Law Firm’s Call for Mumias Sugar Fresh Bidding Process Justified

A petition has been filed in court to remove the Mumias Sugar Company receiver-manager Ponangipalli Venkata Ramana Rao following the controversial bidding process that led to Sarrai Group being awarded the firm’s assets.

According to M/S Kimeto and Associates Advocates, the appointment of KCB’s administrator, Rao, should be revoked on grounds that his conduct as the administrator of the sugar plant portrayed an absolute lack of integrity and competence in undertaking the bidding process.

“He has shown a serious conflict of interest and complete lack of fidelity in adhering to the mandatory provisions of the law in dealings with creditors,” the law firm claims in court documents.

M/S Kimeto and Associates Advocates had earlier on, on March 20, 2019, filed a liquidation petition and are involved in the insolvency proceedings against Mumias Sugar Company.

Following this application, the court-appointed Rao as an administrator of the Mumias Sugar Company on November 19, 2021.

Since then, a plethora of other applications have been filed in court regarding the lease of the sugar plant.

In December 2021, Sarrai Group, the lowest bidder in the leasing process who won the tender – controversially – began works at the sugar plant. However, the court stopped the receiver-manager from continuing with the leasing until the case filed by Tumaz and Tumaz is determined.

In its submission, Tumaz had requested the court to nullify the decision of the receiver-manager awarding the contract to Sarrai Group. Sarrai on the other hand filed an application aiming at having the order to suspend its win lifted.

The fresh petition by M/S Kimeto and Associates Advocates, on the other hand, wants the court to nullify the tender for the leasing of Mumias.

Kimeto Advocates, through the help of the court, is calling for a fresh tender process conducted by the official receiver in consultation with a creditors committee appointed by the court.

According to the law firm, the court should appoint the official receiver as an interim administrator in an interim capacity to convene an initial creditors meeting to review existing proposals and viability of revival of the company.

It justified this position by noting that the receiver manager failed and refused to operationalize the administration process as per the law and the court’s direction.

As such, Kimeto Advocates also wants the court to issue an order for a forensic audit of Rao’s receivership accounts dated June 29, 2020, November 10, 2020, and November 12, 2021.

The law firm argues that the 1.5 billion shillings presented in a sworn statement on receivership accounts are enough to pay off KCB’s debt with the firm.

“The proposed leasing of the Mumias Sugar Company has altogether collapsed with the administrator currently engaged in vicious legal suits all over the country with disgruntled bidders who responded to the call for the leasing of the company by a qualified investor,” Kimeto Advocates argued.

The decision to file a petition by the law firm is not unfounded. In retrospect, the receiver-manager failed in its duties and hastily awarded Sarrai Group 100 percent points without conducting due diligence.

Sarrai Group has no track record of sugar production in Kenya. It is a new company whose financial viability and technical ability have no record in Kenya. Worse still, it has been sued and has pending cases regarding eviction of families and displacement of people from their homes for sugarcane farming in Uganda.

As a receiver-manager, Ponangipalli Venkata Ramana Rao has failed and the value and trust the public, especially the farmers, shareholders, and the creditors put in him as the administrator.

He handed over Mumias without the approval of The Competition Authority (CAK) as required by law as per his tender guidelines. The calculation for dominance is the role of The Competition Authority and not the receiver.

It is, therefore, true to say that Kimeto Advocate’s petition for a fresh tender process is justified – and this time, it should be done openly, and competitively. This way, the Mumias Sugar plant will be revived fast, and its overwhelming debts settled in the shortest time possible.