Regulator cleared in CMC board suit

Capital Markets Authority chairman Kung’u Gatabaki and seven directors of troubled motor dealer CMC were Thursday cleared of contempt of court charges, removing one of the many legal obstacles to the return to normalcy in the Nairobi-based firm.

Constitutional and Human Rights judge Isaac Lenaola said the capital markets regulator and directors of the motor firm did not disobey the orders that Justice Mumbi Ngugi issued on November 16 last year.

Ousted CMC chairman Peter Muthoka had petitioned the court for orders punishing Mr Gatabaki and CMC board members Joel Kibe, Paul Ndung’u, Ashok Shah, Charles Njonjo, Andrew Hamilton, Mary Ngige and chief executive William Lay.

READ: Ruling on CMC’s case set for next month

Mr Muthoka had argued that the directors and CMA chairman had breached a court order requiring them to maintain the “status quo” and avoid making any changes in the composition of the company’s board.

Mr Muthoka, through lawyer Fred Ojiambo, told Justice Leonaola that the changes made in the CMC board were violating Justice Ngugi’s orders.

The judge had ruled that the board be preserved until the case Mr Muthoka had filed against CMA was heard and determined.
CMA, through lawyer Zul Alibhai, had argued that the “status quo” order issued on November 16 was related to the general affairs of CMC and not the composition of the board.

The lawyer submitted that the orders were meant to stop the shareholders from changing directors at an extraordinary
general meeting and did not restrain the regulator from moving in and protect the company’s affairs.

Justice Lenaola ruled that it was obvious from a clear reading of Justice Ngugi’s ruling that “she never intended her orders to extend and include any act by CMA to protect CMC.”

“Once I have held that there cannot have been contempt of the court orders, it follows that all other issues raised by the advocates for the parties are merely academic and I see no reason to delve into them,” said Justice Lenaola before he dismissed the application with costs.

Mr Muthoka had accused the regulator of initiating his removal and that of co-director Joseph Kivai from the motor dealer’s board without following the right procedure.

CMC board members who had voted the two fellow directors out had argued that they did so in accordance with the orders the CMA had issued to resolve the boardroom wrangles in the motor firm.

Mr Kivai is Mr Muthoka’s co-director in Andy Forwarders where the latter acts as the chief executive.

Mr Muthoka also argued that CMA had no powers under the Companies Act to remove him and Mr Kivai from the CMC board.

Mr Muthoka further told the court that the CMA lacked statutory mandate to nominate directors in the absence of the shareholders, saying there was no vacuum within the board of directors to allow the regulator to bring in its own nominees.