Kibos Sugar and Allied Industries Limited v Agriculture & Food Authority & another (Constitutional Petition 19 of 2019) [2022] KEHC 15487 (KLR) (15 November 2022) (Judgment)
Neutral citation:
[2022] KEHC 15487 (KLR)
Republic of Kenya
Constitutional Petition 19 of 2019
RE Aburili, J
November 15, 2022
Between
Kibos Sugar and Allied Industries Limited
Petitioner
and
Agriculture & Food Authority
1st Respondent
Commodities Fund
2nd Respondent
Judgment
1.The petitioner is Kibos Sugar And Allied Industries Limited. It is a limited liability company. Vide its petition dated September 24, 2019 and filed in court on the September 27, 2019, it seeks the following orders:a.A declaration that the 2nd respondent has no right to demand payment for loans advanced by and accrued to the Kenya Sugar Board, such right by dint of section 7 of the First Schedule to the Agriculture & Food Authority Act, 2013, devolved and vested in the 1st respondent.b.A declaration that the 2nd respondent has no legal capacity to own any property and as a result it cannot independently sue for or demand recovery of loans advanced, it can only do so through the 1st respondent.c.A declaration that all demands that the 2nd respondent has made against the petitioner demanding for payment of loans advanced by the Kenya Sugar Board to the Petitioner were entirely without jurisdiction, and to continue with any threats of enforcement, including the threat to refer the petitioner to the Credit Reference Bureau threaten and contravene the protection of property as guaranteed by article 40 read with 260 of the Constitution.d.Aa declaration that since February 1, 2015, by dint of operation of section 42 (2) (d) of the Crops Act, 2013 and by the ensuing practice in the sugar sector, the Sugar Development Levy was not payable, and any and all sums paid by the petitioner amounting to Kshs 114,069,064.00 together with interest thereon at court rates, is money had and received by the 1st respondent and is refundable to the petitioner.e.A mandatory order compelling the 1st respondent to within 14 days of the decree of court to make an election, to either refund, and therefore actually refund and restore to the petitioner Kshs 114,069,064 plus interest at court rated from March 2016 until payment in full, or to elect to set off the loan account for the Kshs 133,972,375 whereupon the petitioner shall be obligated to pay to the 1st respondent the difference thereof, and where after the 1st respondent shall discharge the petitioner’s properties LR No Nandi/kibisem/452, without further condition and in any event within 7 days from the date of order of courtf.A permanent injunction against th respondents restraining each of them from referring the petitioner to the Credit Reference Bureau on account of th loan account of Kshs 133,972,375 advanced by the Kenya Sugar Board to the petitioner, unless first the sum of Kshs 114,069,064 and interest thereon is refunded to the petitioner and offset from the Kshs 133,972,375 and interest thereon, and only if the surplus balance thereon remains unpaid.g.The costs of the petition be borne by the respondents on indemnity basis.h.The honourable court do make any such other or further orders as it may deem just and expedient in the circumstances to remedy the violation of the petitioner’s fundamental rights.
2.The petition was supported by the affidavit of Raghbir Singh Chathe sworn on the September 24, 2019.
3.The petitioner’s case is that being a sugar miller and holder of a milling licence, it has been making payments to the 1st respondent in the form of Sugar Development Levy being 4% of all sugar processed since February 1, 2015 to the date of the petition totalling to Kshs 114,069,064 despite the fact that the 1st respondent was abolished on the February 1, 2013 vide section 42(2) (d) of the Crops Act 2013 that abolished all levies.
4.The petitioner further avers that it has been paying the said funds in the belief that it is fulfilling its obligations where no such obligation existed whereas the 1st respondent has been collecting the said levy in the knowledge that there is no right to collect and as such, the entire sum is refundable to the petitioner.
5.The petitioner further avers that sometime on or about May 16, 2014, the 1st respondent’s predecessor, The Kenya Sugar Board advanced the petitioner Kshs 133,972,375 which loan was secured by a charge over LR No Nandi/Kibisem/452 and Nandi/Kibisem/718 and that sometime on or about the June 30, 2017, the 2nd respondent made a demand against the petitioner for repayment of Kshs 155,118,657.31 being the sum advanced by the 1st respondent to the petitioner with interest in lieu of which the 2nd respondent has threatened legal action and further that it has threatened to report the petitioner to the Credit Reference Bureau.
6.The petitioner avers that its properties are at real risk of dissipation as a result of the respondents withholding the petitioner’s funds and that the instant petition seeks to protect against imminent violation of the petitioner’s right to protect its property.
7.Opposing the petition, the 1st respondent filed a replying affidavit and cross a petition in which it stated that the petitioner was obligated to pay to the 1st respondent the Sugar Development Levy which was charged on sugar sales paid by sugar consumers and collected through sugar millers and as such, the money paid as Sugar Development Levy was not the petitioner’s money.
8.The 1st respondent further submitted that it advanced the petitioner a loan of Kshs 184,120,887.30 secured by a legal charge over the petitioner’s title numbers LR No Nandi/Kibisem/452 and Nandi/Kibisem/718 and that the petitioner’s request for refund or off-set of monies paid in respect of Sugar Development Levy is inconsistent with the petitioner’s own covenants under its charge.
9.It is the 1st respondent’s contention that the 2nd respondent has authority from the 1st respondent to demand for all monies loaned to the petitioner as it is an organ of the 1st respondent. It is further contended that the petitioner is a loan defaulter and there is no danger in disclosing its credit status to the Credit Reference Bureau as this would forewarn those likely to fall into the petitioner’s deception.
10.The 1st respondent further contends that the instant petition raises questions concerning the refund of Sugar Development Levy, which are strictly not matters for a constitutional petition or interpretation and as such, the instant petition has no legal merit.
11.In the cross-petition, the 1st respondent sought the following orders:i.An order dismissing the petition with costs tom the 1st respondentsii.Judgement in favour of the 1st respondent against the petitioner for the sum of Kshs 175,772,123.05 plus interest at the rate of 6% per annum with effect from March 17, 2020 until payment in full.iii.A declaration that the 1st respondent is entitled to enforce or realize its charge over Title Numbers LR No Nandi/Kibisem/452 and Nandi/Kibisem/718 by exercising all or any of its powers as chargee under paragraph 10 of the charge by appointment of a receiver of the charged property, lease or sub-lease the charged property, enter into possession of the charged property or to sell the charged propertry.iv.Costs of the suit and cross – petition against the petitioner andv.Such other or further remedy as the honourable court may deem just to grant.
12.The 1st respondent also filed a further affidavit sworn on the August 13, 2021 by one Rosemary Owino who deposed that she was the interim head of the 1st respondent’s Sugar Directorate and that the petitioner received Kshs 133,972,315 from the Kenya Sugar Board vide a letter dated April 26, 2014 being the first tranche of a loan approved to the petitioner and vide a letter dated July 25, 2014, the petitioner thanked the Kenya Sugar Board for the loan.
13.Ms. Owino further deposed that according to the agreed terms of the Loan, any arrears would attract a penalty of 1% above the basic lending figures and that the petitioner never paid any money towards the Sugar Loans Account and continues to be in default and that the outstanding loan as at July 15, 2021 was Kshs 186,409,832.49 whereas the sum claimed in the cross-petition was Kshs 175,772,123 that had accrued as at the March 17, 2020.
14.She further deposed that the approved loan balance of Kshs 50,148,572.30 was to be disbursed subject to confirmation of proper utilisation of the 1st tranche but that the petitioner had refused to allow the 1st respondent’s officers access to documents ascertaining how the funds were utilised and thus the 2nd tranche was not disbursed.
15.Ms. Owino further deposed that the petitioner had made several verbal promises to settle the loan with fail causing the 1st respondent to believe that the petitioner is not serious about repaying the loan which continues to remain outstanding.
16.On their part, the 2nd respondent filed a replying affidavit sworn on the December 8, 2020 by one Nancy Chelangat Cheruiyot in which she deposed that the 2nd respondent was a legal entity created under section 9 of the Crop Act 2013 and created purely for the purpose of lending to the scheduled crop subsector while the 1st respondent was a regulator.
17.The 2nd respondent further contended that the loan advanced to the petitioner was advanced by the former Kenya Sugar Board whose lending arm currently rests with the 2nd respondent under the Crops Act No 13 of 2013.
18.It is the 2nd respondent’s case that on the July 11, 2017, it communicated to the petitioner through the petitioner’s director Raghbir Singh Chathe seeking repayment of the outstanding loan and further informed the petitioner of its intention to list it with the Credit Reference Bureau for non-performance of the loan advanced and that subsequently, the petitioner suggested that the 2nd respondent seeks a refund of the outstanding loan amount from the overpaid levy to the regulator by the petitioner.
19.The 2nd respondent further deposed that the petitioner’s listing with the Credit Reference Bureau took place before the instant judicial proceedings contrary to the petitioner’s allegations and that subsequent to court orders issued herein, the 2nd respondent delisted the petitioner from the records of Metropol Credit Reference Bureau.
20.The parties agreed to canvass the petition by way of written submissions but only the 1st respondent filed its submissions.
The 1st respondent’s Submissions
21.It was submitted that the petitioner correctly pleaded that the 1st respondent succeeded the Kenya Sugar Board by virtue of section 3 (3) of the 1st schedule to the Agriculture & Food Act No 13 of 2013 and that by dint of section 42 (1) of the Crops Act, all funds, assets and other property, both moveable and immovable vest in the 1st respondent.
22.The 1st respondent submitted that the amount of loan advanced to the petitioner and the fact that the said loan is outstanding and continues to accrue interest is not disputed by the petitioner.
23.It was submitted that the alleged payment of Kshs 114,069,064 as Sugar Development Levy is pegged on the petitioner’s own internally generated list of alleged payments to the respondent which has not been proved by the petitioner as all that has been provided are the petitioner’s cheques payable to itself and thus the evidence adduced by the petitioner is unsatisfactory and falls short of the standard of proof on a balance of probabilities as set out in the case of Edward Akong’o Oyugi & 2 others v Attorney General [2019] eKLR.
24.It was further submitted that even if the petitioner had paid the Sugar Development Levy as alleged, the same was collected from sugar consumers and simply remitted by the petitioner as a levy due to the national government.
25.It was the 1st respondent’s submission that section 18 (4) of the Sugar Act provided for the imposition of the Sugar Development Levy but was repealed and superseded by sections 32 (5) and 42 (2) that authorise the 1st respondent to collect a Sugar Development Levy which proceeds form part of the 2nd respondent in accordance with section 9 (2) (a) of the Crops Act and thus the same continues to be chargeable.
26.The 1st respondent submitted that the petitioner is not entitled to claim a refund of the Sugar Development Levy because it is not beneficially entitled to the same and that in order to succeed in such a claim, the petitioner has to demonstrate that it has a right to that levy as a constitutional right. Reliance was placed on the case of Serah Mweru Muhu v Commissioner of Lands & 2 others [2014] eKLR where the court held inter alia that “in order to protect the right to property, a party must establish a proprietary right or interest in land as the Constitution does not itself create these rights or interests.”
27.It was further submitted that the proceeds of the Sugar Development Levy are property of the 1st respondent and are merely withheld and collected through sugar millers and do not amount to their profits.
28.The 1st respondent directed the court to the case of Albert Omollo Wesonga & another v Agriculture and Food Authority – Constitutional Petition Number 180 of 2016 (Nairobi) in which the petitioner herein was among the interested parties and in which the Court held that the Crops Act preserved the payment of the Sugar Development Levy that is considered a National Government Levy validated by article 209 of the Constitution.
29.The 1st respondent submitted that the petitioner was obligated to collect and remit the Sugar Development Levy by the Constitution and statute and as such, the petitioner’s claim for the same was illegal as the same was not backed by any law.
30.It was submitted that the petitioner pleads ignorance of the law as a basis to claim a refund of the Sugar Development Levy and that it is estopped from pleading their ignorance of the law to seek an illegal remedy in court.
31.The 1st respondent submitted that the sanctity of contract demands that the registered legal charge between the 1st respondent and the petitioner is meant to be binding and that the said legal charge imposes an obligation on the parties thereto as was held in the case of Carlill v Carbolic Smoke Ball Company [1892] EWCACiv
32.The 1st respondent further submitted that the evidence of the loan balance of Kshs 175,772,123.05 accruing as at the March 17, 2020 is uncontroverted.
33.It was submitted that the instant petition does not meet the threshold for a constitutional petition as set out in the case of Anarita Karimi Njeru v Republic [1979] eKLR as the petitioner has asserted that its constitutional right to property under Article 40 has been breached by the respondents without first setting out how it has such proprietary rights to the Sugar Development Levy.
34.Further, it was submitted that the legal charge between the 1st respondent and the petitioner has nothing to do with breach of Constitutional rights and thus the court cannot be used to overturn a proper and valid legal charge as was held in the case of Tom Otieno Odongo v Cabinet Secretary Ministry of Labour Social Security Services & another [2013] eKLR.
35.The 1st respondent urged this court to dismiss the petition.
36.On the cross-petition, the 1st resp[ondent submitted that the court ought not to allow any set-off against the loan balance contrary to the express provisions of the charge unless it is shown that the contract between the 1st respondent and the petitioner is illegal and hence unenforceable. Reliance was placed on the case of Stanley Kamere & 26 others v National Housing Corporation & 2 others [2015] eKLR.
37.It was further submitted that there is no legal impediment to the exercise of the 1st respondent’s rights under the registered charge as there is no defence to the 1st respondent’s cross-petition and the same ought to be allowed as prayed.
38.The 1st respondent submitted that the petitioner has not challenged the validity of the charge registered in favour of the 1st respondent and as such, the 1st respondent is within its right to realise and enforce the charge.
39.On the costs of the petition and cross-petition, it was submitted that the cross-petition was not challenged and the facts set out therein are admitted and as such, the remedies sought therein ought to be granted and the costs be awarded to the 1st respondent.
Analysis & determination
40.I have considered the pleadings herein as well as the submissions filed by both parties and the authorities relied on by the parties’ counsel. I find the following issues arising for determination:a.Whether the petition raises any constitutional issuesb.Whether the petitioner is entitled to refund of Kshs 114,069,064 being monies surrendered to the 1st respondent as Sugar Development Levyc.Whether the cross petition has merit.d.What orders should this court makee.Who bear the costs of the petition and the cross petition.
Whether the petition meets the threshold for a constitutional petition
41.It is the petitioner’s case that its rights under articles 19,20,21 (1), 40 (1) and 260 of the Constitution were infringed by the respondents. On the substance of the petition, the petitioner herein alleges that its right under article 40, the right to protection of property, has been infringed as its properties LR No Nandi/Kibisem/452 and LR No Nandi/Kibisem/718 and money are held by the 1st respondent.
42.On its part, the 1st respondent contended that the instant petition does not meet the threshold for a constitutional petition as set out in the case of Anarita Karimi Njeru v Republic [1979] eKLR as the petitioner has asserted that its constitutional right to property under article 40 has been violated by the respondents without first setting out how it has such proprietary rights to the Sugar Development Levy.
43.It is a now a well-settled principle of law that in constitutional litigation, a party who alleges violation of his or her rights must plead with reasonable precision with regard to the manner in which there has been such alleged violation. This proposition was enunciated in the case of Anarita Karimi Njeru supra where the court stated interalia that “Constitutional violations must be pleaded with a reasonable degree of precision.”
44.It follows that the articles of the Constitution which entitles rights to the petitioner must be precisely enumerated and the claim pleaded to demonstrate such violation with the violations being particularized in a precise manner. Furthermore, the manner in which the alleged violations were committed and to what extent must be shown by way of evidence based on the pleadings.
45.The Court of Appeal in Mumo Matemu v Trusted Society of Human Rights Alliance & 5 others [2013] eKLR provided the standard of proof in Constitutional Petitions as follows:
46.Examining the petitioner’s pleadings as well as the submissions of the parties, it is my considered view that the Petitioner has not met the requirements of a Constitutional Petition. Although the Petitioner has pleaded provisions of the Constitution, it has not demonstrated to the required standard how its individual rights and fundamental freedoms were violated, infringed or threatened by the respondents. It has not adduced any evidence to demonstrate the alleged violations. The petitioner has laid claim to the Sugar Development Levy which is a statutory levy but it has not demonstrated that it has a proprietary interest in that levy and that the respondents have in any way deprived the Petitioner of its right to the said property.
47.On that basis alone, I find and hold that the petition herein fails the test in the case of Anarita Karimi Njeru(supra). It is therefore incompetently brought before this court.
48.Even assuming that this petition was competent, it would not pass the test of the burden of proof. It is trite law that he who alleges must prove his claim. The claim must be propounded on an evidentiary foundation. In the case Leonard Otieno v Airtel Kenya Limited [2018] Mativo J(as he then was) had this to say on the question of burden of proof in constitutional petitions claiming remedies for violation od rights:
49.The petitioner herein has not pleaded the manner in which it was discriminated under ARTICLE 40(1). I find that this petition has not been pleaded with a reasonable degree of precision and that the alleged violations have not been proved.
Whether the petitioner is entitled to refund of Kshs 114,069,064 being monies surrendered as Sugar Development Levy
50.The petitioner avers that it has been making payments to the 1st respondent in the form of Sugar Development Levy since February 1, 2015 to the date of the petition totalling to Kshs 114,069,064 despite the fact that the 1st respondent was abolished on the February 1, 2015 which funds the petitioner claims that are refundable and that this court ought to order so.
51.The 1st respondent submitted that the petitioner is not entitled to claim a refund of the Sugar Development Levy because it is not beneficially entitled to the same and that in order to succeed in such a claim, the petitioner has to demonstrate that it has a right to that levy as a constitutional right.
52.Article 40 of the Constitution, which the petitioner alleges has been infringed, guarantees protection of personal property against arbitrary acquisition by the State. In order to protect the right to property, a party must establish a proprietary right or interest in land as the Constitution does not of itself create these rights or interests.
53.In the case of Joseph Ihugo Mwaura and others v The Attorney General and others Nairobi Petition No 498 of 2009 (Unreported), the Court, referring to section 75 of the former Constitution which is the equivalent of article 40, of the 2010 Constitution observed that:
54.In the instant petition, the petitioner alleges that it has been making payments to the 1st respondent in the form of Sugar Development Levy since February 1, 2015 to the date of the petition totalling to Kshs 114,069,064 despite the fact that the 1st respondent was abolished on the February 1, 2013 vide section 42(2) (d) of the Crops Act 2013 that abolished all levies and further that sometime on or about May 16, 2014, the 1st respondent’s predecessor, The Kenya Sugar Board advanced the petitioner Kshs 133,972,375 which loan was secured by a charge over LR No Nandi/Kibisem/452 and Nandi/Kibisem/718 and that sometime on or about the June 30, 2017, the 2nd respondent made a demand against the petitioner for repayment of Kshs 155,118,657.31 being the sum advanced by the 1st respondent with interest in lieu of which the 2nd respondent has threatened legal action and further that it will report the petitioner to the Credit Reference Bureau.
55.I have considered the above claim and read section 3 (3) and the 1st schedule to the Agriculture & Food Act No 13 of 2013 and section 42 (1) of the Crops Act which provides that all funds, assets and other property, both moveable and immovable previously held by the Kenya Sugar Board vest in the 1st respondent.
56.In addition, sections 32 (5) and 42 (2) of the Crops Act authorises the 1st respondent to collect Sugar Development Levy that was previously collected by the then and now defunct Kenya Sugar Board. Further, the funds collected from the levy form part of the 2nd respondent in accordance with section 9 (2) (a) of the Crops Act and thus the same continues to be chargeable.
57.To this end, I find that the levies paid by the petitioner, which it now alleges were not payable to the 1st respondent was legally paid and the petitioner cannot turn and attempt to have the same refunded on the mistaken belief and perception that the same were not payable as the Kenya Sugar Board had been disbanded.
58.The law abhors a vacuum and that is why sections 32 (5) and 42 (2) of the Crops Act authorise the 1st respondent to collect Sugar Development Levy that was previously collected by the defunct Kenya Sugar Board.
59.Further, regarding the loan advanced to the petitioner by the Kenya Sugar Board of which the 2nd respondent demanded from the petitioner, this court has expressed itself above that funds collected by the 1st respondent form part of the 2nd respondent in accordance with section 9 (2) (a) of the Crops Act.
60.On the petitioner’s attempt to stop the respondents from claiming for repayment of the loan advanced with the security being the petitioner’s named immovable properties being charged to the then Sugar Board, the Court of Appeal in the case of National Bank of Kenya Ltd v Pipeplastic Samkolit (K) Ltd & another [2001] eKLR held that:
61.The same Court of Appeal appreciated in the case of LTI Kisii Safari Inns Ltd & 2 others v Deutsche Investitions-Und Enwicklungsgellschaft (‘Deg’) & others [2011] eKLR that there are certain situations where the court may interfere with a bargain between parties inter alia that “a sense of fairness should be infused into transactions between private persons. The strong party in a contractual relationship should not be allowed to steamroll over the weaker party.”
62.In the instant case, the petitioner has not demonstrated that it entered into the loan agreement with the then Kenya Sugar Board under duress. Having succeeded the Sugar Board, the 1st respondent, through the 2nd respondent is entitled to pursue the redemption of the loans advanced to the petitioner.
63.To this end, I find and hold that the petitioner is not entitled to a refund of Kshs 114,069,064 being monies surrendered as Sugar Development Levy and neither can it seek to injunct the respondents from claiming for repayment of the loan advanced by the defunct Kenya Sugar Board.
Whether the court should grant the orders sought in the 1st respondent’s cross-petition.
65.The 1st respondent’s cross-petition was not challenged. However, where a debt is due, based on contractual obligations of parties, or by statutory command, it ought to be claimed in an ordinary suit for settlement or as provided for in the contract or statute, and not through a constitutional petition. I find that although the cross petition was not challenged, it is improperly before this court. I decline to make any merit orders on the same as the cross petitioner shall have the opportunity to claim and recover the outstanding sums due from the petitioner in the manner provided for in law or in the contract between the parties. I proceed and strike out the cross petition for being incompetently filed in this Constitutional petition.
66.As none of the parties have succeeded in their quests before this court, I order that each party shall bear their own costs of the petition and cross petition.
67.This file is hereby closed. I so order.
DATED, SIGNED AND DELIVERED AT KISUMU THIS 15TH DAY OF NOVEMBER, 2022R.E. ABURILIJUDGE