Mumias Sugar factory. Dubai Bank is demanding Sh92million from the sugar miller. PHOTO | FILE
By GALGALLO FAYO, gfayo@ke.nationmedia.com
In Summary
- Dubai Bank is claiming a debt of Sh92m accruing from a guarantee given to the sugar firm in November last year to help it secure release of sugar stocks that it had bought from Sudan’s Kenana Sugar Company.
The High Court has stopped Dubai Bank from initiating the winding up of Kenya’s biggest sugar miller Mumias over a Sh92 million debt.
The bank claims that the debt accrued from a guarantee given
to the sugar firm in November last year to help it secure release of
sugar stocks that it had bought from Sudan’s Kenana Sugar Company.
This a reprieve for Mumias, which moved to court
last month under a certificate of urgency claiming that Dubai Bank had
threatened to initiate a winding up process in a bid to coerce the
miller to pay the alleged outstanding debt.
“To safeguard the subject matter of the
application, an injunction be and is hereby issued forthwith to restrain
the defendant from presenting to court or advertising any winding up
proceedings against the plaintiff,” ordered Justice Fred Ochieng.
Mumias disputes the validity of the alleged guarantee agreement with Dubai Bank.
On July 11, Justice Ochieng directed Dubai Bank to
respond to the claim within two weeks and Mumias Sugar was given seven
days to file a further affidavit if necessary upon receiving the bank’s
response.
The judge extended the orders stopping Dubai Bank from initiating winding up until September 30, when the case will be heard.
Mumias claims it received a letter from Dubai Bank in June demanding the outstanding amount in respect of the guarantee.
Dubai Bank alleges that Mumias agreed to pay an
unspecified amount to guarantee release of some sugar stocks by the
Sudanese miller.
Coutts Otolo, who was appointed Mumias acting
managing director in April, says he instructed internal investigations
to ascertain the validity of the transactions since he is not familiar
with the claim.
Mr Otolo says the investigations revealed that the
letter of undertaking and guarantee was not properly issued since the
guarantee was not issued under seal and the resolution to issue it was
not passed by Mumias’ directors.
Mumias thereafter asked Dubai Bank to furnish it
with the original copy of the agreements to establish its status, which
the bank allegedly failed to avail.
The sugar firm says having failed to confirm the
validity from Dubai Bank, it instructed its auditors, KPMG, to carry out
forensic audit of the account to establish validity of the agreement.
On June 5, before the audit by KPMG was completed,
Dubai Bank served Mumias with a winding up notice. Mumias claimed the
petition was meant to force it to pay the debt
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