Karim Mohamedhussein Hasanali Meghji v Hetal Nirmal Gurjar

doing against the company or its interests. The wrong being one resulting from negligence, breach of trust, breach of duty, fraud, or other wrongful act or conduct. 6. Although derivative suits are usually by minority shareholders, I am of the view that it may also be brought by a majority shareholder. This is for the reason that derivative suits are not just meant to protect members and minority shareholders, but the company itself. Hence it is an avenue meant to promote accountability by the directors, and to protect the companies from the predatory and malevolent acts of their directors. 7. In so doing, these suits not only make the directors answer for their actions or omissions, but also enforce the directors’ fiduciary duty to the company. As they are brought and continued in the name of the company itself, rather than that of their initiators. 8. This Court has considered the Application (and its Supporting Affidavit), the Respondent’s filed Response, as well as the parties’ rival written and oral submissions. 9. The Respondent has in opposing the Application stated that the company’s Articles provide for arbitration for issues relating to the company’s internal management; and that the presence of an arbitral clause in the company’s Articles, bars the ventilation of such disputes through litigation. In so arguing the Respondent has relied on Section 6 of the Arbitration Act of 1995 (Cap 49 Laws of Kenya) as a shield. 10. I am of the persuasion that where there are allegations of serious wrong-doing on the part of a director or directors (especially fraud and misappropriation of the company’s funds), leave for derivative suit need to be granted, even if there is a provision for arbitration. This is because derivative suits are a tool for accountability- to call upon the directors to account or answer to allegations of wrong-doing. 11. A similar position was taken in Nancy Mwangi t/a Worthlin Marketers v. Airtel Networks (K) Ltd and 2 Others [2014] eKLR, where it was stated that where serious allegation of fraud and misappropriation are made against a director, public policy demands judicial scrutiny, notwithstanding any arbitral cause. 12. I am of the fervent view that where such allegations have been made against a director or directors, the court should not allow the director(s) to take cover behind the veil of arbitration. Arbitration needs to be applied in the promotion of the law, and not as a tool for defeating the law. 13. This is especially because this Court (the High Court) is the court that the Companies Act of 2015 (Cap 486 Laws of Kenya) in Section 2, designated to the court having jurisdiction in company matters, and the custodian of companies. This is a fundamental duty, a higher call of duty. One that calls for disabusement from scapegoating arbitration to side-step the law or avoid legal consequences. 14. In the end, this Court finds this Application to be meritorious, hence accordingly allows, it in terms that the Applicant Karim Mohamed Hussein Hassanali Meghji is hereby granted leave to commence a derivative action (in the name of the company) against the Respondent Hetal Nirmal Gurjar the company’s Managing Director. The Suit be filed within 14 days from the date of this ruling. 15. The Applicant is further awarded the costs of this Application, to be paid by the Respondent the said Hetal Nirmal Gurjar who opposed the Application. DATED AND DELIVERED AT NAIROBI ON THIS 25TH DAY OF SEPTEMBER 2025. PROF (DR) NIXON SIFUNA JUDGE https://new.kenyalaw.org/akn/ke/judgment/kehc/2025/13249/eng@2025-09-25 2

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