NAIROBI, Kenya, Aug 7 – Six sugar distributors and other businesses have sued the State over Sh173.58 million they say they are owed by South Nyanza, Chemelil and Muhoroni sugar companies after the mills were leased to private operators.
The petition, filed at the High Court in Nairobi in August 2026, challenges the treatment of the creditors’ claims during the 30-year leasing of the three state-owned sugar companies.
The businesses want the court to declare that they have enforceable property interests in the leased assets and proceeds and order compensation for the outstanding Sh173.58 million, together with loss of profits and interest.
The dispute comes more than a year after the leasing programme was cleared by the High Court and about 15 months after the leases were signed. The current petition focuses on financial obligations the businesses say were left outstanding after the three mills changed hands and on who should meet those obligations.
The six petitioners are Lesphine Investments Limited, Patel Chimanlal trading as Umiya Wholesalers, Chebaibai Traders Limited, Mahendrabhai Jethabhai Patel trading as Kaval Enterprises, Procel Transport Limited and Axabd Investment Limited.
The petition describes them as merchants, sugar distributors and, in the case of Procel Transport, a transport and logistics company that had commercial dealings with the affected mills.
Their combined claim stands at Sh173.58 million, comprising Sh32.76 million owed by South Nyanza Sugar Company, Sh75.72 million by Chemelil Sugar Company and Sh65.10 million by Muhoroni Sugar Company.
The businesses say they had paid the sugar companies for supplies before the leases were executed. They refer to some of these transactions as “Forward Sales” and say they were left with outstanding claims after the mills were transferred to new operators.
The State Department for Agriculture and Livestock published International Tender No. MOALD/SDA/IT/001/2024-2025 on March 7, 2025, inviting bids to lease South Nyanza, Chemelil and Muhoroni for a period not exceeding 30 years, according to the petition.
Busia Sugar Industries Limited was awarded the lease for South Nyanza, Kibos Sugar and Allied Industries Limited for Chemelil, and West Valley Sugar Company Limited for Muhoroni. The petition states that the leases were signed on May 10, 2025.
The petitioners now question what happened to their outstanding claims after the transition.
In the court papers, they state: “The 2nd, 3rd and 4th Respondents have been made to hand over these assets and operations to the 5th, 6th and 7th Respondents respectively, under opaque corporate arrangements that have not been made public.”
They further argue that the arrangement left their property interests exposed, stating: “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.”
The case follows an earlier legal challenge to the Government’s plan to lease state-owned sugar companies.
In February 2024, activist Martin Nyongesa Baraza filed a petition challenging the proposed leasing of the state-owned sugar companies, arguing that the public had not been adequately involved in the decision-making process. The High Court subsequently issued interim orders suspending the tendering process pending determination of the case.
On February 28, 2025, Justice Chacha Mwita dismissed the petition, ruling that public participation had been adequate and that the leasing process complied with the Public Private Partnership Act.
The decision cleared the way for the Government to proceed with the leasing of Nzoia, South Nyanza, Chemelil and Muhoroni sugar companies.
The Ministry of Agriculture and the Agriculture and Food Authority had said the leasing programme was intended to modernise the factories, reduce debts and improve efficiency and competitiveness in the sugar sector.
The new case raises a different question: whether obligations owed to businesses that dealt with the state-owned mills were adequately dealt with when the assets were transferred to private operators.
The petitioners point to provisions in the tender documents dealing with liabilities. According to the court papers, the tender stated that “All Debts including farmers, employee’s salary arrears, creditors and all other contingent liabilities shall be indemnified by the Government of Kenya.”
It also stated that “All other liabilities” of the three public-sector-owned sugar companies would be transferred to and borne by the lessee, with bidders expected to undertake due diligence.
The petitioners argue that the provisions created uncertainty over responsibility for their outstanding claims. They say they sought clarification from the State and other parties but had not received an official acknowledgement or compensation plan for the amounts they claim.
The businesses also raise questions over the companies currently operating the mills.
The petition identifies South Nyanza Sugar Company 2025 Limited, Chemelil Sugar Company 2025 Limited and Muhoroni Sugar Company 2025 Limited as entities in possession of the respective assets and operations. It alleges that their corporate structures involve other companies and individuals linked to the original leaseholders.
The petitioners say some of the “Forward Sales” were partially settled by two of the entities in November and December 2025, but complain that no formal written commitment was subsequently given on how the remaining claims would be handled.
The case also relies on findings attributed to the Auditor General in audits of the three companies.
According to the petition, the Auditor General reported that the South Nyanza lessee took over the assets before the Lease Transition Committee had completed documentation of all assets and liabilities.
For Chemelil, the petition says the audit found that the takeover occurred despite the absence of a due diligence report and that the company’s liabilities had not been properly ascertained.
For Muhoroni, the petition says the Auditor General reported that the circumstances made it impossible to confirm the credibility of the transfer of ownership and the existence of an effective mechanism to safeguard the company’s assets and premises.
The petition further says that, across the three leases, the fair value of assets and liabilities could not be confirmed.
The businesses are now asking the High Court to declare that the leasing tender violated their property rights and that they have a legally recognisable interest in the assets and proceeds arising from the leases.
They are also seeking an order stopping the Principal Secretary for the State Department for Agriculture and Livestock from collecting proceeds under the leases until their obligations are settled.
They want further orders preventing the leaseholders and the companies currently handling the mills’ assets from doing so until the claims are addressed.
The High Court is yet to determine the claims made by the six petitioners.
