Kosgei & 3 others v Geothermal Development Company; KCB Bank Kenya Limited (Interested Party) (Employment and Labour Relations Petition E077 of 2022) [2025] KEELRC 243 (KLR)
The bottom line
#A Kenyan court ruled that Geothermal Development Company could not legally raise four former employees' mortgage rates from 3% to 13%, because a binding government pay commission circular took priority over internal company rules.
What this practically means
#Executive summary
#Key legal issues
#Whether the SRC circular fixing the mortgage interest rate at 3% p.a. was binding on the respondent
Yes. The SRC circular was binding on the respondent and was superior to the respondent's 2019 Regulations & Guidelines.
Relying on the Court of Appeal decision in Salaries and Remuneration Commission v NHIF, the court found that employees of state corporations are public officers within Article 260, and SRC advice under Article 230(4) is mandatory and binding. No evidence showed SRC approved the respondent's 2019 changes, so the guidelines could not override the circular.
Whether clauses 20.2(a) and 20.2(c) of the 2019 scheme rules were lawful
They were unlawful for being contrary to the enabling SRC circular, which preserves the 3% rate for the life of the loan unless the borrower defaults or leaves on disciplinary grounds.
The SRC circular provided that where a public officer leaves service other than on disciplinary grounds, the loan terms remain unchanged unless there is default. The petitioners had not defaulted. Regulations donating to the Board a discretion to withdraw support derogated from the circular without SRC sanction.
Whether the respondent's decision violated the petitioners' right to fair administrative action and whether the petition met the Anarita Karimi threshold
Yes, Article 47(1) was violated and the petition was properly before the court; the doctrine of constitutional avoidance did not apply.
The decision to implement regulations adversely affecting the petitioners was unlawful and therefore not reasonable administrative action. Having found a violation of Article 47, the court held the petitioners had precisely set out the provisions infringed and the manner of infringement as required by Anarita Karimi Njeru.
Whether the petitioners, being on fixed-term contracts, were eligible for the scheme
Eligibility was not before the court since the loans had already been disbursed; the respondent's own HR manual clause 5.4.1.3 extended the facility to employees on contract terms.
The court noted the SRC circular's scope covered permanent and pensionable officers, but the respondent's own manual applied the mortgage facility to contract-term employees as well. Since loans had been disbursed and secured by charges, the eligibility question was academic.
Legal principles established
#- SRC circulars on remuneration and benefits of public officers are binding on state corporations and cannot be varied by internal regulations made without SRC approval
- Internal scheme rules that derogate from an enabling SRC circular are unlawful
- Implementing such unlawful regulations to the detriment of ex-employees constitutes unfair administrative action under Article 47(1)
Court orders
#- 1.A Declaration that the actions and decision of the Respondent of withdrawing support from the Petitioners' mortgage loans with the Interested Party under the Respondent's Staff House Mortgage Scheme violated the Petitioners' rights under Article 47 of the Constitution of Kenya, 2010
- 2.A Declaration that the Respondent's action or decision that it will no longer support the Petitioners' mortgage loans with the Interested Party is unfair, unreasonable, unlawful therefore void
- 3.An order of certiorari quashing the Respondent's decision that it will no longer support the Petitioners' mortgage loans under the GDC Staff House Mortgage Scheme at an interest rate of 3% per annum
- 4.An order prohibiting and restraining the Respondent, its employees, agents or any person acting under its instructions, including the Interested Party, from varying, adjusting, increasing or reviewing the interest rates on the Petitioners' mortgage loans from 3% per annum to 13% per annum or any other prevailing market or commercial rates as long as the petitioners do not default in their loans
- 5.Costs of the petition
- Jurisdiction invoked
- Articles 22, 23(3) and 47 of the Constitution of Kenya, 2010; Fair Administrative Action Act, 2015
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Kosgei & 3 others v Geothermal Development Company; KCB Bank Kenya Limited (Interested Party) (Employment and Labour Relations Petition E077 of 2022) [2025] KEELRC 243 (KLR)", Case Analysis (2025). Petition dated 18th May 2022 (Employment and Labour Relations Court). Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2025/243/eng@2025-01-31
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.