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Court rejects City Hall bid to halt Co-op Bank’s Sh692m payroll debt recovery
The Nairobi City County Government (NCCG) headquarters along City Hall Way.
The High Court has declined to stop Co-operative Bank from recovering a Sh692.6 million payroll advance by offsetting money collected through Nairobi County's revenue collection account.
Justice David Mburu dismissed the county's application and ruled that the dispute is rooted in a commercial relationship rather than a constitutional violation.
The county moved to court last month accusing the bank of withholding public revenue instead of transferring it to the County Revenue Fund as required by law. It said the bank account received parking fees, market cess, business permit fees and other county charges collected on its behalf.
The bank, however, said it withheld the revenues in exercise of its contractual right after the county government shifted the payroll business to another financial lender.
The court heard that the bank had advanced the county the money to settle employees' salaries. The bank asked the court to grant interim orders compelling release of the funds.
Justice Mburu said the county had failed to establish a strong constitutional case warranting urgent court protection. He held that the parties' rights and obligations arose from their banking and contractual relationship and should be resolved through the appropriate forum.
"A determination pertaining to such commercial rights and obligations is not a constitutional question but a commercial dispute that ought to be heard and determined in different forum," the court said.
Acting County Attorney Boniface Waweru argued that the withheld money was needed to finance the approved budget, pay salaries, pensions and suppliers, deliver healthcare, sanitation and infrastructure services, and meet statutory financial obligations.
Co-operative Bank admitted retaining part of the money but said it exercised its contractual right of set-off after Nairobi County failed to repay a payroll advance extended under a Memorandum of Understanding signed in July 2025.
The bank said it advanced a sum of Sh692,586,116 to ensure county employees received salaries before Treasury funds were released.
The bank said the county later shifted its payroll business to another lender without settling the debt despite repeated demand letters.
It said daily recoveries had reduced the outstanding balance to Sh54.3 million by June 24, 2026, and it was entitled to recover the money to protect depositors and shareholders.
Nairobi County argued that the payroll agreement concerned salary processing and was separate from the revenue collection account, which it said was constitutionally protected from deductions before money reached the County Revenue Fund.
In its ruling, the court found the petition lacked sufficient particulars showing how constitutional rights had been violated.
It added that the interim orders sought were effectively final remedies because they would determine the core dispute before the petition was heard.
"It would appear that the respondent has already made full recovery of what it claims was due," Justice Mburu said, adding that "the balance of convenience does not tilt in favour of the petitioner in this matter".
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