Ritz Enterprises Limited v Equity Bank Limited [2025] KEHC 4047 (KLR)

Ritz Enterprises Limited v Equity Bank Limited (Insolvency Notice E053 of 2022) [2025] KEHC 4047 (KLR) (Commercial and Tax) (27 March 2025) (Ruling)

Neutral citation: [2025] KEHC 4047 (KLR)

Republic of Kenya

In the High Court at Nairobi (Milimani Commercial Courts)

Commercial and Tax

Insolvency Notice E053 of 2022

F Gikonyo, J

March 27, 2025

Between

Ritz Enterprises Limited

Applicant

and

Equity Bank Limited

Respondent

Ruling

1. The provisional liquidator has applied in the Notice of Motion dated 21st November 2024: a review of the ruling of 25th October 2024; and the respondent to be ordered to involve the provisional liquidator in the sale of Apartment number D2, Golden Jubilee Apartments on L. R. No. 209/19102, 4th Parklands Avenue, Nairobi (the charged property) and to produce certified copies of the statements for four bank accounts held by the company with the respondent as well as information on bank overdrafts to the company and personal guarantees by director for the company.

2. The application is premised upon on the grounds in the aplication and the supporting affidavit sworn by the provisional liquidator, Kamal Bhatt, on 21st November 2024. The applicant also filed written submissions dated 13th February 2024 to augment those grounds.

3. The gravamen is that the provisional liquidator has established that the respondent has given a notice to realize the security over the charged property but has not served the notice upon him nor observed Section 560 of the Insolvency Act as was ordered by the court on 25th October 2024.

4. The provisional liquidator intimated that the company had a single director and shareholder who has since passed on, and there has been no management of the company or well-organized information over the affairs of the company. He also averred that he has established that there are four bank accounts held by the company.

5. The provisional liquidator deposed that bank account numbers 141xxxxxx and 141xxxxxx and the information on overdrafts and personal guarantees held at the respondent bank were not within his knowledge by the time he filed the application dated 22nd May 2023. He added that while the respondent claims it was owed Kshs. 6,446,690/-, it has emerged that the company and its sole director held fixed deposits and personal guarantees at the respondent bank, all for the company’s benefit.

6. The provisional liquidator contended that operations of the bank accounts and the alleged facilities are shrouded in mystery and it is no longer possible for him to maintain a clear record of the company’s assets to be able to provide a verifiable report to the creditors.

7. The applicant relied on In the matter of Order iii of the Civil Procedure Rule & In The Matter of Minister’s Appeal Case No. 256 of 2007 between Njue Kiriru v Peterson Njeru & In The Matter of The Republic v The Minister For Lands [2008] eKLR and Kuria Mbae v Land Adjudication Officer – Chuka HMISC Application 257/ 1987, Alpha Fine Foods Limited v Horeca Kenya Limited & 4 others [2021] eKLR, Shanzu Investments Ltd v Commissioner of Lands [1993] eKLR, Gecy Systems Limited v Tom Adago Opiyo & 2 others; Official Receiver & Liquidator of Credit Finance Limited & 2 others (Interested Parties) [2019] KEELC 1161 (KLR), Wesley Kibagendi Jason v ECO Bank Ltd & another [2020] eKLR and Republic v Commission on Administrative Justice Ex Parte National Social Security Fund Board of Trustees [2015] eKLR.

Response 8. The respondent opposed the application through grounds of opposition dated 16th December 2014 and written submissions dated 19th February 2025. The main contentions are that the entire application is incompetent, bad in law, and an abuse of court process; that the issues raised are res judicata and that the applicant has not met the threshold for review by establishing sufficient cause.

9. The respondent highlighted that in the Ruling dated 25th October 2024, the court declined the injunction application. It also contended that stay orders cannot be issued in respect of negative orders, where the court has not ordered any of the parties to perform any task.

10. The respondent submitted that the first four (4) prayers of the instant application are either already spent and/or or overtaken by events. Therefore, the only prayers that are left for this court’s determination are the fifth, sixth and seventh. It relied on John Munuve Mati v Returning Officer Mwingi North Constituency, Independent Electoral & Boundaries Commissions & Paul Musyimi Nzengu [2018] KECA 700 (KLR) to argue that parties are bound by their pleadings.

11. The respondent submitted that the court erred in granting a stay of the Ruling issued on 25th October 2024, which effectively dismissed the Applicant’s application for injunction dated 22nd May 2023. It relied on Chege v Gachora (Civil Appeal 265 Of 2023) [2024] KEHC 1994 KLR, Raymond M. Omboga v Austine Pyan Maranga Kisii HCCA No 15 of 2010 and Western College Of Arts and Applied Sciences V Ep Oranga & 3 Others [1976] eKLR to the effect that that stay orders cannot issue in respect of negative orders where the Court has not ordered any of the parties to perform any tasks.

12. On the principles for consideration for review, the respondent cited National Bank of Kenya Limited v Ndungu Njau [1997] eKLR, Yegon v Yator & 3 Others (Sued As Adminstrators Of The Estate Of The Late David Kiptikigen – Deceased [2024] Keelc 1458 (KLR), Wananchi Group (Kenya) Limited V Communications Commission Of Kenya & Another [2014] Kehc 2983 (KLR)

Analysis and Determination 13. The main issues for determination are; whether application under consideration pleads matters that are res judicata; review of the Ruling of 25th October 2024 is merited; and whether orders for involvement of the liquidator in the process of realization of the security herein should be granted. The request for review carries several requests including provision of statements and information by the bank.

Of Res judicata 14. The respondent argued that the present application raises questions that are res judicata as they were already determined.

15. The doctrine of res judicata is a jurisdiction-regulating principle. It bars adjudication of an issue or matter that was directly in issue in a former suit between the same parties or litigating under the same title, and was determined by a court of competent jurisdiction. S. 7 of the Civil Procedure Act

16. From my reading of the application and the ruling of 25th October 2024, I find that the only issue which was determined by the court is the request for injunction to stop the respondent’s realization of the charged property, which was declined. Therefore, the prayer for an injunction is res judicata.Realizing security in accordance with Section 560 of the Insolvency Act

17. In the present application, the main grievance of the provisional liquidator is that the respondent bank sought to realize its security in the charged property without involving him. He also claims that the respondent has not provided bank statements for the company’s account, hindering the exercise of his duties and obligations to the creditors. This is why he approached this court for the orders sought.

18. Of importance, the court at para. 29 of the Ruling concluded that it would have been an appropriate case to grant an injunction were it not for matters it pointed out below: -38. I should now turn to the issue of granting an injunction against the respondent. It has been admitted by the administrator that he has since disposed off substantial assets of the company to pay off one of the secured creditors. It was not disclosed how diligently the administration was conducted. Were the creditors’ meetings called? What were the resolutions made? Why is it that it is only DTB that was paid and what was the position of the other creditors? This probably explains why there was chaos in the realization of the securities in this company.39. The questions that have not been answered by the administrator are, at the commencement of the administration, who were the creditors and their respective debts? What were the securities held and by who? What assets were sold and how much was realized and how was it shared?40. In my view, failure to give answers to the foregoing is fatal to how the administration was conducted. No wonder each creditor resulted into self-help.41. In the circumstances, issuing the injunction sought would negatively affect the respondent’s legally held securities. One of the secured creditors, DTB seems to have been treated with priority and favor to the detriment of others. I decline to injunct the secured creditor.42. Accordingly, the application for injunction is declined.”

19. Nevertheless, the court found that the bank could proceed to realize its security, provided that it should have complied with the provisions of Section 560 of the Insolvency Act.

20. The provisional administrator has registered two concerns. He learnt that the respondent has given a notice to realize the security over the charged property, without serving the notice upon him. And, without observing Section 560 of the Insolvency Act as ordered by the court on 25th October 2024.

21. The court directed that the bank in realizing its security should, nonetheless, adhere to the requirements in section 560 of the Insolvency Act. The section inter alia provides that: -While a company is under administration—1(a) a person may take steps to enforce a security over the company's property only with the consent of the administrator or with the approval of the Court;

22. Subsequently, a provisional liquidator was appointed by the court bringing to bear section 444 of the Insolvency Act, which provides that: -When—a.a liquidation order has been made; orb.a provisional liquidator has been appointed, in respect of a company, the liquidator or the provisional liquidator shall assume control of all the property to which the company is or appears to be entitled.

23. Therefore, the position and functions of the administrator or liquidator in relation to the affairs and assets of the company and rights of creditors, makes it necessary that they are involved in the process of realizing the security by a mortgagee on the company’s assets.

24. In the premises, the applicant has established proper grounds for the issuance of the order directing the respondent bank to involve the provisional liquidator in the sale of the charged and to comply with Section 560 of the Insolvency Act.

25. However, because of the observation made by the court, the provisional liquidator shall file in court all reports required of him in law-as administrator and provisional liquidator- capturing inter alia, all assets and liabilities of the company, list of creditors indicating the status of each creditor-preferential, secured, unsecured-, all settlements of debts to creditors with details full details of the creditors paid and amounts thereof, assets sold or realized with full details of all transactions thereto, the overall financial status of the company etc.

Review 26. Under Section 80 of the Civil Procedure Act read with Order 45 of the Civil Procedure Rules, the court may review its decision on account of an error on the face of the record; or discovery of new and important matter which after the exercise of due diligence was not was not within his knowledge or could not be produced by him at the time when the decree was passed or the order made or for any other sufficient reason.

27. The court has unfettered discretion to review its decision for a sufficient reason to advance the course of justice. In the Court of Appeal’s decision in Shanzu Investments Ltd v Commissioner of Lands [supra] cited with approval, the decision in Wangechi Kimita & Another v Mutahi Wakabiru Ca No 80 Of 1985 (Unreported) where it was held that: -“any other sufficient reason need not be analogous with the other grounds set out in the rule because such a restriction would be a clog on the unfettered right given to the court by Section 80 of the Civil Procedure Act. The court further went on to hold that the other grounds set out in the rule did not in themselves form a genus or class of things with which the third general head could be said to be analogous.The current position would, then, appear to be that the court has unfettered discretion to review its own decrees or orders for any sufficient reason.”

28. The provisional liquidator cited three key grounds for review.

29. That the Ruling of 25th October 2024 did not address the prayers for disclosure of two bank accounts and bank statements of the company which are critical.

30. That there was a discovery of bank account numbers 141xxxxxx and 141xxxxxx and the information on overdrafts and personal guarantees held at the respondent’s bank.

31. And, that there are duplicate orders appointing Kamal Bhatt as the provisional liquidator Of the bank accounts

32. It was claimed that the Ruling of 25th October 2024 did not address the prayers for disclosure of two bank accounts and bank statements of the company which are critical.

33. The applicant also claimed discovery of bank account numbers 141xxxxxx and 141xxxxxx and the information on overdrafts and personal guarantees by the company and the director.

34. The respondent contended that there was evidence on record to show that the provisional liquidator had the information and knowledge regarding the bank accounts. It pointed to the annexures in his own supporting affidavit which exhibited the bank account statements (marked as ‘KB4’) for account no. 141xxxxxx.

35. The respondent further highlighted that the bank account numbers 141xxxxxx and 141xxxxxx were already disclosed in its replying affidavit sworn on 21st June 2023. It, therefore challenged the purported discovery of new and important matter or evidence which, after the exercise of due diligence, was not within its knowledge.

36. I do note that at para. 28 of the Ruling, the court observed that: -“28….The respondent further admitted to interference with the two bank accounts pending the administration process. In doing so, it is not clear whether the debt is fully settled or there is an amount owing.”

37. I also do note that Mabeya J considered the present application ex parte and issued the following orders on 23rd November 2024: -i.That the application be served and be responded to within 14 days for directions on 18/11/2024ii.That in the meantime, prayers nos. b and d are granted. For the avoidance of doubt, on prayer no. b, only a stay is granted.

38. Prayer d of the application seeks that, pending the hearing and determination of this Application, the Respondent be compelled to produce the certified copies of the bank statements for the period of 1st January 2020 up to 18th November 2024 for the bank accounts held by Ritz Enterprises Limited (in liquidation) for account numbers 141xxxxxx, 141xxxxxx and 141xxxxxxx and 141xxxxxxx.

39. This order was granted by the court. Nothing shows that it was complied with. Obtaining information about bank accounts in the name of the company is part of the mandate of a liquidator or administrator.

40. In view of the query on the amount owing that was raised by the applicant and noted by the court, I am persuaded compliance with this order will unravel the issue. Therefore, there is sufficient cause to grant the order.

41. Similarly, the discovery of information on overdrafts and personal guarantees by the company and the director, fall within the mandate of the liquidator to ascertain the debts and collect the assets of the company. This also meets the threshold of the law.

42. Accordingly, I find that applicant is entitled to the orders sought based on sufficient reason.

Of duplicate orders of appointment 43. The record will support or deny the claim of the issuance of duplicate orders of interim liquidation of the company and appointing of Kamal Bhatt as provisional liquidator.

44. The record shows that on 28th March 2024 the court issued a temporary order appointing Kamal Bhatt as the provisional liquidator of Ritz Enterprises Limited pending the hearing of the application dated 26th March 2024.

45. On 25th October 2025, the court issued interim liquidation order with respect to Ritz Enterprises Limited and appointed Kamal Bhatt as the provisional liquidator of Ritz Enterprises Limited.

46. As such, there are no duplicate orders. This ground therefore fails.

Disposal 47. In the upshot, the application dated 21st November 2024 is allowed in the following specific terms: -i.The respondent bank to involve the provisional liquidator in the sale of Apartment number D2, Golden Jubilee Apartments on L. R. No. 209/19102, 4th Parklands Avenue, Nairobi and in compliance with Section 560 of the Insolvency Act serve the provisional liquidator with any notice required in law to be served upon the chargor- the company-to sell the charged property in the exercise of the statutory power of sale. The provisional liquidator should not, however, place or become an impediment to the process; rather facilitate the realization of the security in question.ii.The respondent bank to furnish the provisional liquidator and the court with the bank statements for the company’s account numbers 141xxxxxx, 141xxxxxx, 141xxxxxx and 141xxxxxxx for the period of 1st January 2020 up to current, within 14 days of the date of this ruling.iii.The respondent bank to furnish the provisional liquidator and the court with the information regarding the overdrafts and personal guarantees by the company and the director at the respondent bank within 14 days of the date of this ruling.iv.The provisional liquidator to provide the creditors and file in court, within 21 days of today, all necessary reports and information for the period he has been the administrator and provisional liquidator, including but not limited to; an inventory on assets and debts of the company, list of creditors indicating their status-preferential, secured and unsecured, payments made to the creditors with full details of the creditors and the amounts paid, inventory of all assets sold or realized- all transactions thereto as well utilization of the proceeds thereof, creditors’ meetings with details of any resolutions or agreements made thereto, and the overall financial status of the company etc.

48. Orders accordingly.

DATED, SIGNED AND DELIVERED THROUGH MICROSOFT TEAMS ONLINE APPLICATION THIS 27TH DAY OF MARCH, 2025. -------------------------F. GIKONYO MJUDGEIn the presence of: -Bhanyi for RespondentKaim for Waithaka for applicantCA - Godfrey