High Court declines to stop prosecution of Flexitech directors over Ksh.30 million Naivas debt

The court dismissed an application for interim conservatory orders by the company and its directors, ruling that the risk of reputational damage and loss of business does not, on its own, justify halting a criminal prosecution.

The judge held that allowing prosecutions to be stopped merely to protect the reputations of businesses and prominent individuals would undermine the administration of criminal justice.

“If courts were to stop criminal prosecutions in order to protect businesses and reputations, except where, on the face of it, the prosecution is a purely civil-commercial dispute being recognised, then no prosecution of prominent people would take place,” the judge said.

The court, however, directed that the application for conservatory orders be heard on its merits, noting that it had not yet examined the full basis of the intended prosecution.

The dispute stems from a service agreement entered into by Naivas and Flexitech on February 10, 2021, under which the fintech firm facilitated purchases by customers who paid for goods in flexible instalments through its Flexpay platform.

Under the arrangement, Flexitech was entitled to retain five per cent of each payment as commission and was required to remit the remaining 95 per cent to Naivas within 24 hours.

Once customers completed their instalments, they would receive release codes allowing them to collect their goods from the retailer.

Court documents indicate that Flexitech initially remitted the collections as agreed but later stopped forwarding the funds, prompting Naivas to demand payment of the outstanding amounts.

The retailer first issued a demand for Sh24.9 million before making a subsequent demand for Sh29.5 million in unremitted collections.

Naivas maintained that Flexitech had acknowledged the outstanding amount but failed to remit the money despite further demands.

The retailer subsequently reported the matter to the police, prompting investigations by the Directorate of Criminal Investigations (DCI).

Following the investigations, the Director of Public Prosecutions (DPP) recommended that the directors be charged with stealing by agent.

The prosecution decision, communicated on August 11, 2026, triggered the directors’ legal challenge against the planned criminal proceedings.

In their petition, Flexitech and the directors argued that the dispute was essentially a commercial disagreement involving the reconciliation of accounts under the service agreement and its subsequent addendum.

They contended that the agreement contained a dispute-resolution mechanism that should be exhausted instead of subjecting them to criminal proceedings.

The petitioners further alleged that the criminal process was being used to pressure the company into settling a disputed civil debt and to undermine the contractual arrangement between the two businesses.

They also claimed that Naivas intended to replace Flexitech with an in-house platform allegedly copied from its Flexpay model.

The directors argued that their business depended heavily on their reputation and that criminal charges would cause irreparable damage to their commercial interests.

They asked the court to restrain the relevant state agencies from arresting, detaining, charging or prosecuting them over the transactions arising from the agreement dated February 10, 2021, as well as related contractual documents.

The petitioners told the court that some of the directors had already been arrested and released on police bond, while another remained at risk of arrest.

They further indicated that they were expected to appear in court on October 12, 2026, and urged the judge to intervene before the charges were formally brought.

Naivas opposed the application, denying that it had instigated the criminal investigations to recover a disputed civil debt.

The retailer maintained that the evidence disclosed a straightforward case of stealing by agent and that the directors should be arraigned and prosecuted.

The respondents and Naivas also opposed the request for interim orders, arguing that the court needed to consider both sides of the dispute before issuing orders that could interfere with the prosecution.

In declining to grant the interim relief, the judge cautioned against determining the substantive issues in the petition before hearing the parties on the application.

The court noted that the petitioners’ principal argument at that stage was that their arrest and prosecution would damage their reputation and business.

The judge found that this concern, without more, was insufficient to justify an interim order stopping the criminal process.

The court directed that the application for conservatory orders be fast-tracked, leaving open the possibility of granting relief if the petitioners establish a proper legal basis for it.

The judge added that the court could still issue conservatory orders if the petitioners satisfied the applicable legal principles, including those set out in the Gatirau Peter Munya case.