A recent High Court decision has highlighted an important issue in commercial disputes: can a creditor place a company under administration when the debt being relied on is still being disputed?
The issue arose in Infinity Industrial Park Limited v Bank of Baroda (Kenya) Limited & 2 Others, where the High Court terminated the administration of Infinity Industrial Park after finding that there were still substantial claims between the company and the bank that had not been resolved.
The dispute came from the parties’ banking relationship relating to the development of an industrial park along Nairobi’s Eastern Bypass. Bank of Baroda claimed that Infinity owed it approximately KSh2.07 billion and proceeded to appoint administrators over the company in August 2026. Infinity challenged the appointment, arguing that the parties had competing claims arising from their dealings.
The problem was that the amount actually owed between the parties had not yet been established. Infinity had also obtained a judgment against the bank in separate proceedings, although the amount payable was still subject to formal proof. This meant that the court could not simply assume that Infinity was the party that ultimately owed money.
Justice Freda Gathiru Mugambi found that the debt relied upon by the bank had to be “due and ascertained.” In simple terms, a creditor needs to be relying on a debt that is sufficiently established, rather than using administration to deal with a dispute where the parties are still arguing over who owes what.
This is important because administration is not simply another way of recovering money. Under section 522 of the Insolvency Act, 2015, administration is intended to achieve objectives such as keeping a company operating as a going concern, obtaining a better outcome for creditors than would be achieved through liquidation, or realising property for secured or preferential creditors.
The Act does, however, give certain secured creditors the power to appoint administrators. Under section 534, a holder of a qualifying floating charge may appoint an administrator, provided the requirements of the Act are met. The existence of this power does not mean that it can be used without regard to the circumstances of the debt or the purpose of administration.
In this case, the Court ordered that the administration come to an end and directed the administrators to return Infinity’s property and records, including title documents, keys, passwords, the company seal and bank mandate.
What does this mean for businesses?
The case is a useful reminder for both creditors and companies facing financial disputes. A creditor should first establish the legal basis for the debt and consider whether the amount is actually due before taking steps that could place a company under administration.
For a company on the other side, an administration appointment can have serious consequences because administrators can take control of the company’s affairs and assets. Where the underlying debt is genuinely disputed, the company may have grounds to challenge the appointment.
The decision therefore shows that administration should not be treated simply as a shortcut for debt recovery. Before taking action, parties should consider the nature of the debt, any competing claims and whether the chosen insolvency process is appropriate in the circumstances.