Background
1.On 18th March 2016, the Appellant deposited, with Chase Bank Kenya Limited, the sum of United States Dollars USD 7,500,000 at an interest rate of 2.35% per annum for a period of one month only, that is; maturing and payable on 18th April 2016.
2.On 7th April 2016, Chase Bank Kenya Limited was placed under Receivership by the Central Bank of Kenya and thus, temporarily ceased trading for a period of twenty (20) days until 27th April 2016 when it reopened for business under the management of Kenya Commercial Bank.
3.Through a letter of offer dated 6th May 2016, the Receiver Manager of Chase Bank Kenya Limited confirmed, in writing, that the Appellant had indeed deposited the sum of USD 7,500,000/ = with the said Chase 
Bank Kenya Limited for a period of one month from 18th March 2016 to 18th April 2016, and that the said amount was to mature with interest earned of USD 16,645.83. In the said letter, the Receiver Manager of Chase Bank Kenya Limited also confirmed that the interest accrued up to 7th April 2016, amounting to USD 9,791.67 would be released to the Appellant in due course and that the principal amount of USD 7,500,000/= would be rolled over for a period of nine (9) months from 6th May 2016. This was however not implemented.
4.The Respondent herein, subsequently acquired the assets and liabilities of Chase Bank Kenya Limited, in Receivership, upon sale by the Central Bank of Kenya through its appointed Receiver the Kenya Deposit Insurance Corporation. The acquisition and transfer took effect on 17th August 2018 as indicated in the Kenya Gazette Notice No. 6833 of 6th July 2018.
5.The Appellant filed Nairobi HCCC 103 of 2019; Afrasia Bank Limited versus SBM Bank (Kenya) Limited wherein it claimed the USD 7,500,000 together with interest from the Respondent on the basis that the respondent did not publish the mandatory Notice, under Section 3 of the Transfer of Business Act.
6.Through a Consent Order dated 6th July 2020 parties agreed to refer the suit for resolution by Arbitration. The Arbitrator delivered the Arbitral Award on 23rd April 2021.
7.Aggrieved by the said Award, the Appellant herein filed the instant Appeal that is the subject of this judgment.
Appeal
8.The applicant filed the application/appeal dated 21st May 2021 under Sections 35(2)(a)(iv)(b)(ii) and 39(1)(b) (2)(a) (b) of the Arbitration Act seeking the following orders:-1.The Arbitral Award dated 23rdApril 2021 issued by the appointed Arbitrator, Mr. Mwaniki Gachoka be set aside and/ or varied.2.Pursuant to Order 1 above, the Honourable Court be pleased to enter Judgment in favour of the Appellant in the sum of United States Dollars Seven Million Five Hundred Thousand (USD 7,500,000) together with interest and costs as prayed in its Plaint dated 6th February 2019, being the amount deposited by the Appellant in Chase Bank (K) Limited (In Receivership) for which amount the Respondent is now liable to the Appellant for failure to comply with Section 3(1) of the Transfer of Business Act.3.Any other Order as the Court may deem fit in the circumstances of this matter.4.Costs of the arbitration and of this Appeal be awarded to the Appellant.
9.The application is supported by the affidavit of Parikshat G. Tulsidas and is based on the grounds that:-1.The Parties herein had, by mutual consent of 6th July 2020 and adopted by the Court on the same day, agreed that any of them may lodge an appeal on any point of fact or law to the High Court arising out of an Award issued by the appointed Arbitrator.2.The Arbitral Award dealt with issues not presented for determination and ignored to determine the issues presented for determination.3.The Arbitral award dated 23rdApril 2021 is in conflict with the public policy against fraudulent transfer of Businesses in Kenya.4.The arbitrator erred in law and in fact by failing to give effect to the stated purpose of the Transfer of Business Act “An Act of Parliament to prevent certain fraudulent transfers of businesses” despite holding that “The tribunal is in concurrence with the claimant's assertion that the aim of the Transfer of Business Act is to protect members of the public from any possible losses or claims associated with potential fraudulent transfers”.5.The Arbitrator erred in law and fact by misinterpreting the provisions of Section 3(1) of the Transfer of Business Act and failing to uphold established authorities in interpreting the section including Dubai Bank Kenya Ltd v Insurance Company of EA Ltd 2013 eKLR, Oriental General Stores Ltd v Bhailalbhai Rambai Patel & Other 1957 EA Vol 1776.The Arbitrator erred in law and in fact in departing, without any justification, from the binding locus classicus Court of Appeal authority of New Kenya Cooperative Creameries Limited v John Kahiato Bari & Another 2020 eKLR which entrenched the doctrine, in upholding the letter and spirit of Section 3 (1) that “This may be an unfortunate and unpalatable consequence but the law is clear on the point and it is the duty of the Courts to declare it as it is.7.The Arbitrator erred in law and in fact by totally ignoring, without justification, the binding locus classicus of the Court of Appeal Authority in National Bank of Kenya Ltd v Pipeplastic Samkolit (K) Ltd & Another 2001 eKLR, that neither a Court nor an arbitrator can rewrite a contract on behalf of parties.8.The Arbitrator erred in law and in fact in breaching the immortal doctrine of stare decisis in respect of the binding authorities submitted by the Appellant in the arbitration.9.The Arbitrator erred in law and in fact in totally ignoring interpretation in other jurisdictions of a similar statute as the Transfer of Business Act, such as in Hong Kong Transfer of Business (Protection of Creditors) Ordinance, which concurs that a purchaser assumes all debts unless notice of transfer setting out prescribed particulars of the transfer, has been given in the manner set out in the said similar statute.10.The Arbitrator erred in law and in fact in failing to appreciate that under the said Hong Kong statute, the purchaser is entitled to be indemnified by the seller for all amounts for which the purchaser is made liable under the Ordinance, although in most cases an express indemnity provision is also included in the contractual documents between the parties.11.. The Arbitrator erred in law and in fact in failing to appreciate that an express indemnity provision exists at Paragraph 6 in the Sale Agreement of 17th April 2015 “the Warrantor shall indemnify and hold the Purchaser harmless from and against all losses suffered, arising against or incurred by the Purchaser in relation to any liabilities, obligations, dues or claims against the Seller” and must have been included to meet the specific situation where the Respondent was obliged to meet a claim such as that of the Appellant/Applicant .12.Given the agreed position that the Appellant deposited USD 7.5 Million with Chase Bank Kenya, and given that the Sale Agreement of 17th April 2018 required the Seller to indemnify the Purchaser with the funds which it avers it holds, then the Arbitrator erred in law and in fact in failing to interpret the applicable statutes in a purposive manner which would achieve the result where no parties would actually lose any funds.13.The Arbitrator erred in law and fact by introducing and creating doubt as to the party responsible for publishing the Notice under Section 3(1) of the Transfer of Business Act when the law itself and existing practice was clear on this position and the parties themselves were not in doubt.14.The Arbitrator erred in law and in fact by stating that a conflict existed between the Transfer of Business Act, the Banking Act and the Kenya Deposit Insurance Act despite finding that “in so far as the intention of the requisite notices, the tribunal finds that there is no inconsistency or conflict between the three acts of parliament is the transfer of business act, the Kenya Deposit Insurance Act and the Banking Act].15.The Arbitrator erred in law and in fact by misdirecting himself to examine any purported conflicts between the Transfer of Business Act and the Kenya Deposit Insurance Act when this was not presented to him for determination.16.The Arbitrator erred in law and in fact by failing to observe that Section 3 of the Kenya Deposit Insurance Act is only concerned with a conflict or inconsistency “relating to the purpose of the Act”, which purpose is clearly stated to be “An Act of Parliament to provide for the establishment of a deposit insurance system and for the receivership and liquidation of deposit taking institutions, to provide for the establishment of the Kenya Deposit Insurance Corporation and for connected purposes” and which does not present any conflict or inconsistency with the Transfer of Business Act.17.The Arbitrator erred in law and in fact in failing to find the Respondent liable for the Appellant's claim despite the Respondent's admission that no Notice was issued under Section 3(1) of the Transfer of Business Act18.The Arbitrator erred in law and in fact in failing to find the Respondent liable for the Appellant's claim despite holding that “the transfer of business act is one that speaks loud and clear on the obligations required prior to taking over a business or part thereof.”19.The Arbitrator erred in law and in fact in failing to find the Respondent liable for the Appellant's claim despite finding that ““The long and short of the holdings are that non-compliance with the mandatory requirement for Notice pursuant to Section 3 of the Transfer of Business Act result in responsibility for ALL liabilities.”20.The Arbitrator erred in law and in fact in failing to find the Respondent liable for the Appellant's claim despite finding that “banking is a business as envisaged by the Transfer of Business Act”21.The Arbitrator erred in law and in fact by failing to find that the Respondent was not excluded from the provisions of the Transfer of Business Act, despite the fact that the Respondent was neither undergoing a reconstruction nor was it winding up (as opposed to under receivership) as would have been required by Section 7 of the said Act.22.The Arbitrator erred in law and in fact by failing to find that the Respondent was not excluded from the provisions of the Transfer of Business Act despite there being no compliance with the Proviso to Section 7 of the Act as to certification by a registered accountant that the amount to be realized from the transfer was the best price obtainable,23.The Arbitrator erred in law and in fact in finding that there was any inconsistency with regards to the publication and content of Notices under Sections 3 of the Transfer of Business Act and Sections 5 and 9 of the Banking Act despite finding that there was no inconsistency or conflict between the two statutes in so far as the intention of the notices was concerned.24.The Arbitrator erred in law and fact in finding that the Respondent was somehow excused by the Banking Act Cap 488 Laws of Kenya from compliance with section 3 of the Transfer of Business Act Cap 500 Laws of Kenya despite the Banking Act under Section 53 thereof, failing to list the Transfer of Business Act as one of the exempted Statutes.25.The Arbitrator erred in law and fact in finding that the Respondent was somehow excused by the Kenya Deposit Insurance Act 2012 from compliance with section 3 of the Transfer of Business Act Cap 500 Laws of Kenya despite the Kenya Deposit Insurance Act failing to list the Transfer of Business Act as one of the exempted statutes.26.The Arbitrator erred in law and in fact if failing to find that the Respondent assumed the Deposits of Chase Bank Kenya Limited (In Receivership) including the Appellant's deposit of USD 7.5 Million given the admission by the Respondent that a Deposit of USD 7.5 Million had been received by Chase Bank Kenya Limited from the Appellant before it went into receivership27.The Arbitrator erred in law and in fact if failing to find that the Respondent assumed the Deposits of Chase Bank Kenya Limited (In Receivership) including the Appellant's deposit of USD 7.5 Million given the content of the clause at page 8 of the Agreement for the Transfer of Assets and the Assumption of Certain liabilities from Chase Bank Kenya Limited (In Receivership) dated 17April 2018 that “The Respondent assumed the Deposits of the Seller.”28.The Arbitrator erred in law and in fact if failing to find that the Respondent assumed the Deposits of Chase Bank Kenya Limited (In Receivership) including the Appellant's deposit of USD 7.5 Million given the definition of “Deposits” in the said Agreement to be “Deposits means all the Moratorium Deposits and the Non- Moratorium Deposits”.29.The Arbitrator erred in law and in fact in failing to hold the Respondent liable for failing to disclose a list of the customers and amounts which it took over from Chase Bank Kenya Limited (In Receivership)30.The Arbitrator erred in law and in fact in departing without any justification from the binding locus classicus Court of Appeal authority of Standard Chartered Bank Kenya Ltd v Intercom Services Ltd & 4 Others [2004] eKLR which entrenched the doctrine that was no privilege from disclosure “where the interests of the Bank require disclosure”31.That the Arbitrator erred in law and in fact in failing to appreciate that notices have previously been issued under Section 3(1) of the Transfer of Business Act and simultaneously under Section 9(5) of the Banking Act in the same transaction, such as was the case in the acquisition of Habib African Bank Limited by Habib Bank A.G, Zurich in 1999.32.That the Arbitrator erred in law and in fact in failing to appreciate that in the said transaction both the transfer for and transferee published the Section 3(1) notice together, with the Central Bank publishing the Section 9(5) notice under the Banking Act. No conflict arose or was alleged to have arisen.33.That the Arbitrator erred in law and in fact in failing to appreciate that, the single Act that could have been argued to constitute a material conflict with both the Banking Act and the Kenya Deposit Insurance Act was the Competition Act whose intention on the first page of the Act is stated inter alia to be” to protect consumers from unfair and misleading market conduct” and in particular Section 46(1)(b)where the Competition Authority may “decline to give approval for the implementation of the merger”34.That the Arbitrator erred in law and in fact in failing to appreciate that, this notwithstanding, the Kenya Deposit Insurance Corporation as Receiver of Chase Bank Kenya Limited and the Central Bank of Kenya willingly submitted the transaction to the scrutiny of the Competition Authority as required by the Competition Act, which ultimately in the approval of the transaction on 4"* June2018 and gazette on 27" July 2018.35.That the Arbitrator erred in law and in fact in failing to appreciate that such approval was also given under the former Restrictive Trade Practices Monopolies and Price Control Act (currently Competition Act) with regard to the takeover of the business of Habib African Bank by Habib Bank AG Zurich, in addition to the approval of the Central Bank of Kenya.36.That the Arbitrator erred in law and in fact in failing to appreciate that neither the Appellant nor the Respondent nor the Arbitrator pointed out any provision in the Transfer of Business Act that could actually stop the sale of the assets and liabilities from Chase bank Kenya Limited (In Receivership) to the Respondent, such as exists in the Competition Act, because none exists.37.The Arbitrator erred in law and in fact in failing to recognize that the Respondent authorized its Directors in the Resolution of 4% April 2018 “to perform on behalf of the Company any and all acts as they may deem necessary or advisable in order to comply with the applicable laws of Kenya and terms of the Agreement”38.The Arbitrator erred in law and in fact in failing to recognize that in similar fashion, the Respondent's Shareholders authorized its Directors “2018 “to perform on behalf of the Company any and all acts as they may deem necessary or advisable in order to comply with the applicable laws of Kenya and terms of the Agreement” and further “authorized the Company Secretary to prepare such documents and effect such filings as are required to give effect to the Resolution”39.The Arbitrator erred in law and in fact in failing to appreciate that the Respondent's Directors and Company Secretary had no choice but to comply with the provisions of the Transfer of Business Act, just as they complied with the provisions of the Competition Act,40.The Arbitrator erred in law and in fact in failing to appreciate that the Respondent could not pick and choose what laws it wished to comply with and those it would ignore.41.The Arbitrator erred in law and in fact by only highlighting the submissions and authorities as tendered by the Respondent and quoting extensively thereon, but totally ignoring the submissions and authorities tendered by the Appellant.42.The Arbitrator erred in law and fact in finding that the Claimant is not entitled to an award in terms of the prayers sought in the Plaint dated 6'” February 2019 including but not limited to an award in the sum of USD 7,500,000/= payable by the Respondent, given the Respondent's admission in paragraph 10 of its Statement of Defence that it did not publish the mandatory notice as stipulated in Section 3(1) of the Transfer of Business Act.43.The Arbitrator erred in law and fact in finding that the Respondent was not bound to act ethically and in line with its principles and moral Commitment to its Customers and the General Public in spite its published commitment to the public to do so.
10.The respondent opposed the application through the replying affidavit of its Company Secretary Mr. George Odete who urged this court to dismiss the appeal on the basis that it is not merited. The respondent’s deponent avers that Central Bank placed Chase Bank under receivership pursuant to the provisions of Section 43(1) 92 and 53(1) of the Kenya Deposit Insurance Act 2012 after which the public was invited to take an equity interest in Chase Bank whereupon the respondents offer was found to be most suitable. He further states that the general public was informed about the assets that were to be taken over by the respondent and those that would remain under Chase Bank in receivership.
11.He adds that the applicant’s deposit was not part of the assets and/or liabilities taken over by the respondent and notes that the arbitrator stated that Section 3(1) of the Transfer of Business Act as read together with Section 4 of the same Act was inconsistent with Section 9(5) of the Banking Act with regard to the proper party responsible for issuing notice.
12.He further states that the Kenya Deposit Insurance Corporation was within its mandate in transferring certain assets and liabilities to the respondents with the aim of protecting the interests of its depositors, creditors and members of the public. He contends that the deposit claimed by the Appellant, being USD 7,500,000 was not included in the assets that were taken over by the Respondent from Chase Bank on 17th August 2018 and was accordingly not assumed by the Respondent.
13.He avers that the transfer of certain assets and liabilities from Chase Bank Kenya Limited (in receivership) constitute a reconstruction and/or winding up of a Company in line with the provisions of the Companies Act and Section 50(6) of the Kenya Deposit Insurance Act.
14.Parties canvassed the application by way of written submissions.
Appellant’s Submissions
15.The Appellant submitted that whereas both parties were clear on the wording of Section 3 of the Transfer of Business Act and of established practice in that regard, that any notice thereunder was to be issued by the Respondent as the Transferee of the business acquired (or by both the Transferor and the Transferee), the Arbitrator nevertheless went on a tangent of his own and came up an investigation that was not before him, leading to his surprising finding that in his view the Act did not provide for the party to issue the Notice. It was therefore the Appellant’s case that the Arbitrator misinterpreted the provisions of Section 3 of Transfer of Business Act and failed to uphold the established authorities cited by the appellant.
16.The appellant argued that the arbitrator dealt with issues that were outside the terms of reference to arbitration and maintained that the Award was in conflict with the public policy as it offends efforts to protect the interests of the members of the public in transfer of businesses by banks. It was submitted that the arbitrator did not give effect to the purpose of the Transfer of businesses Act in view of the respondents admission that no notice was issued under Section 3(1) of the Transfer of Businesses Act.
The Respondent’s Submissions
17.The respondent, on the other hand, submitted that the arbitrator determined all the issues that were listed, by the parties, for determination, and rendered an award within the confines of the dispute. It was submitted that Transfer of Business Act was not applicable to the transaction as it was initiated under Section 50 of the Kenya Deposit Insurance Act.
18.The respondent argued that the arbitrator correctly interpreted the law and made the correct finding that there was an inconsistency in the requirements of the two statutes in the provisions relating to the institution that should give the notices. According to the respondent, Kenya Deposit Insurance Corporation was within its mandate to transfer the business to the respondent without issuing a notice as the transaction was initiated under the auspices of the Kenya Deposit Insurance Act and not the Transfer of Business Act.
19.The Respondent maintained that the deposit of USD 7,500,000 was expressly excluded from the assets which were taken over by the Respondent from Chase Bank (Kenya) Limited on 17th August 2018 and was accordingly not taken over by the Respondent as indicated in the Affidavit sworn by David Irungu, the General Manager - Resolutions at KDIC.
20.According to the Respondent, only certain assets and liabilities of Chase Bank (Kenya) Limited were taken over by the Respondent, following approvals obtained pursuant to Section (9)(1) and (5) of the Banking Act and published in the Kenya Gazette of 6th July 2018 and that the Plaintiff's deposit was not part thereof.
21.The Respondent submitted that the Appellant's argument that the Arbitral Award dealt with issues not presented for determination and ignored to determine the issues presented for determination is a false assertion aimed at misleading this Court. It was submitted that the Arbitrator dealt with all the issues for determination listed in the Appellant's submissions at the Arbitration. The respondent cited the decision in Mahican Investment Limited & 3 Others vs Giovani Gaid & 80 Others [2005] eKLR where Ransley J, while noting that it had not satisfactorily been shown that the matters objected to were outside the scope of the reference to arbitration, held that: -“In order to succeed the applicant must show beyond doubt that the arbitrator has gone on a frolic of his or her own to deal with matters not related to the subject matter of the dispute. This the applicant has failed to show.”
22.The Respondent further submitted that even assuming that the Arbitrator reached the wrong conclusions of fact, or analysis of evidence, or interpretation of the contract, the same was still within the fallibility of the Arbitrator because errors of law, or fact, or mixed fact and law, are not grounds for challenging an Arbitral Award.
23.Regarding the Appellant’s submission that the Arbitrator erred in law and fact by introducing and creating doubt as to the party responsible for publishing the Notice under section 3(1) of the Transfer of Business Act, the Respondent submitted that the Arbitrator examined the issue of Notices as provided under the said Act and the Kenya Deposit Insurance Act before rightfully holding that there is an inconsistency in the requirements of the two statutes in so far as the same make contradictory provisions relating to which is the proper institution, party or entity mandated to issue and publish the requisite notices.
24.The Respondent submitted that there is an Inconsistency in the provisions of section 9(5) of the Banking Act vis-à-vis Section 3(1) and 4(1) of the Transfer of Business Act that places the obligation on the Central Bank of Kenya as the publisher of the notice vis-à-vis the Transfer of Business Act.
25.On the submission that the Award is contrary to public policy, the Respondent submitted that the Appellant did not demonstrate in what way the Arbitral Award is contrary to public policy and has extrapolated the meaning of public policy to include potential errors of law, and fact whereas the same are not, by any stretch of the imagination, public policy grounds to set aside an award.
26.On the Appellant’s claim that the Arbitrator erred in law and in fact by failing to give effect to the stated purpose of the Transfer of Business Act, the Respondent submitted that the Arbitrator considered the Act as a whole and appreciated that it was enacted to prevent certain fraudulent transfers of businesses. The Respondent added that the Appellant’s claim that the Arbitrator misinterpreted section 3(1) of the Transfer of Business Act is misguided.
27.The Respondent further submitted that the Transfer of Businesses Act did not apply to the transaction that is the subject of this suit as the said Transaction was initiated under the auspices of the Kenya Deposit Insurance Act. For this argument, the Respondent referred to the decision by Mativo J. in reproducing the definition of the word "shall" in the Black's Law Dictionary in Republic vs Council of Legal Education & another Ex parte Sabiha Kassamia & Another (20181 eKLR stated as follows:“15.The operative word in the above provisions is "shall.” The Black’s Law Dictionary, defines the word "shall" as follows:-As used in statutes, contracts, or the like, this word is generally imperative or mandatory. [n common or ordinary parlance, and in its ordinary significance, the term "shall" is a word of command, and one which has always or which must be given a compulsory meaning.' denoting obligation. It has a peremptory meaning, and is generally imperative or mandatory. It has the invariable significance of excluding the idea of discretion, and has the significance of operating to impose a duty which may be enforced, particularly if public policy is in favor of this meaning, or when addressed to public officials, or where a public interest is involved, or where the public or persons have rights which ought to be exercised or enforced unless contrary intent appears.”
28.The Respondent submitted that the allegation that the Arbitrator erred in law and in fact in breaching the immortal doctrine of stare decisis in respect to the binding authorities submitted by the Appellant in the Arbitration is misguided, misconceived, erroneous and ill-advised as the facts of the present case are not similar to the ones quoted by the Appellant.
Analysis and Determination
29.I have carefully considered the record of appeal and the rival submissions made by the parties herein together with the authorities that they cited. I find that the main issue for determination is whether this Court should set aside and or vary the Arbitral Award dated 23rd April 2021, and enter Judgment in favour of the Appellant in the sum of USD 7,500,000 together with interest and costs as sought in the Plaint.
30.Section 39 of the Arbitration Act permits the court’s intervention in arbitral proceedings, on appeal, where there is prior consent of the parties to the arbitration. The section stipulates as follows: -39.Where in the case of a domestic arbitration, the parties have agreed that —a.an application by any party may be made to a court to determine any question of law arising in the course of the arbitration; orb.an appeal by any party may be made to a court on any question of law arising out of the award; such application or appeal, as the case may be, may be made to the High Court.(2)On an application or appeal being made to it under subsection (1) the High Court may, as appropriate -a.determine the question of law arising;b.confirm, vary or set aside the arbitral award or remit the matter to the arbitral tribunal for re-consideration or, where another arbitral tribunal has been appointed, to that arbitral tribunal for consideration.(3)Notwithstanding sections 10 and 35 an appeal shall lie to the Court of Appeal against a decision of High Court under subsection (2) -a.if the parties have so agreed that an appeal shall lie, andb.the High Court grants leave to appeal or failing leave by the High Court, the Court of Appeal grants special leave to appeal; and on such appeal the Court of Appeal may exercise any of the powers which the High Court could have exercised under subsection (2).4.An application or appeal under this section shall be made within the time limit and in the manner prescribed by the Rules of Court applicable, as the case may be, in the High Court or the Court of Appeal.5.When an arbitral award has been varied on appeal under this section, the award so varied shall have effect as if it were the award of the arbitral tribunal concerned. "
31.As I have already noted in this judgment, the parties herein had, by their mutual consent of 6th July 2020 and adopted by the Court on the same day, agreed that any of them may lodge an appeal on any point of fact or law to the High Court arising out of an Award issued by the appointed Arbitrator. I accordingly find that this court has the jurisdiction to hear and determine the instant Appeal on both the points of law and fact.
32.As the first appellate court, this Court is reminded of its role to re-evaluate, re-assess and re-analyze the evidence on the record and then determine whether or not the arbitrator arrived at the right decision and in either case, give reasons for its findings. This is the position that was stated in Selle & Another v Associated Motor Boat Company Limited & others [1968] E.A 123, wherein, it was held:-“an appeal from the High Court is by way of re-trial and the Court of Appeal is not bound to follow the trial judge’s finding of fact if it appears either that he failed to take account of particular circumstances or probabilities or if the impression of the demeanor of a witness is inconsistent with the evidence generally.An appeal to this court from a trial by the High Court is by way of a re-trial and the principles upon which this court acts in such an appeal are well settled. Briefly put they are that this court must reconsider the evidence, evaluate it itself and draw its own conclusions though it should always bear in mind that it has neither seen nor heard the witnesses and should make due allowance in this respect.In particular, this court is not bound necessarily to follow the trial judge’s findings of fact if it appears either that he has clearly failed on some point to take account of particular circumstances or probabilities materially to estimate the evidence or the impression based on the demeanor of a witness is inconsistent with the evidence in the case generally.”
33.Section 35 of the Arbitration Act provides as follows on the circumstances when an arbitral award may be set aside: -35.An arbitral award may be set aside by the High Court only if—(a)the party making the application furnishes proof—(i)that a party to the arbitration agreement was under some incapacity; or(ii)the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication of that law, the laws of Kenya; or(iii)the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or(iv)the arbitral award deals with a dispute not contemplated by or not falling within the terms of the reference to arbitration or contains decisions on matters beyond the scope of the reference to arbitration, provided that if the decisions on matters referred to arbitration can be separated from those not so referred, only that part of the arbitral award which contains decisions on matters not referred to arbitration may be set aside; or(v)the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless that agreement was in conflict with a provision of this Act from which the parties cannot derogate; or failing such agreement, was not in accordance with this Act; or(vi)the making of the award was induced or affected by fraud, bribery, undue influence or corruption;(b)the High Court finds that—(i)the subject-matter of the dispute is not capable of settlement by arbitration under the law of Kenya; or(ii)the award is in conflict with the public policy of Kenya.
34.The applicant herein seeks to set aside the Arbitral award on the basis that it dealt with issues that were outside the scope of the arbitration agreement. The applicant noted that the Arbitrator extensively addressed the Banking Act and found that the Central Bank of Kenya sold Chase Bank Kenya Limited to the Respondent through its Receiver, the Kenya Deposit Insurance Corporation, but erred from the word go, when at Paragraph 30, he stated that he is "convinced that the issues framed by the parties revolve around the interpretation and determination of which statute applies to the process of transfer of the said assets and liabilities of the Bank and whether any liability arises therefrom" yet this was not the issue that was delivered to him for determination as the parties were not in any doubt that the Transfer of Business Act applied to the transaction but the only issue was whether it was mandatory for the Respondent to comply with its terms.
35.The applicant emphasized that while both parties were clear on the wording of Section 3 of the Transfer of Business Act and of established practice in that regard, that any notice thereunder was to be issued by the Respondent as the Transferee of the business acquired (or by both the Transferor and the Transferee), the Arbitrator nevertheless went on a tangent of his own and came up an investigation that was not before him, thereby leading to his surprising finding that, in his view, the Act did not provide for the party to issue the Notice.
36.The applicant’s case was that there was no dispute regarding the party required to publish the Notice under Section 3 of the Transfer of Business Act and it was not necessary for the Arbitrator to delve into the said issue even after acknowledging that there existed no dispute over the said issue. The applicant faulted the Arbitrator for creating his own dispute and prescribing his own remedies. For this argument, the applicant cited the decision in Airtel Networks Kenya Limited v Nyutu Agrovet Limited [20111 eKLR where the court, in setting aside an Arbitral Award, faulted an Arbitrator for deciding matters outside his jurisdiction and stated as follows;-“I must clarify that the offensive part of the award of general damages is in overreaching the jurisdiction of the arbitral tribunal by going beyond the boundaries of the contract between the parties and the terms of reference of the arbitration as earlier explained. OR that score alone, I would find that the Appellant is well within the purview of section 35 the Arbitration Act."
37.On its part, the respondent maintained that Arbitrator considered and determined all the issues that were listed by the parties for determination and indeed confined himself to the same.
38.In Synergy Credit Limited v Cape Holdings Limited NRB CA Civil Appeal No. 71 of 2016 [2020] eKLR the Court of Appeal observed as follows regarding the issue of a dispute not contemplated in the terms of the reference: -“In determining whether the arbitral tribunal has dealt with a dispute not contemplated or falling within the terms of the reference, or whether its award contains decisions on matters beyond the scope of the reference to arbitration, the arbitral clause or agreement is critical. Other relevant considerations, with-out in any way prescribing a closed catalogue, would include the subject matter, pleadings and submissions by the parties, as well as their conduct in the arbitration. Pleadings, however, must be considered with circumspection because, as the US Court of Appeals for the Ninth Circuit observed in Ministry of Defence of the Islamic Republic of Iran v. Gould, Inc. (supra), the real issue in such an inquiry is whether the award has exceeded the scope of the arbitration agreement, not whether it has exceeded the parties’ pleadings.
39.The question that this court has to grapple with is whether the Arbitrator went outside his jurisdiction, misconstrued the dispute before him and created a non-existent inconsistency when he held that the content to be published in a Notice issued under Section 4 of the Transfer of Business Act was different from the content to be published in a notice under Section 9 of the Banking Act. According to the applicant the two notices serve different purposes and one cannot therefore be said to be inconsistent with the other.
40.The Record of Appeal shows that both parties isolated the issues for determination in their submissions before the Tribunal and that the Arbitrator identified the issues that were not disputed as follows: -i.The Claimant deposited with Chase Bank (Kenya) Limited, the sums of USD 7,500,000 ON 18TH March 2016 for an agreed period of one month and to accrue interest at the rate of 2.35% per annum, to mature on 18th April 2016.ii.The vide Gazette Notice No. 2320, and before the expected maturity date, Chase Bank(Kenya) Limited was placed under receivership on 7th April 2016 by the Central Bank of Kenya, and that the Kenya Deposit Insurance Corporation was appointed as the receiver pursuant to Sections 43(1), 43(2) and 53(1) of the Kenya Deposit Insurance Act 2012.iii.That certain assets and certain liabilities of the Chase Bank(Kenya) Limited (In Receivership) were transferred to the Respondent, SBM Bank(Kenya)Limited pursuant to an agreement dated 17th April 2018 and vide Gazette Notice No. 6833 dated 5th July 2018, which acquisition took effect on 17th August 2018.iv.That the impugned process of transfer of the said certain assets and certain liabilities of Chase Bank (Kenya) Limited (In Receivership) to the respondent was conducted pursuant to Sections 9(1) and (5) of the Banking Act.
41.The Tribunal noted that the gist of the Applicant’s claim was that under Section 3(1) of the Transfer of Business Act as read together with Section 4 of the said Act, the defendant was, in mandatory terms, required to publish a notice in Kenya Gazette and in the newspapers circulating in Kenya for a period of two months.
42.The applicant’s claim was that the respondent did not publish the said mandatory Notice and was therefore liable to the plaintiff in the sum claimed of USD 7,500,000 together with interest accrued thereon.
43.Tribunal found that among the issues for determination was whether the provisions of the Transfer of Business Act, apply to the transfer of certain assets and liabilities of Chase Bank (In Receivership) to the respondent and whether there is conflict and/or inconsistencies between the provisions of the Transfer of Business Act and those of the Banking Act and KDI Act. Also listed for determination was the question of which statute is applicable to the subject transaction. The Tribunal was also to determine the issue of whether the claimant is entitled to the prayers sought against the respondent.
44.Section 3(1) of the Transfer Business Act required the respondent to publish Gazette Notice and it specifically provides;-“Where any business or any portion of any business is transferred, with or without the goodwill or any portion of thereof, the transferee shall, notwithstanding any agreement to the contrary, become liable for all the liabilities incurred in the business by the transferor, unless due notice in accordance with this Act has been given and has become complete.”
45.Section 4 of the Transfer of Business Act provides for the manner of issuing the notices as follows:Whenever a business, or portion thereof, is transferred due notice must be given and become complete in accordance with the Act (Section 3(1))i.The Notice is to be published either before or after the date of transfer;ii.The Notice should contain the particulars contained in subsection (2) being;
- The name and address of the Transferor;
- The nature of the business, and the name or style under which, and the address at which, the Transfer has carried on the business;
- The name and address of the Transferee;
- The address where the Transferee intends to carry on the business;
- A statement as to whether the Transferee is assuming or is intended to assume all the liabilities incurred in the business by the Transferor.
In default of which the transferee would become liable for all the liabilities incurred in the business by the transferor, notwithstanding any agreement to the contrary.iii.The Notice to be published in the Gazette as well as in circulating newspapers as prescribed by the Registrar General;iv.The notice is deemed complete after lapse of two (2) months after publication.
46.Section 9 of the Banking Act, on the other hand, provides as follows on the procedure, manner and particulars to be contained in the Notice to be published: -i.The transacting parties shall:a.Obtain prior written approval of the Minister endorsing the g-ahead of the Agreement or Arrangement for the transfer of assets and liabilities (Section 9(1)).b.Provide duly certified notice or passing of a resolution by their shareholders.c.Provide a duly certified copy of Shareholders’ Resolutiond.Provide a duly certified copy of terms and conditions of relevant agreement of arrangement between the transacting institutionsii.Requirements (a) –(d) above is to be submitted to the Central Bank of Kenya by each transacting party:iii.The Central Bank of Kenya shall publish the Notice in the Gazette.
47.The Tribunal considered the description of the Transfer of Business Act as “An Act of Parliament to prevent certain fraudulent transfers of business and found that the Act is intended to apply generally to any transfers undertaken to and/or in a business. Upon considering the definition of the words “business” and “bank” as stated under the Transfer of Business Act and the Banking Act respectively, the Arbitrator at paragraph 48 of the Award held that: -“From the circumstances described herein above, it can be argued that banking is a business as envisaged by the Transfer of Business Act.”
48.The Tribunal also considered the issue of the Notices to be issued in respect to the transfer of business herein as provided for under the different Acts of Parliament and held as follows at paragraphs 105 – 108 of the Award: -“105.The Tribunal is in concurrence with the Claimants assertion that the aim of the Transfer of Business Act is to protect members of the public from any possible losses or claims associated with potential fraudulent transfers.106.The Transfer of Business Act is one that that speaks loud and clear on the obligations required prior to taking over a business or part thereof. But in the same vein the same requirement to notify and protect the members of the public is also contained in the Banking Act as already observed.107.The Tribunal is convinced that the notices required and issued under the applicable KDI Act and the Banking Act all fit a similar intention and purpose, even if the Transfer of Business Act was to be assumed to apply.108.Accordingly, in so far as the intention of the requisite notices, the Tribunal finds that there is no inconsistency or conflict between these three Acts of Parliament.”
49.The Tribunal analyzed the applicability of the cited sections on the requirement of Notice that is the subject of the dispute that was before him and held as follows at paragraphs 80 - 97 of the Award: -“80.On the other hand, in analyzing the issue of obligation in the Banking Act, the requirement for Notice to be issued and published is pursuant to Section 9(5) of the Banking Act. It provides that: -Notice of the passing of the resolution confirming any amalgamation or arrangement, or any arrangement for the transfer of assets and liabilities, together with a copy of such resolution and the terms and conditions of the relevant agreement or arrangement, duly certified by the chairperson of the meeting at which such resolution was passed and by the secretary of the institution concerned shall be sent to the Central Bank by each of the institutions involved and after receipt of such notices from all the parties to the relevant agreement or arrangement, the Central Bank shall publish those notices.81.From the above provision, the Tribunal notes that the Banking Act places a two-part obligation regarding the requirement for notice: on the first part, an obligation on the parties involved the transfer transaction or agreement; and on the second part, an obligation on the Central Bank of Kenya.82.The first obligation is on the Transferor (Transferor Institution) and the Transferee (Receiving Institution), being the institutions involved, to both furnish the Central Bank of Kenya with their Notices together with the Resolutions approving the transfer of assets and liabilities. The Tribunal notes that within the ambits of the Banking Act, there is no further duty placed on the parties to a transfer agreement with regards to publishing any further notices, other than the one envisioned by Section 9(5).80.The Second obligation is imposed on the Central Bank, who is he body responsible for publishing the Notices in the Kenya Gazette upon receiving he same from the involved institutions.81.Further, and as already stated above, in so far as the issue of liability is concerned, the Tribunal notices that liability in default is only addressed and introduced in Section 3(1) of the Transfer of Business Act.82.On the other hand, in the event of non-compliance, the Banking Act does not levy any statutory liability on either party to the transfer transaction nor the Central Bank of Kenya.87.Based on the foregoing, the Tribunal notes an inconsistency in requirements of the two statutes, in so far as the same make contradictory provisions relating to which is the proper institution, party or entity mandated to issue and publish the requisite notices.88.Specifically, there is s an inconsistency in the provisions of Section 9(5) of the Banking Act vis-à-vis Section 3(1) and 4(1) of the Transfer of Business Act that places the obligation on the Central Bank of Kenya as the publisher of notice vis-à-vis the Transfer of Business Act.89.As already stated, the Transfer of Business Act is silent on who is mandated to issue and/or publish the requisite notice in the Gazette, but places a mandatory liability on the transferee in cases of default, whereas the Banking Act mandates the Central Bank of Kenya only, to publish the requisite Notice in the Gazette.90.Accordingly, the Tribunal finds that Section 3(1) of the Transfer of Business Act as read together with Section 4 is inconsistent with Section 9(5) of the Banking Act in so far as the same relates to who is the proper party required to issue and publish the requisite notices.95.From the foregoing, it is evident that the procedure under the Banking Act requires prior approvals issued by the banking- industry regulator, being the Central Bank of Kenya. It also requires approvals to be issued by the Minister before a notice is submitted to the Central Bank of Kenya. The process of notification under the Banking Act also requires notification to be ascertained through internal processes that require approvals by the transacting institutions Resolutions, and certification by the Chairperson and Secretary of the Institutions.96.Comparatively, the notice required by the Transfer of Business Act only entails the notice to be published within the prescribed time and detailing the prescribed particulars, and that the same be circulated in newspapers and the Gazette.97.In light of the above, as much as both statutes make provisions on how notice of a transfer of assets of general business and the banking business, the Tribunal in inclined to find that there is conflict between requirements and particulars that should be contained, and procedure of lodging the Notice to be published in the Gazette . The said conflict is found at Section of the Transfer of Business Act and Section 9(1), 9(4) and 9(5) of the Banking Act.”
50.This court respectfully differs with the findings of the Tribunal on the interpretation of the various Acts applicable to the dispute herein and specifically, the finding that there is conflict between the requirements and the particulars that should be contained in the Notice, and the procedure of lodging the Notice to be published in the Gazette. My considered view is that having found that there is no inconsistency in the three Acts in as far as the intention of the Notices is concerned, the Tribunal could not turn around and hold that there is an inconsistency in the Acts merely because the requirements, procedure and particulars to be contained in the Notices differ. I say so because the various Acts serve different purposes and in the case of the Banking Act and the Kenya Deposit Insurance Act, target different institutions or bodies. In this regard, it has to be appreciated that the different Acts must not necessarily contain identical procedures and requirements.
51.I therefore find that there is no inconsistency in the Acts in question and that contrary to the Tribunal’s findings on inconsistency of the Acts, the Acts complement each other while serving the same purpose of ensuring that transfer of business is done in a transparent and seamless manner. In this regard, I find that there would be no harm to any of the parties in the transfer of business transaction if they complied with the requirements of the three Acts.
52.As I have already stated in this judgment, the Tribunal found, at paragraph 106 of the Award, that the Transfer of Business Act is that Act that speaks loud and clear on the obligations required prior to taking over a business or part thereof and noted that the same requirement to notify and protect the members of the public is also contained in the Banking Act. This finding, by the Tribunal, bolsters my finding that the Acts complement each other.
53.The Tribunal further found, at paragraph 104 of the Award, that: -“It was therefore important for all the depositors, including the Claimant, to be made aware of the fact that only certain assets and liabilities were to be transferred to the respondent, in accordance with the applicable laws.”
54.This court notes that despite its above findings that depositors were entitled to be made aware of the transfer of assets and liabilities in accordance with the applicable laws, the Tribunal still went ahead to selectively and without any justification lock out the very law that it had found to “speak loud and clear” on the obligations required prior to taking over a business or part thereof. The Tribunal rendered itself as follows when excluding the Transfer of Business Act: -“124.Certain provisions of the Transfer of Business Act have already been found to contradict provisions of the Banking Act. Section 3(1) and 4 of the Transfer of Business Act provides for the manner of issuance of notice.125.However, the same have been determined to contradict the notice and procedure provisions found at Section 9(5) of the Banking Act. Based on section 52A of the Banking Act, and in the absence of any evidence to assert that Chase Bank (in receivership) is not licensed under the Banking Act, the Tribunal has no difficulty in finding that the provisions of the Transfer of Business Act are inconsistent with provisions of the Banking Act, and therefore the provisions of the Banking shall be upheld to prevail.126.In conclusion, with respect to which statute is applicable to the subject of these proceedings, the Tribunal is persuaded that the Transfer of business Act is wholly inapplicable to the subject transaction between Chase Bank (in Receivership) and the Respondent SBM Bank Limited.127.Whereas requisite notices were issued prior to the transfer of the assets and liabilities, there is no evidence to assert that the Respondent was legally obligated to issue notices under the Transfer of Business Act.128.Further, the Tribunal finds that the said transfer of Business Act contains provisions that are inconsistent with provisions of the Banking Act and the Kenya Deposit Insurance Act, which are the basis of the receivership process under which the said certain assets and liabilities were transferred to the Respondent.129.The Claimant’s case was wholly anchored on the provisions of the Transfer of Business Act and by now it is obvious that the main pillar of the claim has collapsed.”
55.Having found that the Tribunal erred in its finding that there is an inconsistency in the Acts, I find that the Transfer of Business Act was applicable to the transaction that the parties herein undertook in the transfer of business. It is noteworthy that the said Act was specifically intended to prevent fraudulent transfers of business. I therefore find that excluding it as being inapplicable to the instant transaction, which the Tribunal found, involved transfer of business, would create room for businesses, especially banks, to engage in opaque transfers to the detriment of their customers.
56.I further find that even though the Transfer of Business Act is an old Act of Parliament, having been enacted in 1930, as compared to the other Acts which were referred to in this case, it still exists as good law that is applicable in our context as it has not been repealed or its provisions declared unconstitutional. For this reason, I find that the Tribunal erred in law when it made a finding that appeared to cherry pick the Acts that the parties needed to comply with while leaving out the Transfer of Business Act despite the parties’ common ground regarding the Party is required to publish the Notice under Section 3 of the said Act.
Public Policy
57.The Applicant’s further argument was that the Award is contrary to public policy in view of the fact that the arbitrator did not give effect to Section 3 of the Transfer of Business Act. According to the applicant, the arbitrator ought to have considered the Act as a whole in order to discover the meaning of each phrase and word. The respondent, on the other hand, held the view that the applicant did not demonstrate that the award is contrary to public policy.
58.In Christ for all Nations v Apollo Insurance Co. Ltd. (2002) EA 366, Ringera J. (as he then was), while explaining the scope of public policy in setting aside an arbitral award observed as follows; -“An award could be set aside under page 35(2) (b) (ii) of the Arbitration Act as being inconsistent with the public policy of Kenya if it is shown that it was either (a) inconsistent with the Constitution or to other laws of Kenya, whether written or unwritten or (b) Inimical to the national interest of Kenya or (c) contrary to justice or morality.”
59.In Mall Developers Limited vs Postal Corporation of Kenya ML Misc. No. 26 of 2013 [2014] eKLR the court observed that: -“Public policy must have a connotation of national interest. It cannot mean fairness and justice as was submitted by the parties herein as it was only the Claimant and the Respondent who were individuals entitled to be affected by the decision of the Arbitrator. They did not both demonstrate to this court how the decision by the Arbitrator would negatively affect, impact or infringe the rights of third parties and thus offend public policy.”
60.Public policy was discussed by the Court of Appeal in Kenya Shell Limited v Kobil Petroleum Limited [2006] eKLR, where it was held that: -“An award could be set aside under section 35(2) (b) (ii) of the Arbitration Act as being inconsistent with the public policy of Kenya if it is shown that it was either (a) inconsistent with the Constitution or to other laws of Kenya, whether written or unwritten or (b) Inimical to the national interest of Kenya or (c) contrary to justice or morality.”
61.In Open Joint Stock Company Zambeznstony Technology vs Gibb Africa Limited [2001] the court held as follows on public policy: -“I may perhaps add that public policy, in my view, generally refers to the set of stoic-cultural, legal political and economic values, norms and principles that are deemed so essential that no departure there from can be entertained. Public policy acts as a shield for safeguarding the public good, upholding Justice and morality and preserving the deep rooted interest of a given society.”
62.The common thread that runs from the above cited authorities is that for an arbitral award to be set aside on account of being against public policy, the applicant ought to demonstrate that the award was inconsistent with the Constitution or any written law, inimical to the national interest of Kenya and contrary to justice and morality.
63.In the instant case, I have already found that the Tribunal erred in excluding the applicability of a law that was intended to protect the general public by preventing fraudulent transfers of business. Guided by the dictum in the above cited cases and having regard to the findings that I have made in this judgment, I find that the Award conflicts with the public policy as it offends efforts to protect the interests of the members of the public in transfer of businesses by banks.
64.Having found that the Transfer of Business Act was applicable to the transaction between the parties herein and further, having found that the Award is in conflict with public policy, the next issue for consideration is whether the respondent is liable for the applicant’s claim as stated in the Plaint.
65.It was not disputed that the respondent did not publish the Notice that is a mandatory requirement under Section 3 of the Transfer of business Act. The said Act provides that a Transferee of business is liable for all the liabilities of transferor unless a Notice is issued under the Act.
66.The uncontested facts of this case are quite straightforward. The applicant deposited the sum of United States Dollars (USD) 7,500,000/= with Chase Bank Kenya Limited at an interest rate of 2.35% per annum, for a period of one month only. The deposit was to mature on 18th April 2016 but that was not to as Chase Bank was subsequently placed under receivership after which its assets and liabilities were acquired by the respondent upon sale by the Central Bank of Kenya through its appointed Receiver the Kenya Deposit Insurance Corporation.
67.Needless to repeat, the respondent did not publish the mandatory Notice under the Transfer of Business Act. I therefore find that the respondent is liable for all the liabilities of the Chase Bank Kenya Limited including the Appellant’s claim herein.
68.Consequently, I find that the Appellant’s Notice of Motion application dated 21st May 2021 merited and I therefore allow it in the following terms:-1.The Arbitral Award dated 23rd April 2021 issued by the appointed Arbitrator, Mr. Mwaniki Gachoka and all consequential orders are hereby set aside.2.Judgment is hereby entered in favour of the Appellant in the sum of United States Dollars Seven Million Five Hundred Thousand (USD 7,500,000) together with interest and costs as prayed in the plaint dated 6th February 2019, being the amount deposited by the Appellant in Chase Bank (K) Limited (In Receivership).3.I also award costs of the Appeal to the Appellant
Bank Kenya Limited for a period of one month from 18th March 2016 to 18th April 2016, and that the said amount was to mature with interest earned of USD 16,645.83. In the said letter, the Receiver Manager of Chase Bank Kenya Limited also confirmed that the interest accrued up to 7th April 2016, amounting to USD 9,791.67 would be released to the Appellant in due course and that the principal amount of USD 7,500,000/= would be rolled over for a period of nine (9) months from 6th May 2016. This was however not implemented.