18)  The Respondent  rightly  submitted  that this  is the  purview  and jurisdiction  of the High Court  and the Tribunal  has no  jurisdiction  to delve  into  any denial, violation  or  infringement  of, or threat to a right of a fundamental  freedom  in  the Bills of Rights.

The Tribunal  is a Subordinate Court  and  therefore has no  jurisdiction  under Article  25  (a and b)  of  the Constitution.

(19)  In conclusion we find  that the Appeal  has no  merits  owing  to the lack  of jurisdiction.

The Appeal is dismissed.

The Appellants  to pay the  costs  of the  2nd Respondent.

Judgment signed, dated and delivered virtually this 27thday of May, 2021.

Hon. B. Kimemia                  Chairperson                Signed       27. 5.2021

Hon. J. Mwatsama              Deputy Chairperson  Signed       27. 5.2021

Mr. P. Gichuki                       Member                       Signed       27. 5.2021

Tribunal Clerk                       R. Leweri

Getange  Advocate  for 2nd  Respondent:  Present

Ajiki holding brief  for Merichi for Appellant: Present

Hon. B. Kimemia                  Chairperson                Signed       27. 5.2021