The Court of Appeal has locked out an administrator appointed by Dubai-based firm, Vartox Limited, from managing Mumias Sugar Company assets.
Court of Appeal judges Asike Makhandia, Jamilla Mohamed and Sankale ole Kantai ruled that Kereto Maina should not take control or manage assets that had been charged by Mumias to creditors until the appeal filed by Kenya Commercial Bank and a receiver-manager it appointed for Mumias, Ramana Rao, is heard and determined.
The judges said KCB and Rao had proved to the court that they have an arguable appeal against the orders issued by Commercial Court judge Alfred Mabeya on April 14, this year.
They said the argument by KCB and Rao that Justice Mabeya erred cannot be wished away.
The bank and the receiver manager claimed that Mabeya applied Canadian law instead of following Kenya's Insolvency Act.
"In our view, the appeal is arguable on the issue as to whether the trial court erred in applying principles enunciated by Canadian courts based on the Canadian Companies Creditors Arrangement Act, 1993, instead of invoking clear, mandatory and applicable Kenyan statutory provisions of the Insolvency Act."
KCB and Rao had argued that the Commercial Court undermined the lender's interests as the secured creditor.
The court heard that by appointing an administrator, the effect of it was to suspend the receivership process.
KCB and Rao's application was supported by Sarrai Group, the Ugandan firm that won the lease to revive Mumias.
Sarrai's director Rakesh Kumar said the orders also had a ripple effect on the lease it was granted after competitive bidding.
He said the revocation, cancellation and nullification of the lease had far-reaching economic and social consequences to several people, like employees and farmers and even Kakamega County government.
By 2018, KCB was owed Sh600 million by Mumias.
Kimeto and Associates opposed KCB and Rao's application.
Lawyer Jaqueline Kimeto said the application by the two was an attempt to deny other creditors a chance before the Commercial Court.
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She argued that KCB and Rao had not complied with court orders and therefore did not approach the Court of Appeal with clean hands.
Khaminwa and Khaminwa Advocates and Wekesa Simiyu Advocates also opposed the application.
They said Mumias owes them at least Sh80 million, adding that Kereto would take care of all creditors, including the secured ones.
West Kenya Limited and Vartox also urged the court to dismiss the application.
West Kenya's director Jaswant Rai argued that the case was premature and said there was no arguable appeal before the court.
Meanwhile, Gikwamba farmers want the commercial dispute be heard by more than one judge. They argue that the dispute is of public interest and ought to be heard by more than one judge.