Court decision gives hope for Mumias Sugar Company survival

Mumias Sugar Company

The entrance to Mumias Sugar Company.

Photo credit: File | Nation Media Group

Appointment of a receiver-manager often heralds the last rites of a dying company. Such appointments are akin to a kiss of death as very few if any have managed a turn-around.

As noted by Justice Alfred Mabeya recently, “receivership was a selfish, and destructive affair that was only self-centred concerned with the heavy remuneration of the concerned receiver and the appointing authority”.

It is for that reason that Justice Mabeya, concerned over the collapse of Mumias Sugar Company, appointed Pongangipalli Venkata Ramana Rao, as the receiver-manager of the miller and at the same time acted as the interim administrator.

“The receivership of the company will run concurrently with its administration,” the judge said.

Mr Rao was named the receiver-manager by Kenya Commercial Bank over a debt of Sh545 million.

The millers’ loans stood at Sh12.5 billion at the end of June 2018 but other creditors including Ecobank Kenya (Sh2 billion), French development finance institution Proparco (Sh1.9 billion), and Commercial Bank of Africa (Sh401 million) felt slighted over the move and protested.

Proparco is one of the largest secured creditors and financed set up of a power plant at MSC.

Liquidate the company

Before KCB appointed Rao, lawyer Jackline Kimeto had in March 2019 moved to court seeking to liquidate the company because she argued that it was insolvent. This was after the miller failed to pay her a debt of Sh76 million.

In the ruling, Justice Mabeya confirmed Rao as the interim administrator but mandated him to call a creditors’ meeting, establish a creditors committee, which supervises his work and he will be answerable to all of them.

The judge said leasing of the plant will proceed but Rao will be required to do it in compliance with Competition Act and file regular updates to the court.

He directed Mr Rao to file a detailed statement of account of all payments and receipts arising from the receivership of the company from the date of his appointment to date.

“At intervals of six months, to report to court on the operations of the company and present its financial accounts for the period in question,” the judge said and directed the manager to file in court, within 60 days, a statement on the outstanding and the actual claims of all the secured creditors making disclosure as to the time the respective facilities became non-performing and the amount outstanding at the time.

The judge said the lender and the receiver-manager are bound by the constitutional principles of transparency and accountability, which can only be achieved if the two are brought under his supervision.


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