- The court noted that there was no provision for the grant of an order of status quo ante (The state of affairs that existed before).
- It also noted its lack of jurisdiction to extend the administrator's term as it had already ended.
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The Court of Appeal has dismissed a request by an administrator seeking to be allowed to continue managing multi-billion shillings assets belonging to Cape Holdings Limited, including where Dusit D2 sits.
Appellate Judges Asike-Makhandia, Sankale Ole Kantai and Mwaniki Gachoka dismissed the application stating that the court had no jurisdiction to give such orders after the expiration of a term.
"From the foregoing, it must be clear to all and sundry that this court has no jurisdiction to extend or re-appoint an administrator whose term has expired, accordingly the prayer of status quo ante sought in the application cannot be granted for to do so will be tantamount to reinstating or re-appointing an administrator whose term has expired by operation of law which is not permissible. This conclusion suffices to dispose of the entire application," the judges ruled on Friday.
Before moving to the court, Vruti Shantilal had filed a similar application at the High Court seeking an extension of the term for 12 months or any sufficient time.
Then, she told the court this was to allow the completion of the administration of Cape Holdings and the appeals pending.
After considering however, High Court Judge Alfred Mabeya held that the threshold for extending the administrator's term had not been met and consequently declined the application.
Being dissatisfied, Cape Holdings filed a notice of appeal seeking orders that pending the hearing and determination of the intended appeal, the state of affairs that existed before the ruling of the High Court be reinstated.
It also wanted to appellate court to issue an order extending its administration.
In a supporting affidavit, Shantilal argued that it would be in the interest of justice and for the good of all creditors that she continues to oversee the property.
She submitted that under section 522 of the Insolvency Act, the administration's objectives are to maintain the company as a going concern and achieve a better outcome for the company's creditors as a whole.
She said had the administrator not obtained the stay orders, the company would have been liquidated on account of the debt that is in excess of Sh5.4 billion leaving nothing to the other creditors.
The further court heard that there were several pending appeals and some of them sought to determine the priority of rights between a debenture holder and an unsecured creditor.
Shantilal faulted the High Court for failing to find that public interest and supremacy of the law depended on the extension of the administration for the just determination of the pending appeals.
Supporting the application, I&M Bank through counsel William Kabaiku said it would suffer irreparable loss if the court did not allow the same as the pending appeals would be rendered moot.
He also argued that this would give Synergy Industrial Credit Limited, which won a Sh5.5 billion property debt row against Cape Holdings, unfair and unlawful priority over secured creditors.
Synergy opposed the administrator's application saying from the High Court's ruling, it was obvious that there was no explanation as to why the administration was not completed within the statutory period.
Its lawyer Ahmednasir Abdullahi further stated that there was no link between the outcome of the civil appeals and the process of administration as the debt is recoverable from Cape Holdings.
According to him, after failing to escalate the dispute to the Supreme Court, the company employed a different tactic of using the administrator as a tool to defeat his client's bid to sell the property.
He went on to state that Shantilal was in essence seeking the court's nod for re-appointment, yet her term had expired.
Upon considering the applications and submissions, the judges noted that the court had to first, be satisfied on the twin principles that the appeal is arguable and that if the orders sought are not granted and the appeal succeeds, the appeal will be rendered nugatory.
Before considering the same, however, the court noted that there was no provision for the grant of an order of status quo ante (The state of affairs that existed before).
It also noted its lack of jurisdiction to extend the administrator's term as it had already ended.
"Even if we consider the question of whether the applicant (Administrator) has met the twin principles, it is now settled that for an applicant to be successful, it must satisfy both principles. We have looked at the proposed grounds in the memorandum of appeal and consider them arguable, as an arguable appeal is one that need not succeed but one that deserves consideration. On the second principle, we are not persuaded that the intended appeal will be rendered nugatory as argued by the applicant," the judges further ruled.
"Accordingly, we find that this application is not merited, and we dismiss it in its entirety with costs to the 1st respondent (Synergy)."