NULLIFIED

Court cancels Mumias lease to Sarrai Group

The Ugandan firm has been ordered to immediately vacate the premises of the sugar mill

In Summary
  • In a ruling delivered on Thursday, Justice Alfred Mabeya cancelled the lease and removed Ponangipalli Ramana Rao as the administrator.
  • The court said receivers must now be told that it’s no longer business as usual with the current insolvency law.
Mumias Sugar Company entrance
FILE Mumias Sugar Company entrance
Image: HILTON OTENYO

Ugandan Sugar mill company Sarrai Group has suffered a major blow after a court cancelled its Mumias Sugar lease issued last December.

Sarrai has been ordered to immediately vacate the premises of Mumias Sugar.

The Ugandan company had already began works and even pumped money into reviving the collapsed sugar mill but the court stopped the process after several bidders challenge the bid.

In a ruling delivered on Thursday, Justice Alfred Mabeya cancelled the lease and removed Ponangipalli Ramana Rao as the administrator.

“Accordingly the lease made to Sarrai Group on December 22, 2021 is hereby nullified and Sarrai Group ordered to fully vacate the premises of Mumias,” the court ruled.

Judge Mabeya appointed Kereto Marima to be the new administrator of Mumias company and directed Rao to hand over within seven days.

“Rao as receiver manager to cooperate with Marima and ensure smooth administration of Mumias and by default the receivership shall stand suspended during the duration of the administration,” he said.

Rao challenged the decision saying it was not right for the court to appoint him as an administrator and receiver at the same time

The court said the only irresistible conclusion drawn is that Rao is an unwilling suitor as he was aggrieved by his appointment as an administrator yet he was already a receiver.

The judge said if Rao found it difficult to juggle the two hats, he should have come back to the court to seek directions.

“Rao was simply running away from his responsibility as an administrator and decided to focus on receivership,” he said.

Rao did not deny that he leased the assets of Mumias to Sarrai Group as a receiver manager and not an administrator.

The court said receivers must now be told that it’s no longer business as usual with the current insolvency law.

The court further said it believed Rao when he said the only way to revive the company was through leasing of its assets and the court directed him to do it in accordance with the law.

However, he awarded the lease to the lowest bidder when there were higher bidders without any justifiable explanation.

“There is no evidence to show that he sought any advice on the same before he made the decision,” Mabeya said.

Judge Mabeya also said there was no explanation why all the other higher bids were disqualified and Rao did not explain how Mumias would pay off its debts to creditors relying on the lease.

(Edited by Tabnacha O)

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