Uganda-based Sarrai Group has been cleared to resume operations at Mumias Sugar Company in western Kenya after the Court of Appeal temporarily suspended a High Court decision to kick the firm out of running the troubled miller.
The appellate court said in a ruling that they were persuaded that the Sarrai Group together with KCB-appointed administrator PVR Rao had demonstrated that their appeal will be rendered useless if the decision cancelling the lease in April is not suspended.
High Court judge Alfred Mabeya had cancelled the 20-year-lease granted to Sarrai and appointed Kereto Marima as the administrator, pending a process to pick a new company to lease the Mumias plant. The miller was placed under receivership by KCB Group in 2019 over mounting debts.
KCB argued that its rights as secured creditors will diminish if Mr Marima’s actions pursuant to his appointment are not stayed.
“Indeed, they fear that they may not be able to recover the securities. To our mind, these fears are not idle,” appellate judges Asike Makhandia, Jamila Mohammed and Sankale ole Kantai said.
In the intended appeal, KCB and Sarrai argue that the trial court erred in undermining its interest as a secured creditor by holding that public interest surpasses the interests of the creditors.
The lender said Mr Marima will continue with the process of administration including the taking over the assets that had been charged to secure Mumias’ indebtedness to KCB and deal with the assets in whichever manner he deems fit its detriment.
KCB Group further said there was no guarantee that it will be able to recover its securities, should the intended appeal succeed.
Sarrai, in an affidavit of Mr Rakesh Kumar Bvats, a director, said the revocation of the lease had far reaching economic and social consequences to several people in the western region like employees who will definitely lose their jobs, as well as farmers.
Lawyer Jackline Kimeto, who is also a creditor, however, opposed the application saying KCB and Sarrai had not approached the court with clean hands. She said they had all along deliberately failed to comply with several court orders and that granting the prayers sought would be used as a shield to perpetuate illegal activities and disobedience of court orders.
Ms Kimeto said suspending the decision and allowing Sarrai to re-enter the premises of Mumias and continue with activities based on a nullified lease poses more irreparable harm, substantial loss to all other stakeholders, in the event that the nullification is upheld by the court of appeal.
Last week, Justice Wilfrida Okwany who was hearing a contempt of court application against Sarrai Group for going on with operations at the company, withdrew from the case citing several reasons, including her transfer from the Commercial division.
Her withdrawal follows that of the presiding judge of the division Justice Mabeya, who disqualified himself from the case in July. The file will be taken to Justice Mabeya who will pick another judge to hear the application.