The High Court Wednesday heard that the lease of Mumias Sugar Company was conducted hurriedly without getting licences and regulatory approvals from government agencies.
Five farmers who obtained orders stopping the lease process said the administrator, PVR Rao, handed over the property of the ailing sugar miller to Sarrai Group of Uganda before being licensed by the Agriculture and Food Authority as required by the Crops Act.
The farmers led by Lambert Lwanga told Justice Alfred Mabeya one of the conditions for the lease would require various consents and regulatory approvals before the property was handed to the winning bidder.
Their lawyer Kibe Mungai said Mr Rao announced the winning bidder on December 21 and handed the company assets to Sarrai the following day, before getting consents and regulatory approvals.
“Given the 1st respondents (Rao) efforts to ensure that the lease is awarded to Sarrai Group Ltd at any cost, hence the handing over of assets before consents and regulatory approvals are obtained, it is imperative for this court to step in firmly in order, to prevent the apparent financial scandal from crystallising and perfected,” he said.
Mr Rao said he settled on Sarrai to operate Mumias Sugar for 20 years because of its extensive experience in the industry. The company, he pointed out, has three plants in Uganda crushing capacity of 19,000 tonnes per day, and employs more than 22,000 employees.
Mr Mungai told the court that besides the fact that the handover was illegal, the farmers believe that the lease of Mumias with assets worth over Sh15 billion for Sh6 billion was wrong.
“The grant of lease to the 6th Respondent (Sarrai) for a scandalous sum of approximately Sh20 million per month for 20 years despite the submission of others higher bids amounts to unjust enrichment at the expense of shareholders, farmers and workers of Mumias, unsecured creditors and the long-term strategic interests of Kenya in the sugar industry,” he said.
West Kenya through Senior Counsel Paul Muite supported the arguments saying the administrator did not undertake due diligence to fairly and properly assess and compare various bidders but instead made irrational decisions to disqualify bidders on grounds.
“He is not an expert in competition law and by disqualifying West Kenya on a personal determination of dominance, has usurped the 5th defendants (Competition Authority of Kenya) statutory role in such matters,” West Kenya’s Jaswant Rai said in an affidavit.
The hearing continues Thursday.