KIRTESH PREMCHAND SHAH v TRUST BANK LIMITED [2007] KECA 459 (KLR)
The bottom line
#The Court of Appeal ruled that anyone suing or appealing against a Kenyan company in liquidation must first get the winding up court's permission, every single time.
What this practically means
#Executive summary
#Key legal issues
#Scope of section 228 of the Companies Act
The words 'action or proceedings' in section 228 are to be construed widely to include applications and appeals brought against a company in liquidation, so leave of the winding up court is required.
The section was lifted verbatim from the English Companies Act 1862. Its rationale is that the court, as neutral arbiter, takes control of disabled commercial entities to ensure justice and fairness to all creditors and contributories, preventing a scramble for assets. English decisions and commentaries on the section remain relevant. The construction of the words must be wide enough to include any form of proceedings in court brought by any lawful procedure.
Whether earlier leave to continue the suit extends to appeals
The leave granted under sections 228 and 241 of the Companies Act for continuation of the High Court suit was spent upon determination of that suit and does not extend to consequential applications or appeals.
Sanction or leave is sought and granted on the basis of facts and circumstances existing when the matter is laid before the court, and the court exercises its discretion on those particular facts. Expenses incurred in the liquidation may be materially detrimental to creditors and contributories, so the liquidation court must retain control over proceedings against the company.
Effect of the decision in Kissi Petroleum Products Ltd v Kobil Petroleum
The Court distinguished Kissi Petroleum as a decision correct on its own facts, where no leave for continuation of the suit had been obtained in the superior court, while noting its reasoning that a stay of a winding up order does not dispense with the need for leave under section 228.
The full court in Kissi Petroleum held that until a winding up order is set aside, leave is still required for continuation of proceedings and an appeal without leave is incompetent. The present Court agreed the section applies to appeals but found the facts distinguishable because here leave to continue the suit had in fact been granted in the superior court.
Legal principles established
#- Any application or appeal against a company in liquidation requires leave of the winding up court under section 228 of the Companies Act; 'action or proceedings' in that section is given a wide meaning and includes applications and appeals.
- Leave previously granted to a company in liquidation to continue a suit in the superior court does not enure to consequential proceedings or appeals; fresh leave is needed based on facts existing when the new proceeding is laid before the court.
Court orders
#- 1.The notice of motion dated 17th July 2006 seeking stay of execution is struck out
- 2.Costs of the application to the respondent
- On appeal from
- High Court of Kenya at Nairobi
- H.C.C.C. No. 413 of 1997
- Jurisdiction invoked
- Court of Appeal appellate jurisdiction under the Constitution; the ruling determined a preliminary objection on jurisdiction under section 228 of the Companies Act, Cap 486
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "KIRTESH PREMCHAND SHAH v TRUST BANK LIMITED [2007] KECA 459 (KLR)", Case Analysis (2007). Civil Appli. Nai 188 of 2006 (UR. 109/06). Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2007/459/eng@2007-10-12
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.