Supreme Court Clears Path for Kwale Sugar Bankruptcy Proceedings Over Sh405 Million Debt

Nairobi, May 29, 2025 – Kenya’s Supreme Court has delivered a crushing blow to Kwale Sugar International Company Limited (KISCOL), dismissing the company’s final legal attempt to halt bankruptcy proceedings that could lead to the liquidation of one of the country’s significant sugar investments.

In a landmark ruling issued on May 23, 2025, a five-judge Supreme Court bench unanimously rejected KISCOL’s application for conservatory orders, effectively clearing the way for insolvency proceedings that have been pending since 2019 to proceed unimpeded.

The legal battle stems from a Sh2.2 billion construction contract awarded to EPCO Builders Limited for the construction of a sugar factory.

EPCO is now seeking to recover Sh405 million from Kwale Sugar, claiming the amount represents unpaid dues from the project.

Kwale Sugar, which is jointly owned by the Kenyan-based Pabari Group (80%) and Mauritius sugar producer Omnicane Limited (20%), has contested the debt, arguing that EPCO failed to perform adequately under the contract.

The company maintains it has already paid Sh1.79 billion to EPCO and disputes the outstanding amount.

The apex court’s decision was unambiguous in its rejection of Kwale Sugar’s appeal.

Chief Justice Martha Koome, delivering the joint ruling alongside Justices Mohamed Khadhar Ibrahim, Smokin Wanjala, Njoki Susanna Ndung’u, and William Ouko, emphasized the court’s jurisdictional limitations.

“The court cannot frog-leap the Court of Appeal to provide relief to a party before the High Court. To do so would be inconsistent with its jurisdiction,” the judges stated, highlighting what they viewed as an attempt to circumvent proper legal procedures.

The court noted that the petition only challenged the Court of Appeal’s decision rather than addressing the substantive High Court ruling that initiated the insolvency proceedings.

The Supreme Court’s decision carries significant consequences beyond the immediate parties involved.

Kwale Sugar had warned that allowing the insolvency process to proceed could result in the loss of 2,500 jobs and disrupt operations for 300 contracted sugarcane farmers who depend on the facility.

The company argued that the bankruptcy proceedings would cause irreparable reputational damage and potentially force the closure of a critical agricultural processing facility in Kenya’s coastal region.

Kwale Sugar’s legal strategy centered on seeking arbitration rather than court proceedings, as stipulated in the original construction contract.

The company also attempted to raise constitutional issues to justify Supreme Court intervention, but the judges found insufficient constitutional questions to warrant their involvement.

Both the High Court and Court of Appeal had previously allowed the insolvency petition to proceed, rejecting Kwale Sugar’s arguments about the disputed debt.

With the Supreme Court’s definitive ruling, Kwale Sugar’s options have narrowed considerably.

The company must now either challenge the debt directly in the High Court proceedings or negotiate a settlement with EPCO Builders Limited.

The case highlights the ongoing tension in Kenya’s commercial law between enforcing legitimate debt obligations and protecting distressed businesses, particularly in sectors crucial to the country’s economic development.

The ruling serves as a precedent for how Kenya’s highest court will handle attempts to bypass lower court proceedings in commercial disputes.

It also underscores the vulnerability of major agricultural investments to insolvency proceedings when contractual disputes remain unresolved.

The Pabari Group and Omnicane Limited’s significant investment in Kenya’s sugar sector now faces an uncertain future, with the insolvency proceedings set to continue without further legal impediments.

Industry observers note that the case reflects broader challenges facing Kenya’s sugar industry, which has struggled with financial difficulties, operational inefficiencies, and complex ownership structures involving both local and international investors.

The outcome of the High Court insolvency proceedings will determine whether one of Kenya’s notable sugar investments can survive or will join the list of failed agricultural enterprises in the country.