High Court cancels Mumias Sugar lease to Ugandan firm Sarrai Group

The High Court on Thursday cancelled the multi-billion shilling leasing tender for Mumias Sugar Company to Ugandan conglomerate Sarrai Group that was awarded in December 2021.

The group has subsequently been ordered to vacate the premises of Mumias Sugar Company, with the court also removing PVR Rao as administrator with immediate effect.

The High Court ruling by Justice Alfred Mabeya brings to an end Sarrai Group’s grip on the troubled sugar mill, hardly four months after the takeover.

The conglomerate had secured a 20-year lease for the assets of Mumias Sugar, and promised to turn around the fortunes of the miller.

According to the court, the leasing meant that Mumias Sugar would permanently remain an asset to KCB and would not be able to repay creditors.

“The lease does not promote the purpose of Mumias administration, it is this court’s finding that the lease meets the threshold to be interfered with. In the circumstances, the court will interfere with the Rao administration and cancel the lease,” ruled Justice Mabeya.

The court also ejected PVR Rao as Mumias Sugar administrator, replacing him with Kareto Mirima of K Consult Limited.

Martin Gitonga, lawyer representing West Kenya, said: “All his actions with the way he leased all the assets of Mumias to Safari were shrouded in secrecy yet court wanted him to act in transparency.”

Jackline Kimeto, the petitioner, said: “This paves way for a proper evaluation of the future of Mumias Sugar for the benefit of the public, people of Mumias Sugar and creditors.”

The new administrator has now been directed to ascertain claims made by creditors.

The court said the move by Rao to proceed with issuing the lease to Sarrai hurt creditors at the company.

KCB Group took over the running of the debt-ridden miller in September 2019, to protect its assets and maintain its operations.

However, plans to have the miller revived through a leasing process drew mixed reactions from various quarters.

Whereas others called for transparency in the deal, others accused opposers of the takeover of playing politics in the matter.

Mumias Sugar Company was once the region's leading sugar miller producing up to 250,000 tonnes of sugar a year, before it was beset with financial challenges, posting a pre-tax loss of Ksh.10 billion the year before it was placed under receivership.