Everlyne Jennifer Mwakhа v Clarence Benard Amuhoyi & 1 other

of approximately Kshs 24,617,598/=, inclusive of debts arising from court judgments. She has not engaged in gainful employment for over two decades due to her declining health. 5. According to the petitioner, her condition requires constant care, effectively removing her from economic participation. Despite assistance from well-wishers, family and her former employer, she remains unable to service even her most basic obligations. No creditor holds security over any of her property and some have commenced execution proceedings. 6. She contends that her financial decline has been significantly exacerbated by the continued deterioration of her health, leaving her unable to meet her financial obligations as they fall due, thereby satisfying the statutory test for bankruptcy. 7. The petition is opposed by two creditors. They contend that the petition offends the mandatory provisions of Section 32 of the Insolvency Act, in that despite being granted multiple opportunities, the petitioner has failed to comply with the requirement for publication of the petition. They further submit that the grounds relied upon by the petitioner do not warrant the making of a bankruptcy order. 8. Clarence Benard Amuhoyi, a creditor, also alleges material non-disclosure and misrepresentation. In particular, the creditor points to paragraph 5(j) of the petitioner’s statement of affairs dated 19th April 2021, in which she avers that she has not operated a business in Kenya within the last five years. The creditor’s replying affidavit sworn on 25th November 2022 asserts otherwise, stating that under a Money Bond dated 7th April 2015, he advanced the petitioner Kshs 18,500,000/= to enable her to execute various tenders awarded to her prior to 31st September 2015. 9. This, according to the creditor, this contradicts the petitioner’s averment and demonstrates that she was, in fact, actively engaged in business during the period in question. He produced copies of bank statements showing payments received by the petitioner from the said tender contracts, allegedly executed using the funds advanced under the Money Bond. 10. These transactions, the creditor argues, are conspicuously absent from the petitioner’s statement of affairs, an omission that points to deliberate and material non-disclosure. Analysis and Determination 11. Section 3 of the Insolvency Act, 2015 establishes the twin objectives of insolvency proceedings which are to grant relief to the honest but unfortunate debtor by providing a genuine opportunity for a fresh start and to protect and balance the rights of creditors. 12. As observed by Prof. Ngugi J (as he was then) In the James Maina Kabatha (Debtor/Applicant), [2020] KEHC 2685 (KLR): “ The twin goals of consumer or individual bankruptcy law are to protect creditors and ensure optimal payment to them where possible; and the provision of shelter and a "fresh start" to individual debtors overburdened by debt.” 13. The learned judge further explained that: “ The “fresh start” goal is accomplished through the bankruptcy discharge, which usually releases the debtor from personal liability from certain debts and prevents creditors from taking any action against the debtor to collect those debts. https://new.kenyalaw.org/akn/ke/judgment/kehc/2025/16507/eng@2025-10-23 2

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Consequently, bankruptcy protection being an extraordinary relief, one of the corollaries to these seemingly confiictual twin goals of bankruptcy law – the protection of creditors and the provision of fresh start for the honest but unfortunate debtor -- is that an individual seeking bankruptcy protection is required to scrupulously demonstrate that he is acting in good faith and disclose all his financial information. It is only upon meeting this double threshold – demonstration of good faith and full disclosure of all financial information – that a Petitioner can become entitled to a bankruptcy order. The architecture and structure of the Insolvency Act and Insolvency Regulations, 2018 reinforce these double thresholds for individual Petitioners”. 14. The present petition must be assessed against this legal framework. The respondents challenge its competence on two principal grounds. The first relates to the petitioner’s alleged non-compliance with Section 32(4) and (5) of the Insolvency Act, which provides as follows: “ (4) (5) A debtor who maKshs an application under this section shall publish a notice of the application in— (a) a newspaper circulating within the region in which the debtor ordinarily resides; and (b) in such other publications (if any) as may prescribed by the insolvency regulations for purposes of this section. The Court may decline to hear the application if subsection (4) has not been complied with to its satisfaction.” 15. Section 32(4) is expressed in mandatory terms, and rightly so. The publication of a bankruptcy petition advances the objectives set out in Section 3 by safeguarding creditors’ rights and enabling them to participate, whether in support of or in opposition to the petition. This requirement is a vital safeguard in the bankruptcy process, as such petitions function, in effect, as class actions that affect the collective interests of all creditors. 16. This principle was reaffirmed by this Court in In re Ali Jillo Fallan, [2021] KEHC 8 (KLR), where Mativo, J (as he then was) observed: “ Insolvency proceedings are class actions by their very nature. This is the reason why the proceedings are advertised in newspapers and the Kenya Gazette. The advertisement affords creditors the opportunity to come forward to either oppose or support the Petition. The Petitioner was required under the law to comply with the regulation and Gazette the Petition. He did not. On the foregoing grounds, the competence of the Petition for want of conformity with the rules is questionable. The court cannot shut its eyes to such a grave failure to comply with the law. The court cannot entertain a practice which has the potential of causing injustice.” 17. It is undisputed that the petitioner was afforded an opportunity to comply with this requirement. The record shows that on 3rd June 2025, Ms. Kamau, holding brief for Mr. Swaka for the petitioner, informed the Court that publication had been effected in the Kenya Gazette of 9th May 2025. Counsel further indicated that a copy of the Gazette notice had been filed in court, attached to a letter dated 22nd May 2025. https://new.kenyalaw.org/akn/ke/judgment/kehc/2025/16507/eng@2025-10-23 3

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18. However, as the respondents correctly point out, no such publication was annexed to that letter. In these circumstances, and purely in the interest of doing justice to all parties, I took the liberty of independently searching for the purported Gazette notice. I was unable to locate any such notice in the Kenya Gazette of 9th May 2025 I therefore find that the petitioner has not complied with this mandatory requirement. 19. The second ground challenging the competency of the petition concerns the petitioner’s noncompliance with the statutory requirements relating to the Statement of Affairs. Section 32(2) and (3) of the Insolvency Act provides that: “ (2) (3) The Court may decline to deal with such an application if it is not accompanied by a statement of the debtor's financial position containing— (a) such particulars of the debtor's creditors and of the debtor's debts and other liabilities and assets as may be prescribed by the insolvency regulations; and (b) such other information as may be so prescribed. The Court may reject a statement of the debtor's financial position if of the opinion that it is incorrect or incomplete.” 20. Regulation 18(3) further requires that a comprehensive statement fully disclosing the debtor’s affairs be provided. Upon review, I concur with the respondents that the petitioner’s statement falls short of the statutory requirements. It contains no disclosure of financial transactions for the three years preceding the petition and is unsupported by any documentary evidence to substantiate the details provided. 21. The Statement of Affairs serves as primary evidence that the petitioner is unable to pay her debts as they fall due. It is therefore essential that the information it contains be supported by credible documentation. I concur with the holding in In re Jeremiah Koskei Bowen, [2025] KEHC 2286 (KLR) that a petitioner must demonstrate their financial position through primary financial statements and supporting documents. I also endorse the observation in In re Ali Jillo Fallan (supra) that the Court will not issue a compulsory bankruptcy order on grounds of general insolvency unless the facts are clearly and convincingly proved. 22. The debtor anchors her claim of insolvency on prolonged incapacity and significant medical challenges, asserting that the attendant expenses far outweigh her assets. While the Court does not discount the seriousness of such circumstances where duly proven, the evidentiary burden lies squarely on the petitioner to substantiate these assertions. In the present case, not a single medical report, doctor’s letter, or hospital record has been tendered to verify the extensive medical history narrated in the petition. 23. Equally, there are no receipts, invoices, bank statements, or other documentary proof of the alleged medical expenses or liabilities. The absence of such primary evidence renders the petitioner’s claims unverified and incapable of sustaining a finding of commercial insolvency. The law demands more than mere assertions; it requires cogent, credible, and contemporaneous documentation demonstrating that the debtor is genuinely unable to pay her debts as and when they fall due. Without such proof, the Court cannot conclude that the statutory threshold for granting bankruptcy protection has been met. 24. The 1st respondent further contends that in 2015 the petitioner received Kshs 18,500,000/= to finance her tender contracts, yet failed to disclose the related payments in her Statement of Affairs. According https://new.kenyalaw.org/akn/ke/judgment/kehc/2025/16507/eng@2025-10-23 4

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to the respondent, these transactions demonstrate that the petitioner had been actively engaged in business within the past five years, contrary to her averments of having no such commercial activity. 25. I have carefully considered the evidence presented. The Money Bond and the alleged payments in question date back to 2015, placing them beyond the mandatory three-year disclosure period prescribed under Regulation 18(3). While they may not trigger a statutory duty of disclosure for the purposes of compliance, they remain relevant in evaluating the petitioner’s bona fides and the overall credibility of her assertions. 26. On the totality of the evidence and submissions before me, I find that the petitioner’s Statement of Affairs is materially deficient and falls far short of the statutory requirements under the Insolvency Act and the Insolvency Regulations, 2018. It lacks critical disclosures, omits mandatory financial transaction histories, and is unsupported by any primary documentary evidence. In its present form, it does not provide a reliable or verifiable basis upon which the Court can assess the petitioner’s true financial position or determine whether she meets the statutory threshold for bankruptcy relief. 27. The Statement of Affairs is the cornerstone of any bankruptcy petition; without completeness, accuracy, and evidentiary backing, the Court is left with speculation rather than proof. This deficiency striKshs at the heart of the petition’s integrity and renders it incapable of sustaining a lawful determination in the petitioner’s favour. 28. Yet, Section 16(2) of the Act bestows upon this Court a general power to: dismiss a bankruptcy application or to stay proceedings on such an application on the ground that the Court is of the opinion that a requirement of this Part or the insolvency regulations has not been complied with in a material respect. Disposition 29. On the strength of this provision, and having considered the petition, responses and submissions by the parties, I make the following final orders: i. The petition is hereby stayed for a period of thirty (30) days from the date of this ruling to allow the petitioner an opportunity to comply with the statutory requirements outlined herein, specifically proper publication of the petition in accordance with Section 32(4) of the Insolvency Act and filing of a comprehensive and substantiated Statement of Affairs in compliance with Section 32(2) and Regulation 18(3) of the Insolvency Regulations, 2018. ii. The petitioner shall, within the said thirty (30) days, file a copy of the Gazette notice and newspaper publication evidencing compliance with Section 32(4) as well as a revised Statement of Affairs containing full disclosure of financial transactions for the preceding three years, supported by credible and contemporaneous documentation. iii. In the event of non-compliance within the stipulated period, the petition shall stand automatically dismissed without further recourse to this Court and with costs. It is so ordered. DATED, SIGNED AND DELIVERED AT NAIROBI THIS 23RD DAY OF OCTOBER 2025. F. MUGAMBI JUDGE https://new.kenyalaw.org/akn/ke/judgment/kehc/2025/16507/eng@2025-10-23 5

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