Court bars Ugandan firm Sarrai Group from running Mumias Sugar for 6 weeks

Justice Wilfrida Okwany

Justice Wilfrida Okwany presides over a case seeking to stop the leasing of Mumias Sugar Company to Uganda's Sarrai Group on January 25,2022.  

Photo credit: Dennis Onsongo | Nation Media Group

 The High Court has extended orders barring a Ugandan company picked to revive the financially crippled Mumias Sugar Company from resuming operations for six weeks.

Dismissing an application to lift the orders stopping Sarrai Group Ltd from beginning to revive the debt-ridden Mumias, Justice Wilfrida Okwany said the case by five shareholders-cum-farmers was urgent “and worthy of the orders to protect the subject matter”.

The extension of the orders rattled the Kakamega County Government prompting Senior Counsel James Orengo to seek disqualification of the judge from the case.

Mr Orengo protested the six-week window given to the five farmers and shareholders to prepare for the trial as too long.

Besides the farmers being given time to respond to evidence by 10 defendants, Justice Okwany allowed West Kenya Sugar Company Ltd, through Senior Counsel Paul Muite and lawyer Martin Gitonga to join the suit.

West Kenya had bid the highest at Sh36 billion, yet Sarrai Group bid at Sh5.8 billion.

“How can you pick a company whose capacity is Sh5.8 billion, leaving the one with Sh36 billion?” asked Mr Muite.

Debts

Mr Muite said West Kenya was to pay all the debts and resume work within 18 months, while Sarrai would take 80 years to restore Mumias.

Mr Muite said the Kenya Commercial Bank (KCB) manager and the court appointed receiver manager Ramana Rao would be summoned to explain the criteria used to pick Sarrai and leave West Kenya.

The judge heard that Sarrai Group, the lowest bidder, had not filed the signed lease agreement in court as proof that it had compounded its status.

Urging the judge to quit the case, Mr Orengo said the judge relied on submissions stated off record in extending the orders requiring Sarrai to stay away from the sugar company whose operations ground to a halt, and which is saddled with Sh30 billion debts.

Mr Orengo had opposed the extension of the orders stopping Sarrai Group from resuming cane crushing at Mumias.

“There are no orders to extend. They have lapsed today (Tuesday),” Mr Orengo stated.

He said the case was scheduled to be heard today but the court has granted the five shareholders who opposed Sarrai beginning work time to respond to evidence filed by defendants in the case.

Creditors

Mr Orengo said KCB, which is one of the creditors, had sought orders requiring the five shareholders and farmers -- Mr Lambert Ochochi, Mr Augustino Saba, Ms Prisca Ochacha, Mr Robert Magero and Mr Wycliffe Ng’ong’a to deposit a security for bond pending the determination of the case.


“The five cannot raise a security matching the Sh5.8 billion invested by the Ugandan company even if they are given 10 years,” Mr Orengo submitted.

Justice Okwanyi fixed the case for hearing March 14 saying she will be proceeding for her annual leave.

But Mr Orengo said two months was too long a period when cane farmers and a host of other debtors were suffering.

Justice Okwany fixed the case for mention before Justice Alfred Mabeya on March 1 for further directions.

Sibling rivalry has taken centre stage in court, where rival enterprises owned by members of the billionaire Rai family are battling for a deal to lease the troubled Mumias.

West Kenya Sugar, under Mr Jaswant Rai, has claimed that it offered to lease Mumias Sugar for Sh36 billion, yet the deal was awarded to a Ugandan rival, Sarrai Group, whose bid was more than six times lower, at Sh5.8 billion.

Jaswant’s brother, Mr Sarbi Singh, controls the Sarrai Group.

West Kenya produces the popular Kabras Sugar brand, while Sarrai, the second largest producer of the sweetener in Uganda, is behind Kinyara Sugar.

Statutory manager

The farmers filed the suit against the statutory manager, Rao, KCB, Attorney General Kihara Kariuki, the Agriculture CS, the Competition Authority of Kenya, Sarrai Group Ltd, the Chief Land Registrar, the County Government of Kakamega, the Capital Markets Authority and Gakwamba Farmers’ Cooperative.

The suit is the third involving the leasing deal.

Butere-based businessman Julius Mwale, has through his Tumaz and Tumaz Enterprises, had sued Mr Rao and Sarrai Group over the tender, and the High Court has issued orders barring operations pending determination.

The court orders remain in force, but the five farmers claim that Sarrai Group has been proceeding with operations in violation of directions issued by Justice Anthony Ndung'u.

Kakamega County has sued Tumaz and Tumaz in Vihiga seeking to stop interference with Sarrai's operations at Mumias.

Mr Rao, in his response to the suit filed by the five farmers, argued that West Kenya Sugar was overlooked to avoid creating a monopoly, because the firm would have controlled 41 per cent of Kenya’s sugarcane crushing capacity if it had been awarded the deal.

But the five farmers have challenged Mr Rao’s stand, arguing that the Competition Authority has never labelled West Kenya a dominant force in the industry.

The winning bidder will operate the debt-ridden Mumias Sugar for 20 years, while remitting funds monthly to Mr Rao on behalf of KCB.

The court heard that if West Kenya’s bid is accepted before the lease period is over, all Mumias’ debts will be repaid, including to farmers, employees, secured and unsecured creditors and the Kenya Revenue Authority, which is demanding in excess of Sh10 billion in taxes.

Besides West Kenya Sugar, other bidders were K E International (Sh26.6 billion), Kituman Finances (Sh26.8 billion), Tumaz and Tumaz Enterprises (Sh27.5 billion) Pandal Industries (Sh7.9 billion), Kibos Sugar (Sh6.4 billion) and Sarrai Group (Sh5.8bn).

Lawyer Danstan Omari, representing more than 10,000 cane growers from the sugar belt, asked the judge to allow him to urge the court to lift orders stopping Sarrai from reviving Mumias Sugar.

Mr Omari and Mr Paul Macharia, who are representing the Gakwamba Farmers’ Cooperative Society Ltd, argued that the suspension of Mumias Sugar’s revival is economic sabotage that is punishing more than 10,000 farmers.

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