Court cancels Mumias lease to Sarai group, removes Rao as admin

Justice Alfred Mabeya

High court has cancelled the Mumias Sugar Company lease issued to Sarai group.

Justice Alfred also removed the KCB appointed administrator Ponangipali Ramana Rao and appointed Kereto Marima of KR Consult limited as the new administrator.

“Kereto Marima of KR Consult is hereby appointed as the receiver of Mumias,” Justice Mabeya ruled.

Rao who was appointed as the administrator/receiver by KCB bank, had allowed the lease to be issued to Sarai who were the lowest bidders with Sh 5.8 billion.

The lease was highly contested and several bidders and creditors filed petitions in court opposing the same.

Rao was accused of allegedly failing to inform the creditors of his appointment within 14 days of his appointment.

He also failed to lodge with the registrar a notice of his appointment within 7seven days.

In addition, Rao failed to convene an initial or any creditors meeting not later than seven days of his appointment among others.

The court ruled that Rao is conflicted as both the receiver and administrator.

Rao argued that if the tender had been awarded to the highest bidder (West Kenya Sugar) it would have been a monopoly.

However, the judge ruled Rao did not do any consultations on the same.

“The manner in which Rao handled the leasing process did not tally with what was expected of him as an administrator,” the judge added.

According to the judge, the action was only meant to protect the interest of KCB.

It was court’s opinion that the lease is not in line with the best interest of the company.

The judge added that Rao did not produce the lease in court to enable the court make a more informed decision.

“The same was withheld from the court without any explanation. What did it contain that Rao did not want to be seen? That remains a speculation,” The judge ruled.

Justice Mabeya added that simple calculation would show that leasing Mumias at Sh 5.8 b for 20 years, it would perpetually remain under receivership and administration.

“Mumias would perpetually remain an asset under KCB and may be a retirement home for Rao,” the court ruled.

In addition, the judge ruled that Mumias will remain under receivership for 20 years and yet not be able to pay a single debts.

“The above circumstances justify this court to interfere with administration,”Mabeya said.

It was the courts determination that the lease in these case meets the standard of unfair harm.

It only favors KCB and unfairly prejudices other creditors.

“At best it is an undervalue entered into without previous valuation or expert consultation on market value and under no circumstances can the lease purport to be in the best interest of Mumias,” the Judge added.

In addition, the judge found that it will only bind Mumias in a never ending receivership and administration which at the end, will not have paid off Mumias’ debt.

The judge went ahead to order Rao to formally and in an orderly manner hand over to Marima the full control and administration of Mumias.

He was also ordered to cooperate with Marima and ensure smooth administration of the company.

“In default the receivership shall stand suspended during the duration of administration,” the judge ruled.