The High Court has cancelled the lease awarded to Ugandan firm Sarrai Group for the revival of financially troubled Mumias Sugar Company.
The firm has also been ordered to vacate the premises of the sugar company, an order that has set stage for fresh search of another investor to revive the miller and roll it back to profitability.
Justice Alfred Mabeya has also revoked the appointment of Ramana Rao as the administrator and receiver manager of the sugar miller over non-compliance with terms of the job.
For instance, the judge found that he did not provide status of the company as required by directions issued by the court in October last year. He also failed to hold a meeting with all the creditors, the court found.
The removed administrator was also said to have flouted court orders to submit a detailed statement of accounts of all payments and receipts arising from the receivership of the company from the date of the appointment
He has been replaced by Kereto Marima, who will now oversee the revival.
Justice Mabeya made the orders following applications by five aggrieved farmers and a section of creditors, who challenged the lease and pressed for the removal of Mr Rao.
They claimed that the bidding process that led to the leasing of Mumias Company’s assets to Sarrai Group was opaque.
They also claimed that Mr Rao failed to produce all board resolutions and approvals given to him in relation to the leasing of Mumias’ assets to the Sarrai Group Limited.
They questioned why Mr Rao declined an offer by an investor, West Kenya Sugar Company Limited, who had offered Sh36 billion to bail out Mumias.
Instead, he picked Sarrai Group which offered Sh6 billion, a difference of Sh30 billion.
"Mr Rao has leased the Company’s sugar factory and related assets to the lowest bidder (Sarrai Group) in circumstances that point towards fraud since the 20-year lease executed by him will expire with Mumias continuing to be mired in debt with its assets potentially wasted. None of Mumias’ historical debts will ever get repaid in those 20 years," said one of the creditors, Vartox Resources Inc,
But in his Affidavit, Mr Rao explained that he discarded the highest bid by West Kenya Sugar on the basis that it would not achieve the goals of the lease which was to turn around the company to profitability.
Why bid was rejected
Among the reasons why West Kenya's bid was rejected was to avoid its dominance in Kenya's sugar industry.
According to Mr Rao, if West Kenya was given the job to revive Mumias Sugar, it would be in control of at least 41.95 per cent of the total sugar crushing capacity in Kenya.
Mr Rao was appointed the receiver manager and administrator of Mumias Sugar Company (in receivership) on November 19, 2021 and he was tasked with overseeing the leasing process of the company's assets for purposes of its revival. The bidding process attracted bids from several entities.