No appeal: Vartox Resources Inc backs out of Mumias Sugar case
Mumias Sugar Company in Western Kenya.
Vartox Resources Inc, which had challenged the 20-year lease awarded to Uganda-based Sarrai Group to manage Mumias Sugar Company, has withdrawn its petition at the Court of Appeal.
The application for withdrawal will be brought before court when judges resume after their August recess.
The firm, which took over the loans of Victoria Commercial Bank, intended to argue against Sarrai Group's bid to overturn the nullification of the lease and removal of PVR Rao as Mumias Sugar's administrator.
"Take notice that Vartox Resources Inc., the 3rd Respondent in these proceedings hereby wholly withdraws its application dated 25 December 2022," the application reads.
Vartox, which is registered in Dubai is claiming billions from Mumias Sugar, which it inherited from Victoria Commercial Bank. The bank took over the debts from EcoBank and French firm Proparco. The loans were secured using Mumias Sugar's ethanol and power generation plants.
In the intended appeal, Vartox had argued that the 20-year lease, which was cancelled by High Court Alfred Mabeya in April last year, was a calculated move by the KCB appointed receiver manager Rao to deny other bidders a chance to manage the miller. The company's director Kristian Khachatourian added that the entire evaluation process was a sham.
“It is clear that there was no impartiality or transparency whatsoever in the selection process of who finally obtained the lease of Mumias," Vartox Resources said in the court papers
While quashing the lease, Justice Mabeya noted that a simple calculation would show that by leasing Mumias Sugar at Kshs 5.8 billion for 20 years, the firm would perpetually remain under receivership and administration.
"It would permanently remain an asset under KCB and be a retirement place for Rao," the judge said, adding that KCB would "superintend administration and receivership for 20 years and yet not be able to fully repay a single creditor".
The collapsed miller was placed under receivership by KCB Group in 2019 over an unpaid loan of Sh545 million and appointed Mr Rao as the receiver manager.
His first task was to complete the lease process, which he did on December 22, 2021 as he picked Sarrai Group to manage the miller.
Six firms had placed their bids including Kenya’s biggest miller, the Jaswant Rai family-owned West Kenya Sugar, which submitted the highest bid with Sh36 billion on the table.
Others were a consortium led by businessman Julius Mwale’s Tumaz & Tumaz Enterprises (Sh27.6 billion), Turkish and French consortium Kruman Finances (Sh19.7 billion), Kibos Sugar (Sh5.9 billion) and India’s Pandhal Industries (Sh5.9 billion).
Other than awarding the lease to the lowest bidder, competitors of Sarrai challenged the deal arguing that the process was shrouded in secrecy.
Mr Rao dismissed West Kenya’s bid submitting that the firm would have become a dominant player, against competition rules.
He added that West Kenya’s financial bid did not make sense as the firm would have to crush an impossible amount of sugarcane to meet the Sh36 billion lease price quoted.
But West Kenya dismissed the claims arguing that such a pronouncement can only be made by the Competition Authority, which was not involved in the process.
