BY SAM ALFAN.
Dubai based Vartox Resources Inc has accused Kenya Commercial Bank and its receiver manager PVR Rao of auctioning properties of distressed companies at throwaway prices.
In papers filed in court, Vartox alleges that Rao and the lender are part of a syndicate that sells properties of troubled firms at gross undervalue.
The company has cited several cases including a case involving Tahir Sheikh Said Grain Millersltd(TSS), whose property was allegedly sold at a price 50 percent lower than the actual value.
“Vartox has since learnt that there is a market trend where Rao is the common denominator in massive companies where assets of significant value are at play,” says Kristian Khachatourian, a director of the company.
He said in the case of TSS, assets worth colossal amounts were sold at 50 percent of the value, yet there were existing court challenges against Rao, KCB and the purchaser in relation to the dealings with the TSS assets.
Through lawyer Abbas Ishmael, Vartox says it has unearthed that TSS was a distressed company where Rao was appointed as administrator in 2016 and his administration has been perpetually extended year on year.
The court documents reveal that TSS owned several assets which included a grain milling plant, machinery, silos and other movable assets and all of TSS’ grain milling assets in Mombasa.
He said on December 17, 2019, Rao sold all the movable assets for Sh350 million notwithstanding there was an offer of Sh810 million two years earlier.
The firm made allegations in reply to an appeal filed by Gakwamba farmers, who are seeking to reinstate a 20-year-lease granted to Sarrai Group to manage ailing Mumias Sugar Company ltd.
The firm says the property, which had been sold was allegedly transferred by KCB to a third party in 2017, under unclear circumstances and the assets were later charged to the lender to secure a loan of Sh600 million.
“On 27 December 2019, the same date the movable assets were sold by Rao, KCB, despite not being the registered owner of the land, entered into a sale agreement and sold the land for KES 300 million,” he said in a sworn statement.
Kristian added that the buyer of the movable assets Jamii Flour Millers ltd and the company later changed its names to Ustawi Grain Millers ltd (Ustawi) on January 20, 2020, less than a month after acquiring the property and the assets.
Ustawi, he said, is owned and controlled by the same family that controls the firm that had won the lease to run Mumias- Sarbjit Singh Rai, Amaanraj Rai and Rajbir Rai.
According to Kristian the same persons are the shareholders of Sarrai and less than a year after the property was sold for Sh300 million to Ustawi, Ustawi secured a loan of USD 14,715,000 against the property “a property which KCB sold and Ustawi purchased for Sh300 million was now capable of securing a loan of more than Sh1. 4 billion”.
“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,” says Kristian.
Kristian further said the actions of Rao and KCB in the TSS case are reminiscent of their nefarious intentions in the Mumias case.
Vartox is apprehensive that if Rao and KCB are allowed back at Mumias, the miller will suffer the same fate as TSS as its assets will be plundered.
“The above facts are evidence that Rao, KCB and Sarrai have had a relationship for years now and 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,” says Vartox.