Mumias Sugar Case Far from Over as Mr. Rao’s Integrity is Questioned

The Mumias Sugar Company saga where five farmers challenged the leasing of the sugar plant to Sarrai Group continues to take twists and turns as the case builds against the integrity of the receiver-manager, Ponangipalli Venkata Ramana Rao.

In the case, which is currently tabled before High Court’s Justice Alfred Mabeya, the farmers are contesting the lease on grounds that it was undertaken in an opaque manner and awarded to the lowest bidder, Sarrai Group without regulatory approvals.

The farmer’s lawyer, Mr. Kibe Mungai told the court that the lease was granted to Sarrai Group which was the lowest bidder at 5.8 billion shillings leaving out  West Kenya Sugar which was the highest bidder at 36 billion shillings.

While making his submissions, Mr. Mungai noted that the main purpose of placing the company under receivership was to address its indebtedness.

He noted that the lease should be able to generate sufficient resources to pay all debtors, particularly Kenya Commercial Bank, thereby leaving the company in a stable condition to be returned to its owners, directors, and shareholders.

“There was an unusual hurry in awarding the lease to Sarrai Group and this cannot speak well about the integrity and accountability of Mr. Rao,” the lawyer added.

He also took issue with Mr. Rao’s assertion that West Kenya would control at least 41.95 percent of the total sugarcane crushing capacity per day in Kenya.

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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 percent in the market to be described as dominant,” added Muite.

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

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 from 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 3.7 billion shillings 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 Sarrai Group as it is illegal,” she submitted.

Sarrai Group defended its position by claiming that the lease was not marred with “improprieties, fraud and apparent corruption as averred”.

The Group added that 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.

According to Sarrai, the assets of Mumias Sugar Company are wasting away because of the orders stopping its operations.

Meanwhile, another law firm, Wekesa, and Simiyu Advocates has written to Mr. Rao seeking a copy of the lease entered into with Sarrai Group on December 22nd, 2021.

In the letter copied to the High Court among others, the firm asked Mr. Rao to demonstrate how long it will take for Mumias Sugar to be fully operational under the lease as well as appointing authority as a Receiver and when the first payment was made under that lease.

The firm also sought a copy of the evaluation criteria, and the particulars of payments Mr. Rao has made to himself as receiver/manager’s charges per annum since he was appointed the receiver up to 31^st December 2021.

“Please furnish copies of the consents procured by yourself and the successful bidder from the Competition Authority and the Capital Markets Authority and any other statutory bodies as condition precedents prior to entering any lease and handing over the company assets to Sarrai Group,” the letter adds.

Wekesa and Simiyu Advocates are calling for the scrutiny of every aspect of the lease for due proceedings.

Meanwhile, the County Government of Kakamega still holds that the suit against the leasing process is misconceived, incompetent, and does not show a reasonable cause of action against the county.

Justice Mabeya will resume hearing the case from March 8^th to 10^th, 2022.