Fresh battle over Mumias Sugar management moves to the court

Mumias Sugar Company. [Benjamin Sakwa, Standard]

A row over Mumias Sugar Company receiver manager Ponangipalli Ramana Rao is brewing after a lawyer moved to court to have a new administrator appointed.

Rao had moved back in office after the Court of Appeal lifted High Court orders that had ousted him as the receiver manager.

Commercial Court judge Alfred Mabeya had also last year appointed an administrator Kereto Marima.

However, Justices Asike Mahandia, Jamilla Mohamed and Kantai ole Sankale suspended Justice Mabeya's orders after agreeing with Kenya Commercial Bank that if Kereto took over, there were fears that their interest in Mumias would not be taken care of.

"The applicants are apprehensive that their rights as secure creditors will diminish if Mr Kereto Marima's actions pursuant to his appointment are not stayed. That his actions may not be reversible and will be highly prejudicial to them. To our minds, these fears are not idle," the Court of Appeal judges bench noted.

However, lawyer Jackline Kimeto has filed a new application before the commercial court, seeking to have the court appoint a new administrator.

In her case, Kimeto claims that although the commercial court had ordered Marema to secure creditors assets and call for meeting, he has not done so to date.

"12 months have now elapsed since Mr Marema's appointment on April 14, 2022 and he has now automatically ceased acting as the court appointed administrator by operation of the law in accordance with section 593 of the Insolvency Act no 18 of 2015," she says in her application filed last month.

She continues: "There no exists huge gap in the interim administration process as there is no administrator currently in place to act on behalf of this honourable court and the body of creditors of the third respondent company (Mumias)."

This will be another round of battle over Rao's stay as the receiver manager since his appointment last year. Although, Kemeto's interests are on Marema, the question will be whether an administrator can manage Mumias alongside a receiver manager.

At the same time, the ruling by the Court of Appeal will be at the centre of whether Rao stays or leaves.

In the Court of Appeal, Kenya Commercial Bank, Gikwamba Farmers, and Uganda-based miller Sarrai urged the judges to lift orders issued by Justice Mabeya, ousting receiver-manager Ramana Rao who had been appointed by the bank to run the sugar miller.

Sarrai had been awarded the lease but was opposed by, among others, its rival in the bidding process West Kenya Limited.

In reply, West Kenya, Dubai-based firm Vartox Resources Inco and Kimeto and Company Advocates rallied for the court to dismiss the two separate appeals.

The then KCB lawyer Kiragu Kimani told Justices Makhandia, Jamila and Kantai that it is illegal to have an administrator run the assets of secured creditors.

He argued that Justice Mabeya has created uncertainty on whether Mumias ought to be under receivership or administration.

"What should prevail, the receivership or administration? It is clear that the appeal is not frivolous. Each case has to be looked on its own peculiar aspect. The new administrator has stepped into the shoes of the secured creditors and the secured creditor has taken to the back seat," argued Kimani.

Gikwamba Farmers' lawyer Wilfred Lusi and Sarrai's lawyer Wesley Gichaba supported KCB's application.

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