Vartox Resources Inc. has accused Kenya Commercial Bank and Mumias receiver manager Ponangipali Ramana Rao of being part of a syndicate where assets of distressed companies are sold at a gross undervalue.
Through lawyer Abbas Ishmael, Vertox said that this is an obvious case of fraud and corruption.
This was stated in an affidavit in opposition of an appeal by Gakwamba Farmers seeking to set aside the high court ruling nullifying the lease awarded to Sarrai Group.
Vartox Resources director Kristian Khachatourian said in his affidavit that they have learnt that there is a market trend where Rao is a common denominator in massive companies where assets of significant value are at play.
Tahir Sheikh Said Grain Millers Limited (TSS) is said to be one of KCB and Rao’s victim.
Assets worth colossal amounts were sold at 50% of the value and there are existing court challenges against Rao, KCB and the purchaser in relation to the dealings with the TSS assets.
“In the case of Tahir Sheikh Said Grain Millers ltd(TSS), it is evident that KCB, Rao and the persons behind Sarrai were part of a scheme to defraud creditors as well as shareholders and,” Khachatourian said.
According to the company, since the delivery of the ruling of 14th April 2022 it has unearthed that TSS was a distressed company where Rao was appointed as administrator in 2016 and his administration has been perpetually extended by the high court year on year.
The court heard that TSS owned several assets which included a grain milling plant, machinery, silos and other movable assets.
“All of TSS’ grain milling assets were erected or operate on an immovable property known as land Reference No. Mombasa/Block I/316 (the property),” Ismael added.
TSS assets sold at a loss
On 17th December 2019, Rao allegedly sold all the movable assets for Sh 350 million notwithstanding there was an offer of Sh 810 million two years prior for the same.
Ismael added that in 2017, in circumstances that are unclear, the property appears to have been transferred by KCB to a third party.
Afterwards, the property was charged to KCB to secure a facility of Sh 600 million.
“On the same date the movable assets were sold by Rao and KCB despite not being the registered owner of the land, entered into a sale agreement and sold the land for Sh 300 million,” said Ismael.
He added, “the law is well settled, there is an obligation on lenders such as KCB by section 97(3) of the Land Act, 2012 which requires them to ensure that a property is not sold below 75% of its market value.
The lawyer added that the buyer of the movable assets and property was Jamii Flour Millers Limited. The company allegedly changed its name to Ustawi Grain Millers limited (Ustawi) on 20th January 2020, less than a month after acquiring the movable property and the assets.
Sarrai Group involvement
Vartox claimed that Ustawi is owned and controlled by the same family that run Sarrai group – Sarbjit Singh Rai, Amaanraj Rai and Rajbir Rai.
In addition, the court was told that the same persons are the shareholders of Sarrai and less than a year after the property was sold for Sh 300 million to Ustawi, Ustawi secured a loan of USD 14,715,000 (apprx. Sh 1.4 billion) against the property.
“A property which KCB sold and Ustawi purchased for Sh 300 million was now capable of securing a loan of more than Sh1. 4 billion,” Ismael claimed.
According to Khachatourian, the actions of Rao and KCB in the TSS case are reminiscent of their nefarious intentions in the Mumias case.
“How else can either of them explain the selection of Sarrai as the lessee of Mumias assets despite having submitted the lowest bid?” Ismael questioned
Ismael said it is evident that Rao, KCB and Sarrai have had a relationship for years now.
“It is therefore proof that the selection of Sarrai by Rao as the lessee of Mumias assets was not only deliberate and intentional but a calculated move by Rao and KCB to swindle other bidders and creditors of Mumias,” he added.
The company is apprehensive that if Rao and KCB are entertained by the Appellate court and the orders they want issued, Mumias will suffer the same fate as TSS and its assets will be plundered.