Kenneth Mutembei Mugambi (t/a Markfive Supplies) v Galaxy Merchants Ltd (Civil Appeal E042 of 2022) [2024] KEHC 2097 (KLR) (29 February 2024) (Judgment)
Neutral citation:
[2024] KEHC 2097 (KLR)
Republic of Kenya
Civil Appeal E042 of 2022
EM Muriithi, J
February 29, 2024
Between
Kenneth Mutembei Mugambi (t/a Markfive Supplies)
Appellant
and
Galaxy Merchants Ltd
Respondent
(An appeal from the Ruling of Hon. J. Njoroge (C.M) in Meru CMCC No.40 of 2014 delivered on 2/3/2022)
Judgment
1.This is an appeal from a decision of the trial court refusing to grant a stay of execution upon an application by the Appellant dated 18/1/2022 seeking specific orders that:
2.The application for stay of execution in the trial court followed the Appellant’s unsuccessful appeal against the trial court’s judgment of 8/2/2017 by a judgment of this court (Thuranira Jaden J.) delivered on 30/7/2018 in Meru HCCA No. 20 of 2017.
3.In the ruling subject of the present appeal delivered on 2/3/2022, the trial court ruled as follows:
The Appeal
4.On appeal, the Appellant filed his Memorandum of Appeal on 30/3/2022 listing 7 grounds as follows:1.The Learned Chief Magistrate erred in law and fact by denying me a stay of execution order, thereby allowing the respondent to continue execution of the decree, yet with full knowledge that the decree and its costs, interest and penalties had been cancelled in October 2019 by virtue of my automatic discharge from the No Asset Procedure.2.The Learned Chief Magistrate erred in law and fact by condemning me unheard, through entertaining new evidence delivered to the court only in the plaintiffs written submissions, and later giving a ruling in favour of the plaintiff purely based on the said introduced new evidence.3.The Learned Chief Magistrate erred in law and fact by allowing the plaintiff to bring back to court matters that had been previously tried and dispensed off by the trial Magistrate, four years previously.4.The Learned Chief Magistrate erred in law and fact by finding that I had committed the crime of fraud (Obtaining by false pretense) and delivered a ruling in favour of the plaintiff, without a shred of evidence of my such conviction, for the said crime, in a competent court of law.5.The Learned Chief Magistrate erred in law and fact by finding that my issuance of Postdated Cheques to the respondent, bearing different maturity dates, and which bounced upon being maliciously banked on the same day, amounted to criminality on my part.6.The Learned Chief Magistrate erred in law and fact by delivering a ruling that denied me my constitutional right arising from my admission to the No Asset Procedure by the Official Receiver, and my subsequent discharge from the said procedure in accordance to section360 (1) (a) and (b) of the Insolvency Act 2015.7.The Learned Chief Magistrate erred in law and fact by not finding that the plaintiffs execution of the decree dated 16th December 2021, had been overtaken by time in accordance to the statute of limitations as well outlined by the provisions of the Insolvency Act 2015.
Submissions
5.The Appellant urges that his eventual discharge from the No Asset Procedure in 2019 under sections 359 and 360 of the Insolvency Act cancelled the debt. He faults the trial court for condemning him unheard on the issue of fraud which was belatedly introduced by the Respondent in its submissions. He urges that the impugned ruling removed him from the protection of the Insolvency Act, and gave way for the Respondent to proceed with execution of the decree. He faults the trial court for declaring that he had defrauded the decree holder when he issued the post dated cheques with knowledge that he did not have funds to support the payments, and cites R v Dent (1975) 2 all E.R. 806, Joseph Wanyonyi v R (2004) eKLR, Oware v Republic (1989) eKLR, Francis Mwangi & Another v Republic (2015) eKLR and Joseph Wafukho v Republic (2014) eKLR. He faults the Respondent for failing to prove that he fraudulently applied for the No Asset Procedure and got forbearance of the debt. He urges that the Respondent was well notified of his application and subsequent admission to the No Asset Procedure, but it ignored all the summons and notifications from the Official Receiver. He urges that the Insolvency Act 2015 rightfully gave him a second chance in life to recover from the traumatic ordeals that he underwent which unfortunately culminated in the closure of his once lucrative hardware business.
6.The Respondent urges that the orders obtained by the Appellant under section 359(1) of the Insolvency Act were to last for only 12 months. It urges that the debt owed by the Appellant arose out of a fraudulent credit whereby the Appellant upon being supplied with goods issued 18 cheques which were dishonoured upon presentation. It urges that the issuance of the bad cheques by the Appellant squarely falls under conditions contained in section 360 (2) of the Insolvency Act that can warrant enforcement of the debt after the expiry of 12 months. It urges that the Appellant committed the offence of obtaining credit by false pretence and through issuance of bounced cheques which amounted to fraud, and cites Samat Bhima Keswala v Republic (1992) eKLR. It urges that section 360 (2) of the Insolvency Act was specifically promulgated to ensure that people do not incur liability fraudulently and then subject themselves to the no asset procedure, and that is why the said section stipulates that any liability and/or debt earlier incurred by fraud shall become enforceable. It urges that the act of presenting cheques which were dishonoured amounts to acts of fraud and consequently the court was right to rule that section 360 (2) of the Insolvency Act allowed it to execute. It prays for the dismissal of the appeal with costs and put this matter, which has been in the corridors of justice since 2014, to rest.
Analysis and Determination
7.The Appellant’s application and subsequent admission to the No Asset Procedure in accordance with the section 345 of the Insolvency Act (henceforth called the Act), is not disputed. What is in dispute is whether the Appellant got a forbearance of the debt.
8.The Respondent contends that after the Appellant’s automatic discharge from the No Asset Procedure after 12 months, the decretal sum became enforceable while the Appellant contends that the said discharge cancelled his debt and gave him a clean slate.
9.Section 354 of the Act provides for how a debtor's participation in the No-Asset Procedure is terminated as follows:- “A debtor's participation in the no-asset procedure terminates when— (a) the Official Receiver terminates the debtor's participation under section 355; (b) the debtor is discharged under section 359; (c) the debtor applies for the debtor's own bankruptcy; or (d) a creditor who is entitled to do so (for example, because the creditor's debt is enforceable as a debt specified in section 351(2) applies for the debtor's bankruptcy and the debtor is adjudged bankrupt.”
10.Section 357 of the Act provides for the effect of termination of a debtor's participation in the No-Asset Procedure as follows:-
11.Section 359 of the Act provides for discharge of a debtor's participation in the No-Asset Procedure as follows:-
12.Section 360 of the Act provides for the effect of discharge of a debtor's participation in the No-Asset Procedure as follows:-
13.The Respondent contends that since the Appellant’s debt arose out of a fraudulent credit of issuance of post-dated cheques which were dishonoured upon presentation, the Appellant is fully liable to settle the decretal sum. On his part, the Appellant denies any fraud in his dealings with the Respondent and seeks forbearance under section 360 (1) of the Act.
14.The offence of obtaining credit by false pretences is defined under section 316 of the Penal Code as follows:-
15.Section 316A of the Penal Code provides for bad cheques as follows:-
16.When PW1 Vinit Arwind Salva, was cross examined by the Appellant on when the post-dated cheques were presented for payment, he stated that –
17.In his testimony, the Appellant vehemently denied owing the Respondent any money, and although he admitted that when he was finally paid by one of his major debtors Nyambene County Council, he still did not pay the Respondent. He further confirmed that:
18.The court finds that the Respondent proved on a balance of probabilities that the Appellant, fully aware that he had insufficient funds in his account, issued the Respondent with post-dated cheques which bounced upon presentation on their maturity date. The Appellant’s contention that the Respondent presented the cheques maliciously before their date of maturity is, therefore, rejected.
19.It is clear from the foregoing that the Appellant does not enjoy the protection under section 360 (1) of the Act, and he must be called upon to settle the decretal sum, now that he has already been discharged from the No Asset Procedure.
20.This court does not find on the facts of this case any error of law or principle by the trial court as would justify appellate interference with the exercise of discretion of the trial court.
Orders
21.Accordingly, for the reasons set out hereinabove, the Appellant’s appeal is without merit and it is hereby dismissed.Order accordingly.
DATED AND DELIVERED ON 29TH DAY OF FEBRUARY, 2024.EDWARD M. MURIITHIJUDGEAppearances:Appellant in person.Mr. K. Muriuki, Advocate for the Respondent.