High Court resumes Mumias Sugar leasing case

Devki withdraws bid to lease Mumias Sugar Company

The case challenging the leasing of Mumias Sugar Company Limited to Sarrai Group has kicked off in earnest with the applicants urging the High Court to issue an injunction stopping the same.

Five farmers, Lambert Lwanga Ogochi, Augustino Ochacha Saba, Prisca Okwanko Ochacha, Robert Mudinyu Magero and Wycliffe Barasa Ng’onga together with West Kenya Sugar Company and Mumias Outgrowers were today unanimous that the leasing was opaque, shrouded in illegalities and did not follow regulatory approvals.

The farmers’ lawyer, Mr. Kibe Mungai told Presiding Judge at the Milimani Commercial Court, Justice Alfred Mabeya that the lease was granted to Sarrai Group which was the lowest bidder at Ksh.5.8 billion leaving out  West Kenya Sugar which was the highest bidder at Ksh.36 billion.

While making his submissions, Mr. Mungai noted that the main purpose of placing the company under receivership was to address its indebtedness and that the lease should be able to generate sufficient resources in order to pay all debtors, particularly Kenya Commercial Bank, and thereby leaving the company in a stable condition to be returned back to its owners, directors and shareholders.

“There was an unusual hurry in awarding the lease to the sixth defendant (Sarrai Group) and this cannot speak well about the integrity and accountability of the first respondent (Ponangipali Venkata Ramana Rao),” the lawyer added.

He also took issue with Mr. Rao’s assertion that the lease was awarded to Sarrai Group because during technical evaluation, it was noted that if West Kenya Sugar Company was awarded the lease of the assets of Mumias Company, then Rai Group of Companies will control at least 41.95% of the total sugarcane crushing capacity per day in Kenya.

Lawyer Paul Muite adopted Kibe’s submissions, adding that the issues being raised by the plaintiffs are serious. He said claims by Rao on market dominance ought to be handled by the Competition Authority of Kenya which has data to make that decision. “You must be occupying 50% in the market to be described as dominant,” he added.

Muite pointed out that Mumias is a valuable company in terms of asset base and that West Kenya Sugar had offered Ksh 36billion in addition to monthly rent of Ksh.150 million, an upfront deposit of Ksh.900 million as security for monthly payment and a bank guarantee security bond of Ksh.500 million.

Ms. Maureen Odeck for Mumias Outgrowers said Rao ought to have operationalized his appointment as an administrator of Mumias, adding that he handed over the assets of the company without seeking approval of the Competition Authority of Kenya. She added that the secret manner in which the lease was granted will prejudice 77,000 farmers who are owed Ksh.3.7 billion by the sugar miller.

“The lease is intended to defraud poor farmers, employees, unsecured creditors and shareholders. We urge you to allow the notice of motion to prevent take over of the assets of Mumias by the sixth respondent (Sarrai Group) as it is illegal,” she submitted.

The Judge threw out the application by Mumias Outgrowers (1998) which had sought to have the matter referred to the Chief Justice to empanel a three-judge bench to hear it.

Justice Mabeya noted that as much as the matter was of public interest, it did not warrant determination by a three-judge bench.

On Monday, Mumias Outgrowers filed an urgent application arguing that the case raises substantial questions of law and was of great public concern.

The farmers went to court in January 2022 and obtained orders stopping operations at the sugar milling plant. The defendants in the case are Ponangipali Venkata Ramana Rao, KCB Bank Kenya Limited, the Attorney General, Cabinet Secretary Ministry of Agriculture, Livestock and Fisheries, Competition Authority of Kenya, Sarrai Group Limited, Chief Land Registrar, County Government of Kakamega and Capital Markets Authority

In response, Sarrai Group say the lease for operating and taking over assets of Mumias Sugar Company was not marred with “improprieties, fraud and apparent corruption as averred” and the farmers have failed to place before court convincing material to demonstrate corruption in the process leading to the award of the lease to the company. They argue that assets of Mumias Sugar Company are wasting away because of the orders stopping its operations.

The County Government of Kakamega has raised a preliminary objection to the suit saying it is misconceived, incompetent and does not show reasonable cause of action against the county.

The hearing resumes on February 17, 2022, in the morning.

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