Judge cancels takeover of Mumias Sugar by Ugandan firm

Entrance gate at Mumias sugar company. PHOTO | ISAAC WALE | NMG

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  • Justice Mabeya further noted that Mr Rao did not explain how Mumias would repay KCB’s debt and those of other lenders, including a Dubai-based Vartox, farmers, workers and suppliers.

The High Court in Kenya has cancelled a 20-year-lease awarded to Uganda-based Sarrai Group to manage Mumias Sugar Company.

Justice Alfred Mabeya cancelled Sarrai Group’s lease on grounds it would benefit KCB  and ignore the interests of Mumias shareholders and other lenders, noting there was no evidence that the KCB-appointed receiver-manager PVR Rao sought the advice of the Competition Authority of Kenya when he awarded the lease to Sarrai Group last December.

Justice Mabeya further noted that Mr Rao did not explain how Mumias would repay KCB’s debt and those of other lenders, including a Dubai-based Vartox, farmers, workers and suppliers.

Vartox is claiming Ksh6b (Shs198b) from Mumias Sugar, which it inherited from Victoria Commercial Bank. Victoria Bank on its part took over the debts from Eco Bank and French Development Agency Proparco.

The loans were secured through Mumias Sugar’s energy generation and ethanol plants.

Justice Mabeya also faulted Mr Rao for failing to conduct a feasibility study, which would have informed a reserve price.

“His actions were only meant to protect the interest of KCB and if the lease is upheld, it would be tantamount to blessing KCB with an asset known as Mumias,” he ruled.  Sarrai Group secured a lease in December, prompting opposition from other bidders including businessman Julius Mwale of Tumaz & Tumaz and West Kenya. KCB, had placed Mumias under receivership in September 2019 over an unpaid loan of Ksh545m (Shs17.9b), had appointed Mr Rao as the receiver-manager, who was later made the administrator by Justice Mabeya, who gave him the nod to complete the leasing process. 

Justice Mabeya also directed Mr Rao to step aside as the administrator and in his place, appointed Kereto Marima.

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