Small legal fee that could sink Mumias sugar

Mumias Sugar Company #ticker:MSC is yet to respond to a petition seeking to wind it up over non-payment of legal fees.

The matter appeared before High Court Deputy Registrar Clare Wanyama last week and despite being served by lawyer Jackline Kimeto, the troubled miller failed to appear or file its response.

Ms Kimeto wants the firm wound up over a debt of Sh76 million. It has been certified for hearing on May 30.

The sugar company is embroiled in a legal battle with Kimeto & Associates in which the law firm is demanding their dues, for representing it since 2015.

Ms Kimeto said in court documents that she stood for the miller in various cases and provided legal opinions, but the management is yet to honour their part of the bargain.

She said her law firm and the sugar company entered an agreement to provide legal services on April 22, 2015 as well as render advisory work, for which she sent fee notes.

The same have been duly taxed and judgment has been entered for the amounts.

More debts

Kimeto said the board of directors and the management seem unable to turn around the affairs of the company to meet its obligations to its creditors as well as to properly account for the proceeds from operations of the company, thereby sinking into more debts.

“It is quite clear that in spite of the numerous written communication, the company has and continues to incur liability, that it is insolvent and unable to pay its debts as they fall due or can only pay if compelled by orders of the court,” reads the application filed in court.

Among the cases Ms Kimeto represented the sugar firm is a suit where Kenya Power was seeking more than Sh1 billion from the miller.

In the suit the power utility firm was demanding the money on account of back feed charges and penalties for deemed electricity sales out of a power purchase agreement that was poorly negotiated by the company in 2009.

Kenya Power entered a deal in which Mumias Sugar Company would sell its surplus power and would, in turn, purchase the same power at double the cost at which it sold being a demonstration of the weak terms which it entered into.

More penalties

A revised agreement was negotiated under previous management of the company eliminating the penalties which the company continues to incur as a result of deemed energy generated by the same having been reduced into a supplemental agreement ready for signature in March 2017.

And by May last year, Ms Kimeto wrote to the company warning that the miller was likely to incur more penalties under the agreement, owing to capacity adjustments, so long as the supplemental agreement remained unsigned by the parties.

“The client is therefore currently extremely exposed under the current PPA. We trust that you will take heed of the cautionary advice and commit yourselves to have the supplemental agreement in place as soon as possible,” reads part of the letter by Ms Kimero on May 21, 2018.

In reply, the management said they were reviewing the tariff issue on the power purchase agreement and ready to present it to the board.

No action seems to have been taken by the board since then and the company is still very much exposed.

Ms Kimeto said in the court documents although the current management had promised to turn around the firm, the same has become an almost impossible task.

The lawyer further accused the company of issuing several unpaid cheques.

And the fact that the miller did not open for some time, makes it more uncertain as to whether it can manage to pay its dues.

“I am aware that the company has not been operational for a period of over one year. The factory has shut down and its sugar cane is rotting in its nucleus estates,” she claims.

She further pointed out that the company has been plagued by extremely high management and staff turnover, with bosses being fired less than a year after being hired, for the last five years.”