KCB SUFFERS MAJOR SETBACK AS IT’S ADMINISTRATOR IS REMOVED FROM MANAGING STRUGGLING MUMIAS SUGAR.

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High Court Commercial Division Judge Alfred Mabeya who revoked and cancelled the Mumias Sugar Company lease issued to Sarai group and removed Panama Rao as administrator./PHOTO BY S.A.N.

BY SAM ALFAN.

Kenya Commercial Bank (KCB) suffers setback as it’s administrator is removed from managing struggling Mumias sugar.

The ruling by High Court Judge Alfred Mabeya is a major win for west sugar company which is fighting for a larger control of the western region sugar belt.

The judge ruled that the lease is unlawful as it failed to cater for the interests of creditors.

“Accordingly, the Lease made to Sarrai Group on December 22, 2021 or thereabouts is hereby revoked, cancelled and nullified and Sarrai Group ordered to forthwith vacate the premises of Mumias”, ruled Judge Mabea.

The High court cancelled the Mumias Sugar Company lease issued to Sarai group and removes the KCB appointed administrator Ponangipali Ramana Rao and appointed Kereto Marima of KR Consult limited as the new administrator.

“The Court hereby appoints Kereto Marima of KR Consult Ltd to be the adminstrator of Mumias Sugar Co. Ltd forthwith and Ponangipalli Ramana Rao to formerly and in an orderly manner hand over to Kereto Marima the full and unhindered control and administration of Mumias within seven days of the date hereof”, Justice Mabea ordered.

The Judge said the new administrator should have full and unhindered control of the ailing miller.

While appointing the new administrator, the Judge said that it is imperative that an independent administrator takes over the administration of Mumias and that the receivership that has been in force and that has yielded zero results takes a back seat, at least for a while, and give professional administration of Mumisa as a chance to be undertaken.

He revoked a 20-year-lease awarded to Uganda-based Sarrai Group, saying the decision made by Rao was not in the best of Mumias Sugar.

“His actions was only meant to protect the interest of KCB and if the lease is upheld, it would be tantamount to blessing KCB with an asset known as Mumias,” the Judge said.

Justice Mabeya directed Rao to cooperate with Marima and ensure the smooth administration of Mumias in default, the receivership shall stand suspended in the said period.

“The new administrator should call for and ascertain the claims of all unsecured creditors within 60 days and the amounts outstanding,” the Judge said. 

The judgement implies the new administrator will have to kick start the lease process afresh, in consultation with all the secured and unsecured creditors.

The court directed directed the new administrator within 60 days of the date to call for and ascertain the claims of the secured creditors, the dates they became unperforming and the amounts outstanding as at those dates and lodge the same with the Court accordingly.

In his ruling, Justice Mabea added that Public interest surpasses all the narrow egocentric interests of the creditors of Mumias and public interest commands that Mumias survives and is rescued. 

The further said that its machinery and equipments should roar back to life and that smoke should start billowing from the chimneys of its machinery.  That the farmers who are owed millions get paid their dues and others plant sugar case for future survival.  That the young men unemployed roaming in the villages of Western Province get jobs to do and that the small businesses who were in the supply chain of Mumias business get a lease of life. 

The court noted that the conduct of KCB and its appointed receiver is pertinent and the record shows that the loans of KCB became unperforming way back in 2017.

KCB never took any action or step to either realize its security or recover its outlay and It waited until after these Insolvency proceedings were instituted two years later in March, 2019 to wake up from its slumber and it still waited for yet another six months before it appointed Rao in September, 2019 as receiver manager.

The court noted that after appointing Rao receiver in September, 2019, receivership continued between then to date and According to “the receivership accounts” filed in Court, the receiver had collected in excess of Sh 800 million between September 2019 and September 2021 when the administration order was made and out of that amount not a single cent was ever applied towards repayment of the debt.

Rao stated that there was no surplus for such debt repayment. However, the receivership accounts disclosed that there was monies available to pay donations, facilitation, PR exercise amongst others. KCB was all happy with that state of affairs and advanced Rao another handsome amount of Sh 200 million for alleged “operations” and continued charging interest on the same.

Apart from that, KCB was all impressed with the Lease which was at a grossly under value and folded its hands to continue sitting on Mumias for 20years.

“All the foregoing is but evidence of an uncaring lender who alleges to have been financing Mumias ever since 1974 and would be happy to continue doing so”, noted the judge.

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