Sarrai to run Mumias Sugar Company as court ends lease war

Sarrai Group senior managers Rakesh Kumar, Sarbjit Singh Rai and Stephen Kihumba before the High Court in Milimani on May 18, 2023 where they had been summoned to show cause why they should not be jailed for contempt of court. [Collins Kweyu, Standard]

The Commercial Court in Nairobi has put an end to the Mumias Sugar Company lease war.

Justice Josephine Mongare dismissed lawyer Jaqueline Kimeto’s application to revive the case days after she had withdrawn the matter.

According to the judge, the court had no power to revive the case. She said that, just like a bulb to electricity, Kimeto had withdrawn the power of the court to entertain her case.

The orders by Justice Mongare now end the long-running receivership battle pitting Kimeto, Jaswant Singh, West Kenya Sugar Company, senior lawyer John Khaminwa against Kenya Commercial Bank, Uganda-based miller Sarrai Group and Gikwamba farmers.

The ruling pave way for Sarrai to now fully run the ailing miller.

"A party cannot breathe life into it by whichever means, not even a consent setting aside the orders of withdrawal. The existence of a suit can be equated to the existence of a light bulb; it only exists if there is an electric current and the gadget known as bulb," Justice Mongare said

"Once either the light or the bulb cease to be in contact, the light goes out and in its place is darkness. The only way to get light again is to supply current to it. The light that comes into existence again is not the continuation of the one that went out. It is new,” she added.

Kimeto had withdrawn the Mumias case after President William Ruto directed an end to the circus. Ruto observed that the numerous cases were meant to frustrate the revival of the miller.

Sarrai had already started reviving and repairing broken-down machines for a full hog when Kimeto moved to court on claims that the firm was vandalizing parts.

Despite Sarrai telling the court that the items she had alleged to have been vandalised were being repaired, the court blocked the revival.

This circus attracted the President’s wrath. After Ruto’s ‘mambo ni matatu’ (three things) remark, West Kenya and Singh withdrew their case, so did Dubai based firm Vertox.

Kimeto also withdrew her case but wrote a letter claiming she did so under duress and threats. She was directed to file a formal application to revive the case which she did, but failed to file submissions.

Justice Mongare said that it was too late for Kimeto to change her mind and the only remedy available was to file a fresh suit to pursue her abandoned claim.

If thespians and playwrights sat in Kenyan courts to script Mumias' lease war, perhaps it would capture the high-octane drama soaked with edge-of-the-seat emotions and chilling suspense. 

Each court in the country would ultimately be a scene of its own. The main plot would be the government’s idea for the revival of its sugar companies, an intense bidding process that culminated with Uganda-based miller Sarrai leasing Mumias.

Judges’ recusal, letters flying to the Judicial Service Commission (JSC), and President Ruto’s demand for withdrawal of cases would form part of the plot.

Of course the main cast government-owned KCB and Sarrai, while on the other hand, lawyers Kimeto and Khaminwa, would take the leading role. 

The support cast would be Victoria Commercial Bank, Vertox, Tumaz and Tumaz Enterprises, Kakamega County and Gikwamba farmers.

In 2019, KCB appointed Ramana Rao as Mumias Sugar’s receiver manager. Mumias owed KCB more than Sh554 million in debt. 

Mr Rao then floated the tender for leasing Mumias, a process that culminated in Sarrai being picked as the preferred company to revive and run Mumias.

This is where the battles started. However, the better part of the court battles was a fight for judges to withdraw from the case. 

Fast forward to October 13, 2023, not only did Kimeto and Khaminwa lose their bid to have a second Court of Appeal Judge bench composed of Justices Mohamed Warsame, Kathurima M’Inoti and Dr Imaana Laibuta to withdraw, but they were also ordered to pay the cost for what judges observed to be a fanciful application for recusal. 

According to the trio, parties ought to bring cogent evidence for any judge to recuse themselves from a case. 

They said that some of the parties in the case had introduced allegations, insinuations and innuendos including allegations of judicial bias, misconduct and outright corruption, which compelled a judge of the High Court and another Court of Appeal bench to recuse themselves.  

“If judges in a collegiate court were to recuse themselves simply on account of the person who empaneled the bench, such courts would never work. A judge would be wrong to recuse himself or herself on spurious grounds, just as he or she would be wrong to refuse to recuse in the face of real likelihood of bias that has been proved to the required threshold,” said the bench headed by Justice Warsame. 

At the Court of Appeal, the twin applications filed by Sarrai and its directors first landed before Justice John Mativo on May 12, 2023.   

Justice Mativo certified the applications as urgent, paving the way for a fast-tracked hearing.  

At the heart of the applications was an order by High Court Judge Dora Chepkwony requiring Sarrai and its directors to explain why they ought not to be jailed for alleged contempt of court. 

Sarrai, its directors, KCB and Rao argued that the orders of the High Court to stop Mumias operations contradicted those of the Court of Appeal, and they (orders) had defied the hierarchy of courts. 

In April last year, High Court judge Alfred Mabeya revoked the lease between Mumias and Sarrai. At the same time, he ordered Rao to leave and appointed Kereto Mrima as the  Mumias administrator.  

Aggrieved, Sarrai went to Justice Chepkwony and she suspended the implementation of Justice Mabeya’s orders.  

Rao challenged Mabeya’s orders before the Court of Appeal. On September 23, 2022, Justices Asike Makhandia, Jamilla Mohamed and Sankale Ole Kantai suspended them. 

In the meantime, at the High Court, Justice Mabeya withdrew from the case and the file landed before Justice Wilfrida Okwany, who directed that Sarrai should cease activities at Mumias. 

Thereafter, Kimeto asked Justice Chepkwony to jail Sarrai directors for alleged disobedience of court orders. It is this contempt application that landed before Justice Mativo.

After the case was certified as urgent, the file was placed before Justices Hellen Omondi, Ngenye Macharia and Mativo. The trio however withdrew from the case. 

The file was then placed before Justices Warsame, M’Inoti and Laibuta. Again, Dr Khaminwa and Kimeto urged the second bench to recuse itself.  

Khaminwa argued that since Justice Warsame was sitting in JSC, he should not preside over the case as there was a complaint against judges over Mumias before the commission. 

Kimeto expressed discontent with the entire bench, arguing that it was empaneled by an acting president who she had filed a complaint against before JSC. 

KCB, Sarrai and Rao opposed the application. Senior lawyer Githu Muigai, for Sarrai, and Mahat Somane, for KCB, said the application for recusal was a red herring intended to scare judges from sitting in the matter. 

Githu his clients were unfairly being punished as they had started repairing Mumias machinery and had planted sugarcane in preparation to have the operations run full throttle. The court heard, Mumias had started contracting farmers with cane for crushing. 

“With the resumption of operations, Mumias Sugar employed many Kenyans engage in planting, harvesting, cane crushing and distribution value chain,” argued Muigai, adding that the commercial court had relied on falsehoods to find his client guilty. 

The court was told that Mumias stoppage was hampering government’s efforts to revive the sugar industry in a bid to lower the cost of living. 

The Justice Warsame bench allowed the application. It also allowed a separate application which sought to have Sarrai back at Mumias. 

Mumias Sugar Company was incorporated on June 29, 1971. It was then privatized through listing at the Nairobi Stock Exchange in 2001. 

According to court papers, the Treasury owns 20 per cent of ailing miller while other State institutions have 4.57 per cent stake. Individuals own the other 75.43 per cent. 

The miller’s financial troubles started in 2012. According to Treasury’s documents, by the end of 2017-2018, it registered a Sh39.44 billion losses after tax. In that year alone, it posted a net after-tax loss of Sh15.14 billion. The shareholding equity had eroded to negative Sh14.63 billion, exceeding its Sh628.24 million assets.