The long-standing feud between billionaire brothers Jaswant Singh Rai and Sarbi Singh Rai has taken a dramatic turn, threatening to derail the revival of Kenya’s once-thriving Mumias Sugar Company.
The latest chapter in this bitter sibling rivalry revolves around control of the company’s ethanol distillery and co-generation (co-gen) plants, sparking political tensions and raising concerns over the future of the beleaguered sugar miller.
Last week, milling operations at Mumias Sugar ground to a halt after local leaders and farmers stormed the factory in protest against the takeover of the ethanol and co-gen plants by Jaswant’s West Kenya Sugar Company.
The move came after KCB Bank, which placed Mumias Sugar under receivership, granted Jaswant’s company control of the two plants. This decision has reignited a fierce battle between the Rai brothers, with political leaders in Kakamega County taking sides and threatening to escalate the matter to Parliament.
A Family Feud with Far-Reaching Consequences
The Rai brothers, scions of one of East Africa’s wealthiest families, have been locked in a protracted legal and business rivalry for years. Jaswant, the owner of West Kenya Sugar, and Sarbi, who manages Mumias Sugar, have repeatedly clashed over control of assets and business interests.
The latest dispute stems from KCB’s decision to allow West Kenya Sugar to revive the ethanol and co-gen plants at Mumias, a move that has been met with fierce opposition from Sarbi and his allies.
In a letter dated January 20, 2025, Patrick Mutuli, the legal officer for the receiver manager appointed by KCB, stated that West Kenya Sugar was reviving the plants in compliance with a directive from President William Ruto. “West Kenya Sugar is reviving the distillery and co-gen plants at Mumias Sugar (in receivership) in compliance with the directive issued by the President,” the letter read.
Mutuli further requested unhindered access to the plants to enable West Kenya Sugar to complete its assignment.
However, the decision has been met with resistance from Sarbi’s camp, which argues that the 20-year lease granted to the Uganda-based Sarrai Group for Mumias Sugar’s operations excludes the ethanol and co-gen plants.
Sarrai Group, which has been running the milling operations, offered Sh20 million per month for the plants, while West Kenya Sugar bid Sh150 million.
The disparity in bids has further fueled tensions, with critics accusing Jaswant of using his financial muscle to edge out his brother.
Political Fallout and Calls for Parliamentary Intervention
The political landscape is further complicated, with Kakamega Governor Fernandes Barasa and Senator Bonny Khalwale advocating for Sarrai Group to manage the disputed plants.
Governor Barasa criticized the choice of West Kenya Sugar, arguing, “You can’t remove the person who used to oppose the revival of Mumias and then expect that Rai will revive ethanol and the co-gen.”
Senator Khalwale echoed this sentiment, emphasizing that Sarrai should handle all aspects of Mumias Sugar operations given their existing lease.
Meanwhile, former Sports Cabinet Secretary Rashid Echesa has defended the legal rights of West Kenya Sugar to operate the distillery and co-gen plants, noting that these assets are legally under Rai’s control.
Echesa accused some politicians of being financially supported by Mumias Sugar to castigate President Ruto and oppose the revival of the plants.
“As we speak, whether we like it or not, the distillery and co-gen are property of West Kenya Sugar under Rai, so legally they should run those plants,” he said.
A Stalled Revival and Uncertain Future
The ongoing feud has left Mumias Sugar’s revival in limbo, with operations at the factory stalled and local farmers bearing the brunt of the impasse.
Last week, more than 40 members of the Kakamega County Assembly accused Mumias Sugar’s management of sponsoring demonstrations to oppose the takeover of the plants.
David Ndakwa, the leader of the minority in the assembly, criticized the management for misleading the public about its capacity to operationalize the distillery and co-gen plants.
“It is ironic that even after the management of Mumias Sugar admitted that they rely on bagasse from others to power their boilers, they are misleading people that they can operationalize both distillery and co-gen,” Ndakwa said.
As the Rai brothers’ rivalry continues to play out in the courts and the political arena, the future of Mumias Sugar hangs in the balance.
With Parliament poised to intervene, stakeholders are hoping for a resolution that will allow the once-iconic sugar miller to regain its former glory.
For now, the bitter-sweet saga of the Rai brothers serves as a stark reminder of the challenges facing Kenya’s sugar industry and the urgent need for decisive action to save it from collapse.
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### Key Changes:
1. **Removed redundancy**: The repeated section “A Family Feud with Far-Reaching Consequences” was deleted.
2. **Improved flow**: Reorganized paragraphs for better readability and logical progression.
3. **Grammar and clarity**: Fixed minor grammatical errors and improved sentence structure.
4. **Consistency**: Ensured consistent use of terms like “co-gen” and “ethanol distillery.”
The Law Society of Kenya (LSK) has expressed its intention to potentially halt the admission of Ugandan lawyers into Kenyan practice following the Uganda Law Council’s refusal to grant a temporary practising licence to Senior Counsel Martha Karua. Karua sought this permission to defend opposition figures Kizza Bisigye and Obeid Lutale in Kampala’s general court martial where they face charges related to the illegal possession of firearms.
In a strongly worded letter dated December 10, LSK President Faith Odhiambo criticized the Uganda Law Council’s decision as “disrespectful, arrogant, and dismissive.” She highlighted the offense this caused not only to the cooperative relations between the Kenyan and Ugandan legal fraternities but also to the manner and rationale behind the decision.
The Uganda Law Council, in its correspondence to Karua on December 6, rejected her application citing reasons such as her alleged lack of unique skills to justify the licence and the absence of necessary identification and academic documents. Additionally, they accused her of misconduct, including presenting herself in court without a valid Ugandan practising certificate.
Odhiambo voiced her astonishment at the Council’s apparent disregard for Kenyan legal professionals, especially one as esteemed as Karua. She emphasized Kenya’s role in promoting regional legal collaboration, allowing advocates from neighboring countries to practice within Kenya, predominantly from Uganda, and stressed the unfair restrictions Kenyan lawyers face abroad.
“It is inconceivable that the Law Council of Uganda would hold such little regard for Kenyan practitioners, no less a reputable and long-standing member of the Senior Counsel Bar,” Odhiambo said.
LSK President Faith Odhiambo.
“Given our responsibility to safeguard Kenyan legal practice under the LSK Act, we can no longer tolerate this blatant disrespect,” Odhiambo stated, indicating plans to engage with the Attorney General for a solution that would uphold mutual respect and legal dignity.
Moreover, LSK is contemplating suspending the admission of Ugandan lawyers until mutual recognition agreements are established, a move aimed at maintaining the integrity of Kenyan legal practice.
“To further protect the integrity of legal practice in Kenya, the Law Society of Kenya is actively considering, after necessary consultations, the suspension of admission of advocates from the Uganda Law Society until such a time as reciprocal arrangements are appreciated and implemented. This measure, though regrettable, is necessary to uphold the dignity and equity of Kenyan legal practice,” Odhiambo said.
Bisigye and Lutale are accused of possessing illegal firearms across multiple countries including Kenya, Greece, and Switzerland, with specific charges related to an incident in Nairobi in November 2024. The military court proceedings were delayed when Karua attempted to represent them but was barred due to her lack of a Ugandan licence.
Karua, in response, wrote a letter on December 9 challenging the character and professional critique from the Council, arguing it was an unjust attack on her integrity. She further communicated with the Uganda Law Society on December 10, urging them to support her reapplication for a special practising certificate under Article 19 of the IBA Standards, which calls for cooperation in granting foreign lawyers the right to represent clients.
Karua emphasized the importance of the East African Community’s principles in supporting cross-border legal practice, looking forward to the Uganda Law Society’s assistance in navigating this dispute.
The Battle of who should managed Mumias Sugar Company pitying the Rai brothers Jaswant Singh Rai of Rai Group and Sarbjit Rai of Sarrai Group has taken an ugly twist with the former resorting to financing a smear campaign against the latter.
It must be known that Jaswant has four Sugar Factories in Kenya namely West Kenya Sugar situated in Malava in Kakamega County, Sukari Industries of Ndhiwa in Homabay County, Olepito Sugar situated at Tangakona area in Busia County and the latest entrant Naitiri Sugar in Bungoma County.
With all these sugar factories the man still wants to add Mumias Sugar Company to himself. His bid to take over Mumias, was rejected by Ponangipalli Rao who was the Company’s Reciever manager.
Rao said that if the bid was awarded to West Kenya, it would amount to a dominant position as the Rai Group which owns West Kenya, controls atleast 41% of the daily total Sugarcane crushing capacity in the Country.
On the other hand Sarbi owns Kinyara Sugar and Hoima Sugar both in Uganda all under Sarrai Group and with each having a success story to share. It is from this background that the Reciever manager developed confidence in Sarrai and saw his capability to run Mumias Sugar Company hence awarding him a 20 year lease.
We should not also forget that the defunct Kenya Sugar Board (KSB) basing on the same reasons in 2011, rejected West Kenya’s application to set up a factory in Busia on grounds that it had a functional Sugar Mill in Malava in Kakamega County and at the same time holding an operating license for Bilibili site in Bungoma County.
What Kenyans should also know is the fact that KCB, The Treasury and the Ministry of agriculture had earlier invited Sarrai to come to Kenya to revive Mumias having seen his capacity after visiting the two sugar factories he owned in Uganda. He was initially not interested as he had anticipated these wars but later accepted after several considerations.
For Jaswant had wanted to have the Mumias Sugar neuclears where his plans were to transport Sugarcane to his companies and hence KCB believed they couldn’t recover their money with Jaswant being in control of Mumias.
It is in the same manner that Jaswant acquired a ones vibrant Panpaper Mills in Webuye at a throw away price of Ksh900 Million after duping the people of Western and Bungoma to be precise that he was going to revive it only to turn it into a Godown to stock cheap illegal sugar. He now brings paper from his Mufindi Paper Mills in Tanzania.
So for the Kenyan Media which should act as the farmers’ watchdog to allow itself to be used by Jaswant to drive a false narative about Sarrai so that he can take over Mumias Sugar Company is saddening and they should refer to the above reasons why he is not allowed to add another Sugar Factory to himself.
This is a man with a big appetite for the sugar Industry in Kenya where he wants by all means to dominate it and have the monopoly hence what Kenyans especially the Sugar farmers should know is that he will no longer be interested in sugarcane development immediately he succeeds to take over Mumias Sugar Company.
It is in black and white that his main agenda is to fully embark on Sugar importation as it is in the public domain that he has been in the center of illegal sugar importation in the Country.
You will all remember what happened to him in 2018 where his Raiply Paper Mills formerly Panpaper in Webuye was raided by the DCI where llegal Sugar worth Ksh250 Million was nabbed.
After cases of sugar suspected to be having laced with Mercury were reported in the Country, the sugar that was seized at the Raiply Mills was also taken for tests in the same year where same results were declared.
He was cleared by the Senate Committee which was led by former Kakamega Senator Cleophas Malala who is now the UDA Secretary General. He told the Country that after licking the sugar he found it fit for consumption.
Jaswant has now started a smear campaign against his brother Sarbjit Rai of Sarrai Group who won the tender to operated Mumias Sugar Company for the next 20 years. He has bought Newspaper Editors and bloggers to run fake stories about MSC and his brother with an aim of destabilising the giant Miller and tainting his brother as one who is not capable of running MSC.
A good example is a full page story that appeared in the Business Daily on 31st May 2023 with the header, ‘Loaders Pile More Woes On Sarrai In Battle For Mumias’. And to show clearly that this was a sponsored story to push Sarrai out of Mumias the Media House went ahead to add a subheading saying, “Workers Want The President To Fullfill His Pledge To Replace Firm With New Reviever Manager’.
The issue here is not about the incapability to run MSC but the President replacing the Sarrai with a new Receiver Manager. Many would ask who is this new Reviever manager that is supposed to replace Sarrai incase President William Ruto fullfils his promise as stated by the said Loaders.
What Kenyans and Sugarcane Farmers in particular should know is that there is enough evidence to show that Jaswant is now financing the campaign against Sarrai with the aim of seeing him out of Mumias so that he can take over and monopolise the sector.
What Jaswant vowed since 2011 when he first set up a Weighbridge within Mumias Sugar Zone at Tangakona in Busia County was to make sure that the ones giant sugar Miller which used to command East and Central Africa is dead so that he can take over as the leader in the market.
It is common knowledge that Jaswant is not ready to allow Mumias Sugar to roar back to life under a diffrent person if not himself for obvious reasons. He knows very well that if left undisturbed, MSC would roar back and it would push him out of business so he would rather push it into the grave for good rather than seeing it operating under a diffrent person something that Kenyans should know that it is not all about his brother Sarrai.
The people of Western Region whose economic backbone has always been Sugarcane farming should therefore keenly follow this happenings to see whether the Government of Kenya shall succumb to Jaswant’s financed anti-Sarrai campaigns and pressure.
The desperation of Uganda-based Sarrai Group senior executives to avoid a possible 6-month jail term sentencing has landed them in even more trouble after their dirty trick was bursted by the Court of Appeal.
They were taken out of hearing list last week after a bench of three Appellate court judges discovered that they dishonestly violated procedures, rushed and fixed the hearing date. The judges who include Hellen Omondi, John Mativo and Grace Ngenye, discovered the notice for hearing date was issued on a Sunday which is outside the law.
The three judges expressed displeasure at the manner in which the process of fixing the hearing dates was rushed. The judges said they were not party to giving the hearing dates.
The firms owners Mr Sarbjit Singh Rai, together with Rakesh Kumar and Stephen Kihumba, were found guilty of contempt by High Court judge Dorah Chepkwony in July last year over failure to cease operations at Mumias Sugar Company.
They were fined Sh100,000 each and ordered to appear personally before Justice Alfred Mabeya, the presiding judge of the commercial division of the High Court on May 18, and show cause why they should not be committed to jail for six months.
The court also rejected their application seeking to suspend the entire insolvency proceedings in the High Court.
Hurried application
Aware that they may be fined or thrown to jail, the officials rushed to court of appeal in a bid to stop the sentencing.
West Kenya Sugar company had opposed Sarrai’s application..
Through lead Counsel Muite and Martin Gitonga raised concern over hurried manner in which the hearing of the application was fastracked.
Sarrai Group led by Prof. Githu Muigai had urged the court to suspend all proceedings relating to the lease of Mumias Sugar company.
“The Court be and is hereby pleased to issue an order of stay, restraining any and all further proceedings in HC IP E004 of 2019, particularly and in respect of the finding of contempt vide the ruling and orders of the Justice Chepkwony dated 27th April and delivered on 28th April, 2023, pending hearing and determination of the Applicants’ Appeal,” pleaded Sarrai.
In a letter dated 15th of May ,2023, C.M Wekesa wrote to Court of Appeal president protesting the manner in which directions on Sarrai Group application were issued.
The letter raised concerns on how directions were issued on the application filed by Sarrai Group seeking to stay their sentencing by the High Court.
“With tremendous respect, the directions on the hearing of this application on 16th May, 2023 subverts the right to fair trial for the Respondents and pays no regard to the earlier directions issued by this Court on filing of responses and submissions. By 16th May, 2023 when this application is ostensibly fixed for hearing, the timelines for filing responses, rejoinder and submissions would not have lapsed given that the earliest for the pleadings to have been filed and closed on our part being submissions is 21″ May, 2023,” stated the letter.
“How fair will the hearing be without the Respondents’ responses having been filed and given the directions of this court of 19th May, 2023? How can the Court of Appeal fix the application for hearing before the close of the pleadings as per timeline set by the same Court?” Questioned lawyer Wekesa adding that it was unconstitutional.
He wondered why the case was being fast tracked when there were hundreds of applications, pending before the court and we’re yet to be allocated dates.
“It is even surprising that this Court gave a hearing date of 16 May, 2025 for application E187 of 2023 without giving any directions on the filing of the pleadings. In fact, we learnt of the existence of this application through this Court’s directions fixing the hearing on 16 May, 2023. These directions were issued on Sunday 14 May, 2023,” Wekesa pointed out.
He said the circumstance under which the applications were certified urgent, directions given and the hearing of 16th May, 2023 fixed even before the expiry of filing the responses by the Respondents are troubling and raise more questions than answers.
On Thursday 18th when the trio appeared before the Court of Appeal, judges Hellen Omondi, John Mativo and Grace Ngenye declined to hear the case over the manner in which the hearing was rushed.
“Before the time for compliance lapsed, a hearing notice was issued on a Sunday in total ambush to the parties, thus undermining the right to a fair hearing as enshrined under Article 50 of the Constitution of Kenya,” the judges said.
The judges took out the case from the hearing list saying it was prematurely and improperly listed before them.
The sentencing has been pushed to June 15.
Another complaint about how Sarrai Group application was being was sent to Chief Justice Martha Koome and Secretary of Judiciary Service Commission.
Through a letter dated 15th of May this year, Kimeto & Associate wrote to CJ and JSC a second complaint against the acting court of appeal president over misconduct.
The Law firm state that they have not received feedback from Judicial Service Commission over their first complaint and now they have been dragged again into another circus and controversy by the appellate court.
“As the pending issues in our previous complaint and petition are yet to be addressed, we have now been dragged into yet another circus and controversy by the Court of Appeal in Civil Application No. E185 of 2023-Sarrai Group Limited v Kimeto & Associates & others (E185),” states the letter.
According to the letter, the law firm wishes to raise matters of grave concern that adversely impact the 1″Respondent’s right to a fair hearing and impacts the integrity of the judicial process especially the integrity of the Court of Appeal of this country.
The Law firm is requesting for Chief Justice most urgent intervention is ensuring that justice is served and a hearing is given to the appeals filed by the appellants because the said appellants have abandoned these appeals since they are happy enjoying blanket stay orders at the behest of the court of appeal.
“It is clear that they do not wish to progress beyond the orders of stay but choose instead to file multiple applications seeking to stay the Insolvency Proceeding in the High Court,” states the letter to CJ.
Kimento & Associate Advocates is requesting for a bench to hear the matter and the bench should exclude Justice Mukhandia and other two judges who handled another civil application.
A secured creditor wants KCB appointed receiver manager Ramana Rao summoned over a report concerning the accounts of Mumias Sugar company, which he filed in court in January.
Vartox Resources Inc, one of the creditors of the ailing miller says Rao should appear in court and explain the books of accounts of the miller for the last two years.
In an application supported by rival West Kenya sugar company, Vartox also wants KCB group chief executive officer Joshua Oigara to appear in court for cross-examination.
Through lawyer Ismael Abbas, Vartox also claimed that Rao has failed to produce a detailed valuation report as ordered by the court.
Abbas submitted that it has become necessary for Rao to be cross-examined on the inconsistencies, falsehood and coverup that he has engaged in during his time as receiver manager of Mumias Sugar.
He said Rao’s recent actions to lease the assets of Mumias Sugar to Sarrai Group Limited is littered with inconstancies.
“As the applicant’s application dated January 28, 2022 is under insolvency Act 2015, there is no provision for a viva voce hearing unlike in civil cases and the applicant does not have ant way to question Rao on the many inconsistencies to bring him to account for his law as administrator and receiver of Mumias,” said Abbas.
He further submitted that Rao has conducted himself in a manner meant to disenfranchise other creditors and stakeholders of Mumias Sugar, who have a debt portfolio exceeding Sh30 billion.
Abbas said the affairs of Mumias are of significant public interest as held by the court in a ruling on 19 November 2021.
Senior Counsel Paul Muite, who represents West Sugar supported the application saying Rao and KCB should come and explain the inconsistencies.
West Sugar has challenged the lease to Sarrai Group wondering how as the highest bidder, the miller missed out on the 20-year lease.
“He should not only be removed as an administrator, his conduct makes him unsuitable for a receiver or administrator,” Muite submitted.
Muite questioned what Rao is hiding since he has not availed the lease documents as requested
He urged the court to direct Rao to produce all documents supporting every entry that appears in his “abstract” filed with the court on January 18, 2022.
Muite said other than cross-examination, the two should also produce all documents including e-mails, letters and all correspondence exchanged with Rao, all board resolutions and approvals given to the administrator in relation to the leasing of Mumias’ assets to Sarrai Group.
Rao was given the nod to lease Mumias Sugar after receiving bids from several entities.
“Rao has leased the Company’s sugar factory and related assets to the lowest bidder in circumstances that point towards fraud since the 20-year lease executed will expire with Mumias continuing to be mired in debt with its assets potentially wasted and the only financial beneficiaries of the 20-year lease are the lowest bidder and the 1st Respondent. None of Mumias’ historical debts will ever get repaid in those 20 years,” added lawyer Abbas.
Rao allegedly discarded the highest bidder’s bid on the basis that it would not achieve the goals of the lease which was to turn around the Company to profitability.
Rao proceeded to award the bid to the lowest bidder after carrying out a technical evaluation but which losing bidders say was marred by opacity and serious anomalies.
The lawyer said Rao has not explained to Vartox or any of the other creditor how a bid of Sh6 billion over a period of 20 years will revive Mumias whose debts are in excess of Sh30 billion.
“In attempting to justify his flouting of the court orders, the 1st Respondent has relied on provisions of the repealed Companies Act that no longer exist in law. He has attempted to justify filing an abstract because Section 351 of the repealed Companies Act provided for the filing of abstracts,” lawyer Abbas added.
He added that Rao needs to be cross-examined on the basis for his reliance on repealed statutes which impact on his competency to act as a receiver considering he is unable to follow simple court directions and is relying on repealed statutes to carry out his duties.
He pointed out that Rao spent more than Sh 71 million paying lawyers and unnamed consultants and has also procured valuation reports after paying Sh21.9 million.
“Despite requests to him to supply details of these payments and the valuation reports, Rao has ignored these requests”.
Rao, he said, operated Mumias’ assets as though Mumias is his personal property.
“Apart from operating the Ethanol plant when he had no mandate to because KCB’s security did not extend to the Ethanol plant, he has refused to account for any of the proceeds from the operation of the Ethanol plant,” he said.
“Furthermore, he has borrowed money through an overdraft from KCB to the tune of Sh216 million in unclear circumstances, thereby further compounding Mumias’ woes and increasing its debt portfolioand the interest alone on the KCB overdraft amounts to Sh. 23 million, a figure that is more than 1 months’ lease rental that is being paid by the lowest bidder.
He said Rao should be crossexamined so that he can explain in detail the borrowings, what he has used the money for and how it impacted Mumias’ balance sheet as well as when the applicant’s outstanding debt will be cleared based on the current lease to the lowest bidder”, he added.
No cross-examination
Last momth, PVR Rao opposed calls by creditors of the miller to be cross-examined over its accounts for the last two years.
Two creditors- a lawyer who previously acted for the company and who is owed Sh96 million and a supplier, sought to cross-examine Mr Rao over the accounts he filed in court last month.
Lawyer Jackline Kimeto wanted Mr Rao to answer questions surrounding professional and legal fees, which run into millions of shillings, donations, public relations expenses, security costs amounting to more than Sh150 million, repairs and maintenance of the distillery and the factory, among others.
It is also her view that the money the receiver generated in the last two years should have paid KCB’s debt.
Another law firm, Wekesa and Simiyu Advocates also wants Mr Rao to demonstrate the time frame that the highly contested lease will take to repay KCB’s debt.
Also sought is a copy of the evaluation criteria prepared at the time of making the invitations for bids to lease the assets of the company and Mr Rao’s charges per year, since his appointment as the receiver up to December 31, last year.
“Please furnish copies of the consents procured by yourself and the successful bidder from the Competition Authority and the Capital Markets Authority and any other statutory bodies as condition precedents prior to entering any lease and handing over the company assets to Sarrai Group,” the letter adds.
Mr Rao awarded the 20-year lease to Sarrai Group in December but several bidders have challenged it in court.
Wekesa and Simiyu advocates wrote a letter to Ramana Rao demanding the manager to demonstrate the time frame in months and years that the highly contested lease will take to “extinguish the lawful indebtedness of Mumias Sugar Co.Legal battle over the Mumias Sugar Company lease award continues to rage on,with Wekesa & Simiyu Advocates law firm now demanding a copy of the lease agreement entered between the receiver-manager Ponangipalli Venkata Ramana Rao & Sarrai Group in December, 2021.
Mr PVR Rao, the administrator of Mumias Sugar, told the High Court that it is not correct to assume that the highest financial bid should have won the 20-year lease, but he had to consider the technical aspects, besides the financial proposal.
His lawyer, Senior Counsel Kimani Kiragu, said it was his considered opinion that West Kenya, which bid Sh36 billion for Mumias, was not interested in the revival of the miller but intended to stall the operations to ensure it continues to enjoy the monopoly in the sugar industry.
“I clearly indicated that the bids I received would go through both technical evaluation and financial evaluation. It is not correct to proceed, as West Kenya and Tumaz & Tumaz have done, on the basis that the highest financial bid alone would be the winner,” Mr Rao said in an affidavit.
Mr Kiragu further said West Kenya failed to demonstrate how it would pay Sh150 million per month, and Sh1.8 billion per annum, for the lease as captured in its financial bid.
In the affidavit, Mr Rao said he was aware that the Rai Group, which is linked to West Kenya, took over Pan Paper Mills Limited in Webuye in 2016, but the paper-making company has not been in operation for more than 11 years.
The court heard that the bid was for the leasing of assets for 20 years, and not for a sale, as mistaken by farmers and suppliers who filed the case challenging the lease to Sarrai Group.
Mr Kiragu said the Mumias Sugar assets are mainly industrial and are prone to degradation due to corrosion if they are left non-operational for a long time.
He disputed claims that he rushed the process but took about a month to finalise the evaluation and award the lease to the Sarrai Group.
He said Tumaz & Tumaz a company associated with businessman Julius Mwale was trying to fill the gaps in its bid by submitting a fresh one through the court case, and that the company was trying all means to scuttle the process by filing the court cases.
Jaswant Rai of West Kenya has faulted the lease saying the bidding process was shrouded in secrecy and lacked accountability and transparency.
Pulling back revival of Mumias Sugar
When lawyer Jackline Kimeto filed an insolvency petition against Mumias in April, 2019, she was hopeful that her move would pressure the miller into paying her Sh76 million debt.
The miller’s shame
Ms Kimeto had defended Mumias in a suit filed by Kenya Power in 2015, seeking Sh1.1 billion in unpaid electricity bills. She also handled other cases for the company.
But her petition pulled a thread that would eventually undo the seams holding together what was left of Mumias’ clothing, exposing the miller’s shame: It was flat broke and headed down the murky waters of bankruptcy.
More than 80 creditors joined the insolvency suit. Five months later, KCB placed Mumias under receivership. The lender appointed Ponangipalli Venkata Ramana Rao as receiver manager.
On September 25, 2019, the NSE suspended trading of Mumias’ shares on account of the receivership. Mr Rao’s first move was to fire all 900 workers as he started reviewing the miller’s books and operations. The number of staff was a pale shadow of Mumias’ heyday, when more than 9,000 people were on its payroll.
Unhappy with KCB’s move, Ms Kimeto filed an application challenging the manner in which the lender placed Mumias under receivership. She filed a second application seeking to have an administrator appointed to take over the miller’s management.
High Court judge Mary Kasango issued orders temporarily barring Mr Rao and KCB from selling or transferring Mumias’ assets, pending determination of Ms Kimeto’s application.
As the lawyer’s application was still lingering in legal red tape, a section of creditors was growing disgruntled with Mr Rao and KCB. They felt that the receiver manager was biased towards KCB at the expense of other creditors.
Creditors resolved in an October 16, 2019 meeting to have an administrator who would be answerable to anyone owed money by the collapsed miller.
Barely three weeks later, Mumias lenders met with representatives of the Kakamega County government and resolved to form a steering committee that would oversee the revival of the miller.
The committee was to have Ashitiva Mandale, George Kashindi, Lynette Okiro and Ms Kimeto. The final slot was reserved for a representative of the National Treasury. The group would work with Mr Rao.
When Mr Rao took control, the firm had not produced sugar for more than a year. More than 25,000 farmers dumped Mumias over non-payment of their dues. Strangely, ethanol had become the biggest and only reliable source of income for the miller.
Blessing in disguise
The receiver manager halted the remaining operations, pending a restructuring process that would be guided by a detailed review of issues affecting the company.
On March 15, 2020, President Kenyatta announced a partial economic shutdown after Kenya reported her second and third Covid-19 cases. It was doom for most companies.
But for companies like Mumias, it was a blessing in disguise because ethanol suddenly became the most sought after raw material because there was not enough hand sanitiser to satisfy the local demand.
Even the police were surrendering ethanol confiscated from illicit brewers to make more sanitiser. Mumias had resumed ethanol production one month before the partial economic shutdown. At some point, the miller was producing 150,000 litres of ethanol a day.
There was, however, a pause between December 2020 and February 2021 following a molasses shortage. Mr Rao eventually sourced for molasses from rival millers and resumed the ethanol production.
Mumias also received a huge boost from the Kenya Revenue Authority (KRA), which opted to waive a Sh11 billion tax bill, a huge chunk of the miller’s debts. In April last year, Mr Rao said he intended to lease out Mumias’ assets for a 20-year period that would ensure the miller’s survival and repayment of debts.
Tycoon Narendra Raval emerged as the most interested candidate through his Devki Group of Companies. Court proceedings would later reveal that the Devki Group had placed a Sh60 billion bid for the 20-year lease. But Mr Raval’s firm did not want the public scrutiny that stakeholders were demanding and withdrew the bid on June 4.
Mr Rao was then summoned by the Senate to explain the leasing plans. He revealed that he had sourced for potential strategic investors.
The companies he had approached were the Devki Group, Catalysis Group (Russia), Sarrai Group (Uganda), Kruman Associates (France), Kibos Sugar, Third Gate Capital Management, Godavari Enterprises and Premier JV (India).
On June 18, activist Okiya Omtatah filed a suit at the High Court’s Constitutional and Human Rights Division in Nairobi seeking to have Mr Rao removed, and the National Treasury compelled to revive Mumias.
Conflict of interest
He argued that Mr Rao had acted unprofessionally by failing to explain the formula used to settle on the eight bidders. He also raised a potential conflict of interest on the receiver’s past dealings with the Devki Group.
Mr Rao had sold scrap metal to Devki Group while managing affairs of Kwale Sugar during a past receivership spell. Mr Omtatah also argued that Mr Rao had failed to issue any specific details to the public on Mumias’ state of affairs since taking over as receiver manager.
Devki Group Chairman Dr. Narendra Raval.
After Mr Rao conducted a fresh tendering for leasing, Mr Omtatah successfully sought orders compelling him to file financial statements and bids placed by the bidding companies. The documents would reveal that Mr Rao settled for the third lowest bid price of Sh6.2 billion, floated by Uganda’s Sarrai Group.
One of Mumias’ key suppliers, Gakwamba Farmers Cooperative Society, would join Mr Omtatah in protesting the manner in which Mr Rao was handling the deal.
Gakwamba filed a suit in the Commercial & Admiralty Division of the High Court in Nairobi on August 2 last year, faulting Mr Rao for entering negotiations with Devki Group and sought orders barring any deal.
“Mr Rao and KCB have not carried out an objective cost-benefit analysis to determine whether the so-called strategic investor is the most effective way of reviving MSCL and ending the suffering of its sugar farmers and other stakeholders,” the society argued.
Gakwamba owns 1,000 ordinary Mumias shares. Farmers under the group are also owed over Sh25 million for cane supplied. The group argues that Mr Rao should not be allowed to lease out Mumias assets through private treaty, and only a process accessible to the public should be implemented.
Justice Wilfrida Okwany agreed with the farmers. On September 23, the judge ordered that Mr Rao open bids in the presence of all bidders. Interestingly, the bids remained a closely guarded secret before Mr Omtatah later secured orders compelling Mr Rao to file the information in court.
Three days after the farmers filed their case, Mr Rao advertised a fresh procurement process for the leasing deal. Not all were happy with the move. Lawyer John Khaminwa had at this point joined the insolvency petition against Mumias. He is owed money by the miller, but wanted to support its revival rather than liquidation.
On September 16, Mr Khaminwa filed an application in the insolvency suit seeking to have Mr Rao cited for contempt of court. The lawyer argued that the court orders stopping sale and transfer of the company’s assets also covered leasing deals, hence Mr Rao was in violation.
Insolvency suit
Mr Rao and KCB opposed the application, holding that during the lease period all assets would still be owned by Mumias. A week later, KCB and Mr Rao filed an application in the insolvency suit, seeking to stop the Senate from further summoning them or interfering with the Mumias receivership.
The two argued that the Senate was interfering with their rights by giving instructions on how to handle the collapsed miller’s affairs. The Senate had on September 29 – a day before Mr Rao and KCB filed their application – requested the receiver manager to comply with the court orders.
Justice Alfred Mabeya had taken over the insolvency suit, and delivered one ruling to handle four applications – Ms Kimeto’s seeking to stop selling of Mumias assets, her request for appointment of an administrator, Mr Khaminwa’s contempt of court allegations and Mr Rao’s bid to stop Senate summons and directions.
In his November 19, Justice Mabeya agreed with Ms Kimeto on the need for an administrator. He, however, appointed Mr Rao the administrator while upholding his role as receiver manager.
The judge held that the Senate had not done anything to indicate interference, as it had only sought clarity from Mr Rao and requested that he comply with court orders. But the judge issued orders barring the Senate from directing Mr Rao on how to conduct business in his receiver manager capacity.
Mr Khaminwa’s contempt of court application was also dismissed, as Justice Mabeya ruled that the leasing would not lead to a sale or transfer of Mumias assets. “Mr Rao is at liberty to proceed with the process of leasing the Company’s assets subject to strict observance of the Competition Act, 2010 Laws of Kenya,” the judge said.
The fresh bidding round attracted six companies. The Jaswant Rai family’s West Kenya Sugar proposed Sh36 billion and became the highest bidder following the Devki Group’s exit.
Tumaz and Tumaz Enterprises, owned by Butere-based businessman Julius Mwale, was the second highest bidder with Sh27.6 billion. A group of French and Turkish investors, through Kruman Finances Limited, bid Sh19.7 billion.
The Sarrai Group, owned by Jaswant Rai’s brother Sarbi, bid Sh6.2 billion. Only Kibos Sugar and Pandhal Industries had lower bids than Sarrai’s as they each wanted to pay Sh5.9 billion. The Sarrai Group got an early, but short-lived Christmas gift as Mr Rao declared the Ugandan firm the best bidder on December 22.
The firm was to take over Mumias operations, excluding ethanol production. Rumours of disgruntled bidders threatening court action started flying almost immediately. Tumaz and Tumaz Enterprises was the most vocal, stating that it was one of the highest bidders.
Kakamega County filed a suit at the Vihiga High Court seeking to stop Mr Mwale’s firm from interfering with Mr Rao’s decision.
Highest bidder
Mr Rao filed a similar suit in Nairobi, arguing that Mr Mwale was planning to disrupt his plans to rescue Mumias through the leasing deal. On January 14 this year, five farmers challenged Mr Rao’s decision to pick Sarrai, arguing that the receiver manager conducted an opaque process.
Lambert Lwanga Ogochi, Augustino Ochacha Saba, Prisca Ochacha, Robert Mudinyu and Wycliffe Barasa Ngong filed yet another suit. Justice Wilfrida Okwany issued orders barring Sarrai Group from starting operations.
West Kenya, Tumaz and Tumaz Enterprises, Gakwamba Farmers Cooperative Society and Mumias Outgrowers Company have since been enjoined in the suit. West Kenya maintains that it was the highest bidder but was unfairly locked out.
In response, Mr Rao argues that in overlooking West Kenya, he was following Justice Mabeya’s orders to comply with competition laws. He argued that if West Kenya would have acquired the lease, the Rai family-owned firm would have become a monopoly in the sugar industry.
The receiver manager adds that West Kenya had several cases against former workers and competitors, and that the Rai family firm did not submit a detailed investment plan in the bid.
Gakwamba Farmers claim that the five farmers who obtained orders stopping Sarrai from proceeding with the leasing deal are strangers sponsored by West Kenya.
In the insolvency petition, Dubai-based Vartox Resources Inc and Ms Kimeto have also challenged Sarrai’s leasing deal, arguing that the process was opaque and intended to benefit only KCB and Mr Rao.
The two argue that Sarrai’s Sh6.2 billion bid was not sufficient to pay Mumias’ debts, yet other firms would have cleared the miller’s liabilities in less than 10 years.
Vartox says that Mumias owes it Sh6 billion, which was secured with the miller’s ethanol plant. The Dubai firm holds that Mr Rao has refused to acknowledge its rights to the plant despite several notifications.
The plant is also collateral for loans that Ecobank and France’s Proparco issued to Mumias. Ecobank, Proparco and Vartox appointed Harveen Gadhoke as the plant’s receiver manager.
All focus is now on the case filed by the five farmers. Justice Okwany will hear the parties on March 14. Orders seeking to stop the Sarrai Group from taking over Mumias operations will lapse on the same day.
An activist has moved to court seeking temporarily suspend a directive by Senate to Mumias Sugar Company receiver manager Ponangipalli Venkata Ramana Rao from inviting bids from investors to salvage the troubled miller.
“The matter is extremely urgent since the on June 9, 2021 or thereabouts, the Senate’s Agriculture Committee looking into the affairs of troubled Mumias Sugar Company (the Company) directed the 1st Respondent, the Receiver Manager, to within 14 days re-advertise the bid to salvage the troubled Mumias Sugar Company,” Okiya Omtatah said in a petition.
According to Omtatah, the Senate got involved after it emerged that the Receiver Manager was engaged in a secretive bidding process to purportedly identify a strategic investor for the Company.
In the petition, Omtatah says it is only when Rao was summoned to the Senate that he disclosed that he had invited eight investors.
The companies include Catalysis Group of Russia, Sarrai Group of Uganda, Kruman Associates (France), Kibos Sugar and Devki Group, which are both from Kenya, Premier JV (India), Third Gate Capital Management and Godavari Enterprises, India.
It has also emerged that none of the eight bidders he secretly invited to bid had the capacity to revive the company, leading to fears that a plan was underway to dispose the company off to Rao’s cronies for a song.
Omtatah says that the fears that the Receiver Manager is conflicted were further reinforced by the fact that, while he was the receiver manager at Kwale Sugar Company he sold scrap metal to the purported lead bidder, Devki Steel Millers Ltd.
He also claimed the receiver manager took over the Company to ostensibly “protect its assets and to the best extent maintain its operations,” yet the company was processing ethanol, from molasses bought mainly from the neighbouring Butali and Busia sugar companies.
In the court documents, Omtatah says that instead of reviving the company, Rao has mismanaged the ethanol operations and shut them down in March 2021, thus halting all manufacturing operations at the company.
Also, without proper planning, he ploughed 677 hectares of the Nucleus Estate but failed to plant sugarcane on some 307 HA, letting the effort go to waste.
He adds that he is aggrieved that close to two years after taking over in 2021, the receiver manager has not published a general statement of affairs on the assets and liabilities of the company as at the time he took over and made known the efforts he has taken to protect the assets of the company and the interests of investors (including farmers), creditors, and other parties.
He also said Rao has not published periodic reports on what he has done to reduce the KCB Group debt that is responsible for the receivership or published a general statement of affairs on the current state of the assets and liabilities of the company.
He reiterates that he is aggrieved that the receiver manager has been on site for close to two years with nothing positive to show for it.
“To make matters worse, he has neglected many assets of Mumias Sugar Company, including the Nucleus Estate and machinery, resulting in the company making huge losses due to the deterioration of the assets,” he adds
Omtatah also points out that the neglected assets, especially the nucleus estate which has been left to grow wild, pose a danger to the public.
“Whereas when a company is put in receivership certain rights of its owners are extinguished, and the appointed receiver takes control of the asset and works solely in the interests of the secured creditor, and the receiver may either liquidate the business or revive it, the case of Mumias different.
“The company was set up to implement the Mumias Sugar Scheme to benefit sugarcane farmers in western Kenya and its environs and the general public,” he adds.
He adds that because of the Government’s 20 percent shareholding in the company, and the fact that the company sits on land being acquired for the public purpose of setting up a sugar factory to serve sugarcane farmers and to support the economy of the wider western Kenya region, a public interest arises in how the receiver manager is running the company given the fact that the ‘public’ land is idle, and is not being put to the purpose for which it was ‘acquired’.
“It is clear that the receiver manager who has been on site for some two years now has failed in his mission to protect the Company’s assets and to the best extent maintain its operations. Instead, he has completely shut down the company and is en route to nailing the last nail in the coffin of Mumias Sugar Scheme,” he said.
