Court suspends audit of Kapchebet Tea Factory

By Nikko Tanui

Kericho, Kenya: Kericho High Court has stopped two shareholders of an ISO-certified private tea factory in Kericho County from conducting a forensic audit of the factory.

 The court found that the two had arrogated themselves the power of appointing auditors contrary to the Companies Act.

Kericho Resident Judge Justice Joseph Sergon set aside ex parte court orders issued to David Lang’at and Ismail Gulamani on February to appoint auditors to investigate the financial affairs of Kapchebet Tea Factory Company Limited.

While setting the orders aside, Justice Sergon said the private auditors appointed by Lang’at and Gulamani were not going to be under the control and direction of the court.

“I am convinced by the respondents submission that Section 165 and 166 of the Companies Act only gives powers to the court to appoint auditors, inspectors or investigators on the request of the members to investigate or inspect the affairs of the company,” said Justice Sergon.

Forensic audit

The Chairman of the Kapchebet Tea Factory Stephen Kenduiywa together with Joel Sang, Joseph Ngetich and Roderick Kenduiywa, have been named as respondents in the suit, while Jonah Keter, also a director, has been enjoined in the case as an interested party.

In his February ex parte orders, Justice Sergon had compelled the five respondents, company auditors, bankers, suppliers, corporate secretaries and staff to co-operate and assist the said auditors with documents and information to facilitate the forensic audit.

The applicants, Lang’at and Gulamani, had through their lawyer Sheila Muthee claimed in the suit that their fellow directors and co-shareholders had excluded them from running the affairs of the company and that they were not aware of the company’s financial status.

Paralysed operations

However, the respondents, through their lawyers Charles Opulu and Enock Miruka, filed an objection in court seeking a stay of execution of the exparte orders.

“Sections 165 to 172 of the Companies Act do not give powers to the applicants to investigate their fellow directors because the jurisdiction to appoint auditors and inspectors is vested with the court,” said Opulu.

He said the applicants had used the ex parte orders to paralyse the factory’s operations.