Sheracco Co-operative Savings and Credit Society Limited v Karuturi Limited (Under receivership) & another [2021] KEELRC 1303 (KLR)

f) That the suit offends the procedure laid down under the repealed companies Act on priority of payment of secured creditors, such as itself being a debenture holder whose security had crystalized enabling it to put the 1 st defendant under receivership to secure its debt, as such this application is an abuse of Court process. 4. The plaintiff/ Respondent opposed this application and filed a relying Affidavit deposed upon on 10 th January, 2020 by Ferdinand Juma, the Chairman of the Plaintiff Sacco who contends that the 2 nd Defendant has been jointly sued with the 1st Defendant by dint of Order 1 Rule 3,5,6,7, and 9 of the Civil Procedure Rules. That the 2 nd Defendant is the one that is in control of the 1 st defendant as such they are held vicariously liable for any acts and omissions committed by the 1 st defendant. 5. He stated that prior to and after the placement of the 1 st Defendant under receivership by the 2 nd defendant pursuant to its debenture holders’ rights, all former employee/ workers of the 1 st defendant had their sacco savings deducted directly from their salaries and deposited with the plaintiff society. 6. That when the 1st Defendant was placed under receivership on 21 st October, 2015, the 2nd defendant appointed a manager to run and operate the affairs of the 1st Defendant and remit all proceeds of the business to the said Bank as evidenced by the letter dated 11 th March, 2016. Therefore, he contends that after receivership the 1 st Defendant acted as an agent of the 2 nd Respondent and the issue of vicarious liability arose therefrom. 7. That the 2nd Defendant’ manager at the 1st defendant company acknowledged in the letter dated 14 th July, 2016 withholding some of the savings as per the records in their company and blatantly refused to remit the said savings to the plaintiff. 8. That prior to the institution of this Suit a formal demand letter had been lodged with the 1 st defendant manager on 29th February, 2016 by the advocates for the plaintiff and on 20 th may, 2015 and 25th January, 2016 by the Sub- county co-operatives officer. Subsequently the letter of 25th January, 2016 was responded to by the 1 st Defendant manager who intimated the settlement of the said accounts but have failed to make good their promise. 9. Therefore, he stated that the 2 nd Defendant are vicariously liable for the actions of the 1 st Defendant’s manager therefore have been properly sued. 10. The parties filed submissions to dispose of the application with the applicant filing on 17 th February, 2020 and the Respondent on 7 th February, 2020. Applicant’s submissions. 11. The applicant’s Counsel submitted that the suit as filed does not disclose any reasonable cause of action against the applicant, and that this Court is mandated to look at the plaint as filed and not beyond as held in in Attorney General-v- Oluoch [1972] I EA 392. He further argued that the plaint must disclose three elements; that the plaintiff enjoyed a right; that a right has been violated and the defendant is liable. 12. He maintains that it is not involved in the running of the activities of the 1 st defendant neither has it received the plaintiff’s deductions as such should not be held responsible for the liabilities of the 1 st defendant. 13. It was submitted that the argument by the applicant that the receiver and the manager of the 1 st Defendant are agents of the 2 nd Defendant is misconceived and that such employees are employees and agents of the 1 st Defendant and not of the debenture Holder and cited the case of Surya Holdings Limited & 2 others –v- CFC Stanbic Bank Limited [2015] eklr and the Court of Appeal case of Manuel Anidos –vKinangop Wind park Limited 9In receivership) & 2 others [2019] eklr. 14. Accordingly, he submitted that the duty to deduct and remit the Sacco contributions vested with the 1 st Defendant and not the 2nd Defendant as alleged. 15. It was submitted further that the Plaintiff joined the 2 nd defendant in this suit to avoid the ranking of claims and priority of payment procedure provided for under Section 95(1) and section 311(1) of the repealed Company’s Act and subject the applicant to unwarranted settlement of decree which it is a stranger to. He argued further that the plaintiff after obtaining default judgement against the 1st Defendant ought to have obtained a decree and register it with the appointed liquidator and simply follow priority of payment as stipulated under the law. 16. The applicant submitted that the Court directed the plaintiff on 29 th April, 2019 to file and serve all the necessary documents and fixed the matter for hearing on 1st July, 2019 before the parties complied with Order 11 of the civil procedure Rules therefore the case is not ready for hearing. 17. He concluded by emphasizing that they have been wrongly sued and their name should be struck off these proceedings as the issue for determination is between the plaintiff and the 1st Defendant. Plaintiff/ Respondents submissions 18. The gist of the respondent’s submissions are that, the Applicant in exercising its debenture Holders’ right, appointed the 1 st Defendant,

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receiver and manager as such the said manager and receiver running the 1 st defendant is an agent of the 2 nd Defendant therefore its Members’ contributions deducted by the 1 st defendant prior to and past the appointment of the Receiver are in the hands of the 2 nd defendant’s manager and therefore it is necessary to have the 2 nd Defendant on board in this Suit for this Court to determine the issues conclusively. 19. I have examined the averments and submissions of the parties herein. The 2 nd respondent herein have been sued by the claimants herein because they are receiver manager for the 1 st respondent and therefore also agents of the 1 st respondent which the 2nd respondent have denied. The 2nd respondent have denied being agents of the receiver manager. 20. They deny being agents of the debenture holders. I have looked at the plaint as filed before this court, the claimant claim that the respondents have been deducting their dues. The claimant have not demonstrated how the 2 nd respondent in particular have actually deducted the dues from the claimant’s employees and failed to remit to that SACCO. (a) There is actually no demonstration of any employee-employer relationship. (b) For the claimants to show that this claim is properly before this court as an employment relationship matter. In my view there is no employer-employee relationship between the claimant and 2 nd respondent either. 21. I therefore find that this application is merited and allow it to the extent that the 2 nd respondent are strike out of this suit. 22. There will be no order as to costs. RULING DELIVERED VIRTUALLY THIS 29TH DAY OF JUNE, 2021. HON. LADY JUSTICE HELLEN WASILWA JUDGE In the presence of:Karanja Mbugua for claimant – present 1st respondent – absent 2nd respondent – absent Court Assistant - Wanyoike

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