A court has declined to refer a dispute between farmers and debt-ridden Mumias Sugar Company to Chief Justice Martha Koome to empanel three judges to resolve it.
Dismissing the plea from cane farmers firm Mumias Outgrowers Company (1998) Ltd (Moco), High Court Judge Alfred Mabeya said no constitutional issues were raised to warrant creating a panel of judges to determine the case.
Moco, which says it is owed over Sh3.7 billion, did not state in its principal pleadings the amounts it is owed by the financially crippled sugar manufacturer, Justice Mabeya said.
“A party is bound by its pleadings and any relief that is not included in the principal pleadings cannot therefore be urged from the bar,” he ruled.
That lawyer Maureen Odeck argued that the case is of great public importance and raises serious legal issues does not qualify it to be sent to the CJ, the judge said.
He said the Judiciary has meagre resources and the few available judges should be left to discharge other duties.
“The issue for determination is a commercial dispute which raises no constitutional issues requiring three judges to determine. It can be handled by a single judge,” Justice Mabeya ruled.
He dismissed, with costs, the application seeking the CJ’s intervention.
In the case, five Moco shareholders and farmers are also seeking the removal of receiver manager Ponangipalli Venkata Ramana Rao. They told the judge that he fraudulently picked Ugandan company Sarrai Group Ltd to revive Mumias Sugar in a secret and opaque process.
Lawyer Kibe Mungai, for shareholders, Lambert Lwanga Ochochi, Augustino Ochocha Saba, Prisca Okwanko Ochacha, Robert Mudinyu Magero and Wyclife Barasa Ng’onga, as well as West Kenya Sugar Company Ltd, through senior counsel Paul Muite, urged Justice Mabeya to intervene and remove Mr Rao so as to salvage the company from being run down further.
Mr Mungai argued that Mr Rao’s sole duty as receiver manager is to ensure that KCB’s debt, which stands at Sh2.7 billion, is repaid within the shortest time possible.
He said Mr Rao leased Mumias Sugar’s assets to the lowest bidder, Sarrai (Sh5.8 billion), leaving out West Kenya, which bid Sh36 billion and pledged to revive it within 18 months.
He also told the judge there were other bidders who had brought forth bids for Sh27 billion and Sh28 billion.
“It defeats logic for Rao to pick the (lowest) bidder, leaving the highest, if he meant well for the company, which will eternally be in debt. If Sarrai Group Ltd is allowed to revive it, it will take 18 months to clear all debts and bring life back (to) Mumias Sugar,” he said.
The lease of Mumias Sugar’s assets to Sarrai, he said, was signed long after it had moved in thus undermining Mr Rao’s competency and violating his terms of appointment by the court in November 2021.
The judge heard that Mr Rao leased the assets, valued at Sh15 billion, to Sarrai, which bid Sh5.8 billion with a monthly return of Sh20 million, compared with West Kenya, whose monthly returns are Sh150 million.
“West Kenya would pay the KCB debt of Sh2.7 billion at once then return (Mumias Sugar) to its owners. How could Rao leave such a bidder to go for one which will take over 80 years to pay the creditors,” Mr Mungai argued.
He said one can only conclude Mr Rao wants to continue enriching himself at the expense of farmers and shareholders, who own 70 per cent of Mumias Sugar Company (MSC).
The judge heard Sarrai had not paid Sh120 million under the tender award conditions yet West Kenya was ready to pay Sh900 million under the conditions set for the winning bidder.
Two creditors – Kimeto & Associates Advocates and Vartox Resources Inc, through lawyer Abbass Esmail – have joined the legal battles that have bedevilled MSC.
The two petitioners are seeking to axe Mr Rao from the helm of MSC, accusing him of discharging his administrative roles in secrecy and in an opaque manner.
They claim he leased out MSC’s assets to Sarrai secretly, a move that they say has disenfranchised the company’s creditors and ultimately its shareholders.
Mr Esmail alleges Mr Rao failed to consult the other secured creditors of MSC before leasing out its assets to Sarrai.
Mr Rao was appointed by Justice Mabeya on November 19, 2021 as MSC’s administrator.
“After months of secrecy and speculation about who the actual highest bidder was, it has now been brought out into the public domain that Sarrai was the lowest bidder out of seven bidders who applied to revive the sunken MSC,” Esmail states.
