Court Review

Asian Businessmen at The Centre of Ksh32b Taxpayers’ Money in Kwale Sugar Feud

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Three Asian businessmen Rajesh Pabari, Kaushik Pabari and Harshil Kotecha are the directors behind Kwale International Sugar Company Sh32 billion compensation from Attorney-General Kihara Kariuki. According to information from various sources, Pabari, one of the directors, is married to the Kotechas hence are in-laws.

The Pabari family in Kisumu is known in hardware and oil. Kotecha family has invested heavily in commodities. The two families are well connected in political circles and the issue of Kiscol permit to invest in sugar production in Kwale was politically brokered. The Kotecha family members whose business spread to Kisumu surrounding towns including Luanda where Rajau Kotecha runs a multimillion wholesale business.

The Pabaris and Kotechas have perfected the art of business underdeals. Among Kisumu Asians, one case involving tycoons Sunil Narshi Shah, Kamal Narshi and BN Kotecha and sons is the talk of underdeals.Kotecha accuses the two of illegally obtaining Sh79.4 million during a botched sugar deal in 2015.

In the case is Hemal Kotecha one of the Kotecha brothers. The two Kisumu United Millers directors Sunil Shah and Kamar Narshi claim the case is frabricated. Infact, Kiscol’s move to invest in Kwale project was not aimed at producing local sugar but to use the licence of production to be allocated a percentage located to local industries to import sugar.

Sugar industry players say, the current fight among Asians to control the sugar industry is not aimed at reviving the collapsed ones but simply get hold of multi-million import allocated to each factory. It is cheaper and lucrative to import sugar in Kenya than to engage in farmimg and milling it.

Ever since Kiscol was given a green light to produce sugar in Kwale, not much has been achieved with workers going without pay. Instead immediately it got operation licence courtesy of deputy president William Ruto in 2014 during Jubilee formative years in power, Kiscol directors went international.

First, they approached a consortium of local bankers both locally. Regionally and internationally to finance the project. A Mauritius firm Omnicane was at one time said to have purchase equity worthy Sh 1.7billion from Kiscol. Kiscol according to documents seen by Weekly Citizen was formed in 2010 through a management partnership company Pabari Investments with Omnicane joining later.

Apart from sugar, the underworld faces in the project also set eyes on luctrative electricity generation project. They were to set up a power plant and ethanol distillery in Kwale. Infact, the Mauritius firm Ominicane was brought on board to help the firm import cheap sugar from Mauritius but not to develop sugar plantations in Kwale as many had expected.

From the word go, after Kaushik reached Ruto to get operations, the firm started using it to bring its allocated percentage even before they started production.It is imperative to note, Ominicane produces 150,000 tonnes of refined sugar annually in Mauritius said to be destined to European markets but some ends up in Kenya via the cartel network. From the start, the project was a white elephant one.

During 2018 crackdown on illicit and unfit consumption products by Kenya Bureau of Standards, samples from the seized sugar from its stores found the sugar was contaminated. But industry players are questioning the feasibility study the firm claims to have undertaken before stablshing the industry.

Many say, they knew well a land controversy existed on the project land between the state and locals. But being shrewd operatives, they had set eyes on a compensation deal in the agreement even if the project failed they would be able to import sugar thus making huge profits via importation.

The firm has been fighting local squatters for ownership of LR No 5004-30-R, the 49000 acres of land is in Mabatani, Nyumba Sita, Vidziani, Gonjora, Fahamuni and Kingwende areas.According to land documents, the land was at independent reigistered as a trust land belonging to the Digo community.

Kiscol directors instead of going for 15000 acres for collapsed Ramisi industry using its political connections read Ruto to use security to evacuate locals and burning their houses. According to a search done at the department of the registrar general in Nairobi under the Companies Act (Cap 486) Kiacol is owned by Rajesh Pabari and Kaushik Pabari.

Both are directors cum shareholders with 500,000 shares each. Investigations further reveal that the two now control 80pc of the shareholding and have entered into partnership with leading Mauritian sugar producers, Omnicane, who have acquired 20pc of the total shareholding. Kiscol replaced the old Ramisi Sugar Factory which closed shop in 1989.

The old factory owner’s lease of 99 years expired in 1986 and then president Daniel Arap Moi ordered that all the land that was initially occupied by sugarcane be reverted to the community. The community members filed a petition at the High Court in Mombasa under the Constitutional and Judicial Review Division.

The petition number 65 of 2011 was first heard at the Mombasa court on October 25 2011. It was filed on behalf of the petitioners by lawyer Japheth Chidzipha. The petitioners want Kiscol owner’s servants, agents or employees permanently stopped from evicting them from their ancestral land as continued evictions have rendered them homeless and destitute.

It is said, former National Lands Commission chairman Muhammad Swazuri was instructed by a powerful politician authoring a letter that allowed eviction of the locals to make space for planting of sugarcane. Swazuri comes from Msambweni but has since left NLC and is in court fighting against corruption and abuse of office accusations.

But as events were happening, the Asians move to a court in Mombasa seeking compensation. The AG is now out to set aside a preliminary judgment compelling the government to pay the firm Sh32 billion in special damages. Kiscol sued cabinet secretary National Treasury and the AG, is seeking special damages for breach of statutory and contractual duties over its lease of 15,000 acres of land for sugarcane farming. But the AG did not respond in time forcing the court to award Kiscol its prayers against the government in an interlocutory judgment.

In his application seeking to set aside the judgment, the AG also wants to have his memorandum of appearance and statement of defence be deemed as duly filed and served hence properly on record. According to the AG, Kiscol did not seek leave before entering judgment as required in the Civil Procedure Rules hence it (judgment) was unprocedural.
According to the AG, he wrote a letter to the CS National Treasury seeking instructions regarding the allegations by Kiscol in its case and also prepared a memorandum of appearance which was mistakenly filed in Kwale court instead of Mombasa.

The AG said that upon realising the error, he prepared another memorandum of appearance dated May 31 filed on the same day and that during filing it was discovered that Kiscol had requested for the interlocutory judgment. In court papers, Kiscol argues, it has set up its greenfield sugar manufacturing plant on the parcel of land within Kwale county and holds a sublease dated August 20 2007 between itself and the government.

It accuses the government of failing to provide it with “full, unhindered and peaceful possession” of the leased area. The company says efforts to access the land to implement its project has met resistance from squatters who assert equitable rights to occupy portions of the leased area. According to Kiscol, the squatters have occupied the leased land of approximately 5,816 acres in a various regions seven areas.

“The plaintiff’s efforts to access portions of the leased land occupied by the squatters were frustrated by a court order,” says Kiscol adding that it managed to have the order set aside on March 13 2018, before a petition by the squatters was dismissed in January this year.

The sugar miller argues that it was an express and implied term term of the sublease between the plaintiff and the CS National Treasury that it would have full, unhindered and peaceful possession of the land. Kiscol in court documents says that at the inception of the project and granting of the sublease, it had been made known to the government that the Greenfield project was modelled and designed around the availability of land and unhindered access to it.

It also argues that in breach of the legitimate expectation created by the defendants, it has not been able to access the entire leased area and has accessed approximately 50pc of the leased land. Kiscol claims to have so far invested USD 300 million in the project but the investment cannot yield the projected results because the project is not operating optimally, in fact, the plaintiff is now forced to go into a second restructuring exercise with syndicated lenders.

To play games, at one time the directors colluded with one firm to place it under receivership as the case was proceeding to gain sympathy and upscale the court case.

Tags: Asian Businessmen at The Centre of Ksh32b Taxpayers’ Money in Kwale Sugar Feud