The Court of Appeal has allowed the Capital Markets Authority (CMA) to carry on with a probe against former directors of the collapsed Uchumi Supermarkets.
The appellate court said the notice issued for show cause letters against Joyce Ogundo, James Murigu, and Barth Ragalo in August 2016 was issued properly.
Justices Asike Makhandia, Helen Omondi, and Jamila Mohammed ruled it was wrong for the High Court to stop the probe against the three and delve into the merits of the decision to summon them.
The three former directors had been summoned to show cause over the rights issue, financial statements of the former retail giant, branches expansion, asset sale, and leaseback plans.
Whereas Mr Murigu and Mr Ragalo appeared before the CMA board and were later fined Sh660,000 and Sh855,000, respectively, Ms Ogundo successfully challenged the summons at the High Court. Mr Murigu and Mr Ragalo later challenged the findings of the board.
“In conclusion, from our evaluation of the facts of this case, the evidence, and the law and considering precedents, we are satisfied that the appellant acted in accordance with the provisions of the Act in issuing the NTSC and proceeding with the same would not have amounted to criminal or quasi-judicial criminal proceedings as held by the trial court,” the judges said.
The court said the High Court erred in its finding that the board proceeded in a criminal or quasi-criminal manner in handling the NTSC.
“For the avoidance of doubt, the appellant shall be at liberty to continue with the administrative proceedings that it had commenced against the respondents,” the judges added.
The court said the CMA Act empowers the regulator either on its motion or at the request of any person to look into the affairs of any person that it has approved or to which it has granted a licence and any public company the securities of which are publicly offered or traded on an approved securities exchange.
The regulator said it investigated the affairs of Uchumi in 2015 and thought that certain parties, including the former directors, might have had a role to play in the financial challenges experienced by the supermarket. It then issued the notices to the former directors.
Ms Ogundo said she was a director of Uchumi but quit more than one year before she challenged the summons. The market regulator said the three were alternate directors and directors respectively and after conducting investigations the board issued the summons.
Uchumi embarked on a rapid expansion following years of profit-making streak. It was on a profit-making streak since 2007 and was receiving an estimated 18 million customers per annum.
After four years of suspension from the bourse, the supermarket resumed trading in May 2011, much to the relief of shareholders.
