What you need to know:
Sarrai Group, which operates Kinyara, Hoima and Kiryandongo sugar in Uganda, has had a difficult time in a bid to take over operations at Kenya’s Mumias Sugar Company, since it was granted a 20-year lease to manager operations of the troubled miller
The Court of Appeal in Kenya has granted Sarrai Group’s prayer to resume operations at Mumias Sugar Company.
Sarrai Group, which operates Kinyara, Hoima and Kiryandongo sugar in Uganda, had been barred from taking over operations at the troubled Mumias Sugar.
However, the Court of Appeal in Kenya has temporarily suspended a High Court decision after it was persuaded that Sarrai, together with KCB-appointed administrator PVR Rao had demonstrated that their appeal will be rendered useless if the decision cancelling the lease in April is not suspended.
Kenya’s High Court Judge Alfred Mabeya had cancelled the 20-year-lease granted to Sarrai and appointed Kereto Marima as the administrator, pending a process to pick a new company to lease the Mumias plant.
Mumias was placed under receivership by KCB in 2019 over debts.
KCB argued that its rights as secured creditors will diminish if Mr Marima’s actions pursuant to his appointment are not stayed.
“Indeed, they fear that they may not be able to recover the securities. To our mind, these fears are not idle,” appellate judges Asike Makhandia, Jamila Mohammed and Sankale ole Kantai, said.
In the intended appeal, KCB and Sarrai argue that the trial court erred in undermining its interest as a secured creditor by holding that public interest surpasses the interests of the creditors.
KCB said Mr Marima will continue with the process of administration including taking over assets that had been charged to secure Mumias’ indebtedness to KCB and deal with the assets in whichever manner he deems fit.
KCB further said there was no guarantee that it will recover its securities, should the intended appeal succeed.
Sarrai, in an affidavit of Mr Rakesh Kumar Bvats, a director, said the revocation of the lease had far reaching economic and social consequences to several people such as employees, who will definitely lose jobs, as well as farmers.
Lawyer Jackline Kimeto, who is also a creditor, however, opposed the application, saying KCB and Sarrai had not approached court with clean hands, noting the duo had all along deliberately failed to comply with court orders and that granting the prayers sought would be used as a shield to perpetuate illegal activities and disobedience of court.
Ms Kimeto said suspending the decision and allowing Sarrai to re-enter Mumias and continue with activities based on a nullified lease poses more irreparable harm, substantial loss to all other stakeholders, in the event that the nullification is upheld by the court of appeal.
Last week, Justice Wilfrida Okwany, who was hearing a contempt of court application against Sarrai for going on with operations at Mumias, withdrew from the case, citing several reasons, including her transfer from the Commercial division.
Her withdrawal follows that of the presiding judge of the division Justice Mabeya, who disqualified himself from the case in July. The file will be taken to Justice Mabeya, who will pick another judge to hear the application.
In January, the High Court in Kenya had extended orders barring a Sarrai Group from taking possession of Mumias Sugar operations.