The High Court has quashed the Sh384.5 million stamp duty exemption granted to NCBA Group following the merger of NIC bank and CBA in 2019.
The High Court on Friday quashed the Sh384.5 million stamp duty exemption granted to NCBA Group following the merger of NIC bank and CBA in 2019.
Justice Chacha Mwita said the decision to exempt that bank, whose top owners are families of Jomo Kenyatta and Philip Ndegwa, from paying the stamp duty following the merger was not made in public interest.
“Having considered the issues raised, I come to the conclusion that the exemption was not made in public interest and thus violated the principle in section 106 of the Stamp Duty Act, so that the discretion conferred by that section was not properly exercised,” said the judge.
The judge said the interest exhibited in the letter from the bank, seeking exemption, was more private than in public interest.
The bank said it would appeal against the decision and had applied for copies of the judgment so that it could escalate the fight to the appellate court.
“The decision to appeal against the High Court judgment is based on the belief that the Group procedurally secured the exemption in the interest of the public, and we intend to exhaust all available legal options to uphold this position,” the bank said in a statement.
The lender said the exemption application to the CS Treasury supported by the Lands CS in 2019 was made in good faith and in strict compliance with the laws.
Busia senator Okiya Omtatah challenged the exemption arguing that Kenyans would lose millions in the process, which was allegedly done secretly.
The senator said the tax waiver was never gazetted nor was it disclosed to the public.
“There was no public interest to be served by exempting the merged NIC Group PLC and Commercial Bank of Africa, which are private profit-making entities, from paying the share transfer tax dues,” he argued.
Busia Senator Okiya Omtatah. He is the best-performing Senator in a list dominated by his first-term colleagues, according to a poll by Infotrak.
Soon after moving to court, then Treasury CS Njuguna Ndung’u reversed the exemption in March 2023 and directed the Kenya Revenue Authority (KRA) to collect the taxes.
The move prompted the lender to rush to court and obtained a temporary order, stopping the collection of the taxes.
The lender argued that it applied for exemption from Capital Gains Tax (CGT) following the merger in 2019.
NCBA said the Treasury CS was satisfied that NIC and CBA had met the conditions for grant of exemption, from payment of CGT in respect of the transfer of the CBA shares from the CBA shareholders to NIC Bank and the transfer of assets and liabilities from NIC Bank to CBA as part of the hive-down and business amalgamation implemented as part of the merger.
The lender submitted that the parties to the merger relied on the said representation by the Treasury and concluded the merger.
The lender submitted that the Treasury's action amounted to abuse of power and authority and was contrary to its legitimate expectation
But the judge said, having not been in public interest, the decision to exempt the bank from paying stamp duty violated article 2(1) of the constitution.
He squashed the legal notice exempting the bank from payment of stamp duty saying it was unconstitutional and invalid.
“A declaration that the decision to exempt the respondents in respect to the transaction that led to the merger of NIC and CBA from stamp duty violated the law and was therefore unconstitutional,” said the judge.
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