13th February 2025
Barely into the first quarter of the year, our dynamic duo, Chacha Odera and Kamara Paul are firing on all cylinders. We are thrilled to announce that they have yet again triumphed in the Court of Appeal, successfully defending a consortium of banks and a receiver in Civil Appeal No. 592 of 2019: Athi River Steel Plant Limited vs. Ponangipalli Venkata Ramana Rao, Commercial Bank of Africa Limited, KCB Bank of Kenya Limited, Bank of Africa Limited & I&M Bank Limited.
In May 2024, the duo persuaded the Court of Appeal resulting in a watershed moment decision for holders of floating charges predating 18th January 2016 as the Court of Appeal fortified their right to appoint an administrative receiver as reserved under Section 690(4) of the Insolvency Act, 2015.
In dismissing the Appeal by Athi River Steel Plant Limited (which primarily challenged the applicability of Section 690(4)) and the repealed Companies Act) the Court of Appeal agreed with the duo’s submissions that:
”It cannot be ignored that any starting point for appointment of a Receiver or Receiver and Manager is the existence of an act of default for repayment of an amount that is due and owing. It is clear to our minds, and the appellant does not dispute that colossal amounts were advanced to it. Among the securities offered to secure the advance are debentures as well as charges over properties. It is also not in dispute that the said debentures were registered and the High Court upheld the validity of the charge created thereunder. At any rate, the validity of the securities in not in issue, as no appeal had been made in that regard…Nothing turns on whether the appointment of the receiver was based on the provisions of the debenture or under the Insolvency Act. The attack on the lawfulness of the appointment of a receiver is at best a smokescreen and it would still not address the indebtedness of the appellant to the 2nd to 5th Respondents. We fail to find merit in this argument. “
Dissatisfied with the dismissal of its Appeal, Athi River Steel Plant Limited belatedly sought an extension of time and leave to appeal the decision of the Appellate Court to the Supreme Court. In a ruling dated 7th February 2025, the Court of Appeal, once more persuaded by the duo, declined the Application, upholding the following principles on extension of time:
“Extension of time is not a right of a party. It is an equitable remedy that is only available to a deserving party at the discretion of the Court. A party who seeks an extension of time has the burden of laying a basis to the satisfaction of the court: that discretion should be exercised to extend time, and this consideration is to be made on a case-to-case basis; whether there is a reasonable reason for the delay, it should be explained to the satisfaction of the Court; whether there will be any prejudice suffered by the respondents if the extension is granted; whether the application has been brought without undue delay; and whether in certain cases, like election petition, public interest should be a consideration for extending time. ”
Based on the above principles, the Court agreed that misapprehension of the law and complexity of legal issues in a case are not sufficient reasons to excuse inordinate delay.
These decisions come at the right time in bolstering the rights of secured creditors under debenture instruments established before the commencement of the Insolvency Act, and fortify the view that Courts are generally disinclined to hinder enforcement when the debtor’s indebtedness and the validity of the debenture instruments are not disputed.
Read the full Judgment here.
Read the full ruling here.
