Badar Pharmacy Limited v Imperial Bank Limited (In Liquidation) (Civil Suit 73 of 2022) [2023] KEHC 24305 (KLR) (24 October 2023) (Ruling)

Key Facts

Transaction Type

Issues

• The court examined whether the plaintiff was required to obtain leave from the court to file the suit against the defendant, which was in liquidation. The plaintiff argued that leave was not required as the liquidation appointment was stayed by the Court of Appeal, while the defendant contended that proceedings could not be initiated without such leave.
• The plaintiff argued that decisions by Justices Otieno and Tuiyott, which interpreted Section 56(2) as applicable to liquidation, were per incurium (contrary to binding precedent). The court was urged to disregard these rulings in favor of a plain statutory interpretation.
• The defendant challenged the validity of the liquidation process, asserting that the appointment of the liquidator was made outside the statutorily prescribed timeframes. The plaintiff countered that the illegal appointment could not be used to justify striking out the suit.
• The court was asked to interpret whether Section 56(2), which prohibits civil proceedings against 'the institution' without sanction, applies to institutions in liquidation. The plaintiff argued the section did not mention liquidation, distinguishing it from Section 46(1)(a), which explicitly addresses control by the Corporation.
• The plaintiff claimed the defendant's application was invalid because it was supported by an affidavit from an individual not authorized to represent the defendant. This procedural defect was cited as grounds for opposing the application.

Holdings

• The court determined that the application was unnecessary to analyze due to intervening actions, but noted it had merit prior to those events.
• The court found the application had merit before being overtaken by events, but dismissed it due to intervening factors. The defendant shall bear the application costs.
• The application dated 24/1/2023 is dismissed with costs of Ksh. 20,000 to the applicant. The Applicant's costs shall be paid within 30 days. The court shall give directions on hearing and all pending applications after the ruling.

Remedies

• Court shall give directions on hearing and all pending applications after the ruling
• Applicant's costs of Ksh. 20,000 shall be paid within 30 days
• Application dated 24/1/2023 dismissed with costs of Ksh. 20,000 to the applicant

Legal Principles

• The principle of substance over form guided the court's decision to dismiss the application despite its merits, as intervening events (granting leave to proceed) rendered it unnecessary to analyze further. This aligned with constitutional and procedural justice objectives.
• The court applied the literal rule in interpreting section 56(2) of the Kenya Deposit Insurance Act, emphasizing that the provision does not explicitly apply to liquidation. This principle was central to dismissing the defendant's application as overtaken by events.
• The purposive approach was used to analyze the definition of 'institution' under the Kenya Deposit Insurance Act, comparing it with the Banking Act's definitions. This informed the court's view that the defendant's liquidation status did not insulate it from the suit.

Precedent Name

• Ashok Doshi & another vs Central Bank of Kenya & Another
• Mombasa Misc. CA Application No. 094 Of 2022
• Mombasa CA Application number 094 of 2022
• Nathans Browne Jp v Murang'a County Government

Cited Statute

• Banking Act (Cap. 488)
• Kenya Deposit Insurance Act
• Microfinance Act, 2006 (No. 19 of 2006)

Judge Name

Passage Text

• 21. As I was dusting this application, I noted from the CTS that the applicant filed an application for leave, during the week, court number 5 was on duty and was granted leave. They did not disclose pendency of this application. Nevertheless, this is now water under the Nyali bridge. This caused the application to be overtaken by events.
• 26. The upshot of the foregoing is that I find merit. However, it has been overtaken by events. a. The application dated 24/1/2023 and is thus dismissed with costs of Ksh. 20,000 to the applicant.
• Striking Out suit is a draconian measure which should be exercised sparingly. A pleading can only be struck out if it so hopeless that it cannot be cured/remedied even by amendment.

Damages / Relief Type