Judge trashes affidavit querying Dubai firm’s part in Mumias saga

Mumias Sugar Company main gate [Benjamin Sakwa, Standard]

The High Court has struck out an affidavit querying the involvement of a Dubai company in the Mumias lease battle.

Justice Alfred Mabeya dismissed the document filed by Gikwamba farmers questioning how Mumias assets that had secured loans from Eco Bank and French Development Agency Proparco shifted from the two banks to Victoria Commercial Bank.

The two assets - co-generation plant and Ethanol - ended up with a private company, Vartox Resources Inc allegedly based in Dubai.

The judge said the papers were filed too late in the day.

Gikwamba was questioning why and how Eco Bank and Proparco assigned non-performing assets to Victoria Bank and how much the Tier III private bank paid for the two assets.

At the same time, they wanted VCB to explain if it had the backing of depositors to invest money in assets that allegedly were not generating money.

In the affidavit, they also sought to have VCB’s chief executive Yogesh Patano appear in court to explain how and why the two assets were assigned to Vartox.

“It has not been explained to this court under what compulsion did VCB paid to Eco Bank and Proparco and take the assignment of debt being for a non-performing asset and what was the consideration value of this assignment,” Gikwamba farmers’ lawyer Dunstan Omari said.

Eco Bank’s security agent John Wambugu and Vartox’s director Khristian Khachatourian swore affidavits supporting an application by M/S Kimeto and Associates Advocates to kick out Mumias receiver-manager Mr Ramana Rao.

Mr Wambugu said the appointment of Rao as a receiver-manager for Mumias does not extend to all assets held by other creditors. Mr Rao, he said, was appointed to represent Kenya Commercial Bank and not any other creditor owed by Mumias.

He stated that Vartox is the secured creditor of the assets that Eco Bank held as security as it had acquired the benefits of debt of Mumias assets from VCB.

Mr Khachatourian said his firm has no representative in Kenya who would represent the company on matters arising from the Ethanol and co-generation plants. Vartox, therefore, retained VCB’s insolvency practitioner Mr Harveen Gadhoke.

Vartox also supported the bid to kick out Mr Rao from Mumias, claiming he was not diligent while managing Mumias. Mr Khachatourian said Mr Rao dealt with Mumias assets without consulting creditors.

Despite the dismissal, Gikwamba filed another case over the same issue.

Mr Rao denied the claims, saying he was complying with court orders.

The judge is set to determine whether Uganda miller Sarrai Group will continue with the lease.

The second case was filed by farmers Lambert Ogochi, Augustino Saba, Prisca Ochacha, Robert Magero and Wycliffe Ng’onga, who want the court to reverse Mr Rao’s decision to lease Mumias to Sarrai, saying he flouted procurement rules.

“The court in its ruling of November 19, 2021, said courts cannot micro-manage the receiver-manager and will allow the rules of commerce to settle the issue. To clear indebtedness is an issue of money. Rules that must apply recognise this is a capitalist economy,” their lawyer Kibe Mungai said.

The five supported West Kenya Sugar Company’s argument that it ought to have been the preferred bidder after quoting the highest amount of Sh36 billion.

Mr Rao and KCB said Sarrai emerged the best while West Kenya had floated a spoiler bid. He continued that the Kenyan miller would be the most dominant sugar firm in the country if it clinched the deal.