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ELRCPartially AllowedNot stated in judgment· [2025] KEELRC 1236 (KLR)

Chauhan v Comargo Supply Base (EPZ) Ltd (Cause E129 of 2023) [2025] KEELRC 1236 (KLR)

Employment and Labour Relations Court
30 April 2025
MMM. Mbarũ
954 words in judgment
View original judgmentRead on Kenya Law Watch case
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The bottom line

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A Kenyan court halted execution against a company in administration, confirming creditors cannot seize company property without the administrator's consent or court approval.

What this practically means

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Executive summary

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The respondent, Comarco Supply Base (EPZ) Ltd, the judgment debtor in an employment and labour relations suit, moved the court by an application dated 20 February 2025 under sections 560(1)(d) and 561(3) and (4) of the Insolvency Act, Order 40 and Order 22 of the Civil Procedure Rules and article 159 of the Constitution. It sought a stay of execution of a decree and warrant of attachment dated 13 February 2025, and a stay of the proceedings, pending completion of an administration process. Supported by the affidavit of administrator Kamal Anantroy Bhatt, the application explained that the company went into administration on 21 November 2024 under I & M Bank Ltd in Milimani HCCOMMIP No. E080 of 2024, with Bhatt and Dhir Bhatt appointed administrators. It argued that under section 560 no person may commence or continue legal proceedings, including execution, against a company under administration without the administrator's consent or the court's leave, and that the proclaimed properties were tools of trade immune from attachment under section 44 of the Civil Procedure Act. The court noted that the suit had been settled by consent on 12 September 2024 but the settlement was never confirmed, and that execution followed. Framing the question as whether the application was filed in good faith, the court held that the moratorium in section 560 barred the execution and that the application, far from interfering with the administration, bolstered the statutory object of protecting the company's assets. The application was allowed: the proceedings and subsequent orders were stayed pending the insolvency proceedings, but the claimant, holder of a valid consent judgment, was awarded costs. The matter was set for mention on 31 July 2025.

Key legal issues

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01

Whether execution against a company under administration is lawful

Holding

Execution without the administrator's consent or court leave is unlawful; the application for stay was allowed

Reasoning

Section 560(1)(d) of the Insolvency Act prohibits commencing or continuing legal proceedings, including execution, against a company under administration without the administrator's consent or court approval. Section 561 requires protection of the company's property from wastage. The respondent company went into administration on 21 November 2024, so the warrants of attachment and proclamation issued afterwards contravened the statutory moratorium and interfered with the administrator's functions.

p. 2
02

Whether the application was filed in good faith

Holding

Yes; the purpose was to protect a company asset from sale contrary to section 561 and bolstered the administrator's functions

Reasoning

The court observed that delays in confirming the settlement coincided with the administrators taking over the company and filing insolvency proceedings, while the claimant launched execution. Nonetheless, the court held that the application sought to stop a sale of company property contrary to section 561, which bolsters rather than interferes with the administration, and a person acting for the observance of the law should be commended, not castigated.

p. 3

Legal principles established

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  • While a company is under administration, legal proceedings including execution may only proceed with the administrator's consent or the court's approval
  • Section 561 requires protection of a company's property under administration from wastage, and the paramount object is protection of the company's assets

Court orders

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  1. 1.Proceedings in this suit and subsequent orders stayed pending the insolvency proceedings under Milimani HCCOMMIP No. E080 of 2024
  2. 2.The stay is not to be at the expense of the claimant, who holds a valid consent judgment
  3. 3.Costs awarded to the claimant
  4. 4.Matter to be mentioned regularly to follow up on progress; mention on 31 July 2025

Authorities

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Legislation

  • Insolvency Actsection 560(1)(d)
  • Insolvency Actsection 561(3) and (4)
  • Insolvency Actsections 534 and 537
  • Insolvency Actsection 522
  • Civil Procedure Actsection 44
  • Civil Procedure RulesOrder 40 rules 1 and 2
  • Civil Procedure RulesOrder 22 rules 51 and 52
  • Constitution of KenyaArticle 159

Cases cited (1)

  • Shee Hamisi Mashipa v Mare Nostrum Limited
    [2021] eKLR
Jurisdiction invoked
Sections 560(1)(d) and 561(3) and (4) of the Insolvency Act; Order 40 rules 1 and 2 and Order 22 rules 51 and 52 of the Civil Procedure Rules; Article 159 of the Constitution

Key timeline

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Practical implications

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Frequently asked questions

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Cite this brief

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Cite this brief

Caselaw, "Chauhan v Comargo Supply Base (EPZ) Ltd (Cause E129 of 2023) [2025] KEELRC 1236 (KLR)", Case Analysis (2025). Not stated in judgment. Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2025/1236/eng@2025-04-30

Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.