KCB, administrator defend move to lease troubled miller to Sarrai

Mumias Sugar Company’s creditor Kenya Commercial Bank and administrator Ramana Rao have defended their move to lease the ailing miller to Sarrai Group.

KCB, in it’s argument before Commercial Court judge Alfred Mabeya, said that upon considering all bids, Sarrai had met the criteria to get the opportunity to revive Mumias.

The judge heard that a successful bidder ought to have had the ability to pay rent for the 20 years, have the experience to manage the assets but without any conflict of interest.

At the same time, the court heard that West Kenya Sugar Company allegedly did not produce its financial statements as was required in the bid documents.

According to the two, West Kenya did not provide details on its proposal to inject Sh4.6 billion as an investment. Rao, in his court documents, claimed this made it hard for him to know whether the proposal would work. Meanwhile, Rao claimed that West Kenya has other factories surrounding Mumias and therefore would be conflicting to hand it Mumias.

“I am aware that sugar mills within the western region are in competition over cane and other resources. West Kenya factories are close to Mumias Sugar Company’s plant and the successful bidder will have to work towards reviving Mumias while competing with West Kenya for cane and other resources needed in the milling process,” argued Rao. In the case, the petitioners who allege they are farmers - Lambert Ogochi, Augustino Saba, Prisca Ochacha, Robert Magero and Wycliffe Ng’onga -  want the court to reverse Rao’s verdict claiming he flouted procurement rules.

On the other, another group of farmers- Gikwamba Farmers’ Cooperative Limited have thrown their weight behind Sarrai by arguing that its rival, West Kenya Sugar Limited, float of Sh36 billion is a ‘spoiler bid.’

A spoiler bid means a bid that is unattainable or practicable to meet.

The case involves KCB, Attorney General Kihara Kariuki, Agriculture Ministry, Competition Authority of Kenya (CAK), Capital Market Authority (CMA), Chief Lands Registrar, County Government of Kakamega, Sarrai and Tumaz and Tumaz Enterprises. KCB, AG, Sarrai, CAK Kakamega County want the case thrown out while Tumaz is backing for a repeat of the bidding process.

The judge heard that the five farmers are neither bidders nor are creditors, thus have no power to sue.

Gikwamba Farmers have thrown the case into a new spin now claiming that although West Kenya floated Sh36 billion, it is impossible to meet the bid. According to them, if West Kenya’s bid is taken, it will be expected that it will be paying Sh 1.8 billion as lease per year.

They claim it is impractical to meet the cost of production and have a profit margin, as this will require Mumias to process three times its production capacity.

According to them, Mumias processes 266,000 tons of sugar annually. At the same time, Gikwamba claims West Kenya had admitted it had made Sh934 million loss and that it had produced 318,801 tons of sugar in three years.

“The sixth plaintiff’s bid of Sh36 billion was a spoiler bid and or they do want to run Mumias Sugar Limited Company,” argues Gikwamba’s lawyer Elisha Onyango. Gikwamba states that it owns 1000 shares in Mumias and is owed Sh25 million.

West Kenya claims it was knocked out of the race to avoid monopoly. It takes a jab at Sarrai’s bid, arguing that it is economically unviable. “The selection of the 6th respondent (Sarrai) as the successful bidder, despite submitting the lowest bid was unreasonable and economically unconscionable,” West Kenya says.

The Jaswant Singh Rai led company stated that the bidding process was done in an opaque manner.

Through lawyer Paul Muite, West Kenya told the court that they deserved to take over the ailing miller having been the highest bidder.

“West Kenya was the highest bidder at Sh36 billion compared to Sarrai Group that bid at under Sh6 billion, a difference of 30.2 billion,” argued Muite.