The High Court has dismissed an application by the Registrar of Companies in a case in which the National Bank of Kenya (NBK) is seeking Sh870.9 million from a Moi-era construction firm facing liquidation over mounting debts.
The dispute involves Put Sarajevo General Engineering Company (F.21/80), a firm registered in 1980, and Put Sarajevo General Engineering Company Ltd (C.98786).
The Registrar argued that the two are distinct legal entities and that the credit facilities obtained from National Bank of Kenya (NBK) were advanced to Put Sarajevo General Engineering Company Ltd (C.98786) and not Put Sarajevo General Engineering Company (F.21/80).
Put Sarajevo handled many big-ticket contracts during the 1980s and 1990s, placing it among the big contractors at the time. It was placed under liquidation last year over debts owed to NBK, law firm Hamilton Harrison and Mathews (HHM) and a supplier Arrow Cars Limited.
The Registrar had asked the court to enter judgment against the latter company and its director Esed Becirevic, who are alleged to have received the loan facilities, arguing that the debt belonged to a separate company and not the original borrower named in the suit.
It clarified that it was not claiming the money for itself but that it moved to court in discharge of its statutory responsibility to maintain and clarify the register of companies.
The Registrar said Becirevic had allegedly acknowledged that the Put Sarajevo General Engineering Company Ltd (C.98786), received the facilities from NBK.
However, the court found that the admission relied upon did not establish all the elements necessary to grant the orders sought.
The judge said acknowledging that a company received credit facilities did not, by itself, prove that Sh870.9 million remained outstanding or that Mr Becirevic was personally liable for the debt.
‘Unless there is an admission or other established basis demonstrating that Becirevic personally assumed liability for the facilities, his position as a director is insufficient to justify judgment against him in his personal capacity,’ the court ruled.
Put Sarajevo General Engineering Company (F.21/80) supported the application, maintaining that it had never obtained the facilities from NBK and should not be held responsible for the debt.
It argued that the bank had itself pursued the Kenyan company over the same amount in separate insolvency proceedings.
The judge said the admission did not conclusively establish the outstanding balance, the director’s personal liability or the declarations sought.
‘In sum, the admission relied upon identifies, as a matter of the 3rd Defendant’s own pleading, the recipient of the facilities. It does not conclusively establish the outstanding balance, the 3rd Defendant’s personal liability or all the declarations sought,’ the court said.
The court also questioned the basis on which the Registrar, who was not claiming the money for itself, sought a monetary decree of Sh870.9 million and interest.
Identity of borrower
It further noted that the application could not be used to settle disputed issues requiring evidence, including whether the bank had taken contradictory positions in separate proceedings over the identity of the borrower.
The judge said establishing whether the bank was prohibited from disputing the identity of the debtor would require examination of what it had stated in the insolvency proceedings, the circumstances in which the statements were made and their effect.
Those matters, the court said, required evidence rather than submissions at an interlocutory stage.
The judge also observed that a final declaration on the identity of the borrower could affect the bank’s rights, yet the admission relied upon had been made by another defendant.
The court consequently found that the application did not meet the threshold for judgment on admission under Order 13 Rule 2 of the Civil Procedure Rules.
‘The monetary judgment and the further declarations sought cannot properly issue on the basis of the admission as presented,’ the judge ruled.