A Sh173.6 million debt claim has landed before the courts after six sugar suppliers accused the State of transferring the assets and operations of three public sugar companies without first settling bills arising from their supply contracts.
Chebaibai Traders Limited, Lesphine Investments Limited and four other suppliers say they are owed Sh173,580,487 for goods delivered to the affected sugar companies.
The suppliers have filed a petition challenging the way the assets and operations of the three State-owned companies were leased to private entities. They argue that the leasing process failed to address obligations that had already been created through contracts for the supply of goods.
According to the petition, the Department of Agriculture oversaw the leasing of the companies’ assets and operations despite the outstanding amounts owed to the suppliers.
The petitioners say the transfer has made it difficult for them to pursue payment because the companies that entered into the supply agreements no longer control the assets and operations from which they could have sought recovery.
They further accuse the department of facilitating the transfer of the assets to other entities through corporate arrangements that they describe as opaque and which they say have not been disclosed to the public.
The suppliers maintain that their financial interests were tied to the assets that were transferred and that the handover took place before the obligations arising from their contracts had been cleared.
“The upshot of this lease arrangement is that the property of the petitioners contained in the assets of the 8th, 9th and 10th Respondents has been handed over to third parties by the state without any hope of compensation,” part of their filings state.
They have told the court that the three sugar companies have effectively been left as shell companies following the transfer of their operational assets.
According to the petitioners, this has weakened their ability to enforce the agreements they entered into with the companies and recover money they say is due to them.
The suppliers are asking the court to find that the international tender used to lease the assets breached their property rights because their outstanding claims had not been addressed.
They are also seeking “a declaration that the Petitioners have a cognizable property interest in the assets that are leased under the tender,” together with a declaration recognising their enforceable property right over income generated from the lease arrangements.
The petitioners want the respondents to be held jointly and severally liable for the Sh173.58 million principal debt.
They are also seeking payment for lost profits and interest, which they say arose from the actions surrounding the leasing of the sugar companies’ assets and operations.
The suppliers have further asked the court to stop the State Department from receiving or collecting money generated through the lease agreements until the amounts they claim are owed have been paid.
They also want the entities that assumed control of the sugar companies’ assets and operations barred from dealing with those assets until the court has heard and determined their claims.
The case now places the State’s decision to restructure and lease assets belonging to public sugar companies under judicial scrutiny, with the suppliers seeking protection of their alleged financial interests.
Through the petition, they want the court to determine their rights over the leased assets and proceeds while also deciding how the outstanding contractual obligations should be dealt with.