The High Court has extended the administration of cash-strapped Multiple Hauliers for another six months. Prime Bank had sought leave to proceed with a pending commercial suit against the firm.
In granting the extension, Justice Francis Gikonyo said allowing Prime Bank to proceed with its suit would be prejudicial to the administration process and all the other creditors.
“If each of the creditors was left to pull its way as is clear from their conduct on record, the dismemberment of the company assets would be so chaotic that the losses to the creditors would be insurmountable…The administration of Multiple Hauliers (EA) Ltd is extended for a further period of six months under section 594 (1) (b) of the Insolvency Act.
The official receiver does continue acting as administrator as provided for under the provisions of the Insolvency Act,” said the court in its decision yesterday.
Administration is a process through which a third party—an administrator—is appointed to take over the affairs of a firm in distress to improve its financial situation for the benefit of its creditors or auction its assets as a last resort to protect the interest of creditors.
The case involved multiple motions related to the ongoing insolvency proceedings of Multiple Hauliers.
The company has been the subject of a legal battle involving various creditors, including KCB, Cooperative Bank, NCBA, and Prime Bank.
Prime Bank applied to the court to get the court’s approval to continue with a commercial suit seeking the sale of Multiple Hauliers’ Mombasa Property, which is a critical asset in the company’s restructuring.
KCB, which holds a debenture over the company amounting to approximately $27.7 million (Sh 3.58billion at current exchange rate) opposed the motion, arguing that granting leave would undermine its priority security interests. KCB Bank contended that the administration process aimed to ensure equitable treatment of the creditors and that Prime Bank’s suit could disrupt these efforts.
In making his decision, Justice Gikonyo acknowledged that there existed competing interests over the Mombasa Property.
He said, “My take is that, since there are competing interests over the Mombasa Property by both Prime Bank and KCB, which holds security that runs in priority, it would be highly prejudicial to grant the leave sought. It was contended and not denied that, if the suit was allowed to proceed, in jeopardy would be the Mombasa Property over which KCB claims. Further, since the company is under administration all executions and proceedings that may negatively impact its assets have been suspended. To allow the leave sought would be discriminating in favour of Prime Bank against the rest of the body of creditors.”
The Court also granted restraining orders sought by Multiple Hauliers, preventing KCB, Cooperative Bank, and other secured creditors from auctioning company properties pending the completion of an investment deal.
The court noted that the two banks and other creditors who are secured have the right to exercise their statutory power of sale. It went on to note that the company’s debt ran into tens of billions of shillings.
However, the court proceeded to grant the injunction saying that the properties were part of the overall transaction being offered to the investor who is being depended upon to inject the necessary funds into the Company for distribution to creditors. However, the court limited the injunction just to the six-month extension given to the official receiver to oversee the process.
“The view the Court takes is that the injunction sought is or can only run until the term given to the Official Receiver expires and not permanent as sought in the Motion. In the circumstances, I grant the prayer only to run for the term the Official Receiver is to actualize the transaction sanctioned by the Court on 13/9/2024,” the court said.
The Official Receiver, appointed in September 2024, was granted an extension of six months to continue overseeing the restructuring process.
