- Six sugar suppliers have sued the government for Ksh173.58 million they claim is owed after South Nyanza, Chemelil and Muhoroni sugar mills were leased to private investors.
- The businesses argue their outstanding claims were not addressed during the 30 year leases and want compensation, interest and lost profits.
- They are asking the High Court to protect their interests in the mills’ assets and lease proceeds until the dispute is resolved.
Six sugar suppliers have sued the government, seeking Ksh173.58 million they say is owed after three state owned sugar mills were leased to private investors.
The businesses filed the petition at the High Court on August 6, 2026, challenging how their claims were handled during the 30-year leasing of South Nyanza, Chemelil and Muhoroni sugar companies.
They want the court to declare that they hold enforceable property interests in the leased assets and proceeds. They are also asking for compensation of the full Ksh173.58 million, plus loss of profits and interest.
The case comes more than a year after the High Court cleared the leasing programme and about 15 months after the leases themselves were signed. However, this petition raises a different question. It focuses on whether financial obligations owed to businesses that traded with the mills were properly addressed when the assets changed hands.
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.
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The petition describes them as merchants, sugar distributors and, in the case of Procel Transport, a logistics company that dealt commercially with the affected mills. Their combined claim of Ksh173.58 million breaks down as follows:
- 76 million owed by South Nyanza Sugar Company
- 72 million owed by Chemelil Sugar Company
- 10 million owed by Muhoroni Sugar Company
The businesses say they paid the sugar companies for supplies before the leases took effect. They describe some of these transactions as “Forward Sales” and say they were left with outstanding claims once the mills were handed 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 the three mills for up to 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 leases were signed on May 10, 2025.
The petitioners now question what became of their outstanding claims once the transition took place. In their court papers, they state that the respondents “have been made to hand over these assets and operations… under opaque corporate arrangements that have not been made public.”
They further argue that the arrangement exposed their property interests, adding that the lease has meant their property “has been handed over to third parties by the state without any hope of compensation.”
This is not the first legal battle over the leasing programme. In February 2024, activist Martin Nyongesa Baraza filed a petition arguing that the public had not been adequately involved in the decision to lease the state owned sugar companies. The High Court issued interim orders suspending the tender process while that case was pending.
On February 28, 2025, Justice Chacha Mwita dismissed Baraza’s petition, ruling that public participation had been adequate and that the process complied with the Public Private Partnership Act. That decision cleared the way for the government to proceed with leasing Nzoia, South Nyanza, Chemelil and Muhoroni.
The Ministry of Agriculture and the Agriculture and Food Authority had said the leasing programme was meant to modernise the factories, reduce debts and improve efficiency in the sugar sector. The current case, by contrast, asks whether the businesses that dealt with the mills were fairly treated once the assets moved to private hands.
The petitioners point to specific provisions in the tender documents. 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 mills would transfer to and be borne by the lessee, with bidders expected to carry out due diligence.
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The petitioners argue these provisions created uncertainty over who was responsible for their claims. They say they sought clarification from the State and other parties but received no formal acknowledgement or compensation plan.
The businesses also question the companies now operating the mills. The petition names South Nyanza Sugar Company 2025 Limited, Chemelil Sugar Company 2025 Limited and Muhoroni Sugar Company 2025 Limited as the entities in possession of the assets, alleging 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 these entities in November and December 2025. However, they complain that no formal written commitment followed on how the remaining claims would be handled.
The case also draws on findings attributed to the Auditor General in audits of the three companies. For South Nyanza, the petition says the lessee took over the assets before the Lease Transition Committee had finished documenting all assets and liabilities.
For Chemelil, the audit reportedly found that the takeover happened despite the absence of a due diligence report, with the company’s liabilities never properly ascertained.
For Muhoroni, the Auditor General is said to have reported that the circumstances made it impossible to confirm the credibility of the ownership transfer or the existence of a mechanism to safeguard the company’s assets.
Across all three leases, the petition says the fair value of assets and liabilities could not be confirmed.
The businesses are asking the High Court to declare that the leasing tender violated their property rights and that they hold 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 claims are settled. In addition, they want orders preventing the leaseholders and the companies currently running the mills from dealing with the assets until the dispute is resolved.
By Benedict Aoya
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