Mumias blocked from releasing funds to farmers

July 28, 2008
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, NAIROBI July 28 – The High Court has temporarily stopped Mumias Sugar Company from disbursing a 15 percent retention fund normally made to its farmers through a co-operative society, until further notice.

This followed a suit lodged last Friday by the Mumias Out-Growers Company Limited (MOCO), challenging the company’s move to transfer the responsibility from a bank to a co-operative society.

Previously, Mumias used to pay the fund through a joint bank account held at the local Co-operative Bank branch, but the sugar company sidestepped the bank and started channelling the funds through Sukari Sacco Society.

Through lawyer Patrick Lutta, MOCO wants the responsibility, which was given to Sukari Sacco Society reverted to the Cooperative Bank.

The association also challenged the company’s decision in April to revise interest rates charged on inputs from 16 percent to 12 percent and that charged on the retention, from 12 percent to 8 percent.

This, it claimed, was its mandate and not of the sugar company’s, as purportedly exercised by Mumias Managing Director, Evans Kidero.

“The plaintiff (MOCO) has the sole discretion to determine the interest rates payable in respect of the 15 percent retention and any other goods and services rendered to the members,” MOCO argued.

It argued that the company breached an agreement with its farmers, which gave authority to both entities to prevail upon the terms of the retention payment.

According to the court papers, the agreement stipulates that the company cannot make any payments from the retention fund without the authority of the association.

MOCO insists that it had been disbursing the retention funds, with interest, to its members upon receipt from the sugar miller and has a full fledged section of its accounts department comprising 50 members of staff, which processed and paid the funds to members on daily basis.

It stated that the sugar company was the manager and accountant of the fund but it (MOCO) also was accountable to its members. 

The MD allegedly made further decisions in a letter dated July 14, where he authorised the company to generate a payment list and submit with a cheque to Sukari Sacco Society Ltd (named as Second Defendant)

The case will be heard on Thursday.

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