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Pilot loses bankruptcy appeal in Sh20m KQ debt

Veteran pilot Musa Bulhan on Friday lost the bankruptcy suit instituted by national carrier, Kenya Airways, to recover more than Sh20 million owed by his African Airline International (AAI) 24 years ago.

Appellate judges Philip Waki, Gatembu Kairu and Kathurima M’Inoti said KQ followed the law to the letter in its quest to have AAI and Bulhan to clear the debt. Captain Bulhan was the majority shareholder and chief executive of the airline.

During the 1990s, AAI and KQ were collaborating well in the airline industry, despite being competitors. KQ would maintain the aircrafts of AAI and provide other services while AAI would supply KQ with spare parts and provide other services for its aircrafts.

However, things went south in 1999 when KQ claimed it was owed over Sh51 million by AAI and demanded payment. It filed the suit against AAI for recovery of the balance of Sh27,749,037 and obtained judgement for an admitted sum of Sh3,590,385 on May 21, 1994.  

The rest of the claim was to go for trial but Bulhan came to the rescue of AAI and signed a guarantee on December 22, 1994 for the sum of Sh20,910,825 after denying the balance of the claim made against AAI. KQ then abandoned the suit and preferred to pursue the amount admitted and guaranteed by Bulhan.

When Bulhan failed to settle the guarantee, KQ sued him and obtained summary judgement against him on January 25, 1996. An attempt by Bulhan to have the judgement reviewed and set aside on the basis that KQ owed more money to AAI, was dismissed on July 24, 1996.

A notice of appeal to challenge the dismissal of the application was filed on August 5, 1996 but nothing further has been done for the last 22 years to challenge the judgement. The decree for payment of Sh21,617,135  together with interest at four per cent above the base rate of Barclays Bank of Kenya compounded monthly with daily rests was issued by the Deputy Registrar on March 6, 1996. 

The court file then disappeared from the court registry for some time until an order for re-construction was obtained and the process of execution of the decree commenced. At first KQ took out a notice on January 21, 1999 for Bulhan to show cause why his immovable property should not be attached to pay the amount then outstanding as at January 31, 1999 in the sum of Sh51,827/834 but that process fizzled out.

Instead, a bankruptcy Notice No.20 of 1999 issued by the court on July 13, 1999 was served on Bulhan on July 21, 1999. He moved to challenge the bankruptcy notice on July 27, 1999 but justice John Mbaluto dismissed the challenge on January 20, 2000 and paved the way for the bankruptcy proceedings.

EDS/MK/007/012/018

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