The NCBA Group has lost its bid to stop the implementation of a judgment that quashed the Sh384.5 million stamp duty exemption granted to it following the merger of NIC Bank and CBA in 2019.
The High Court ruled last week that allowing NCBA’s request would undermine constitutional principles, effectively requiring the lender to settle the tax bill.
The CBA and NIC Bank merged in 2019 to form NCBA, and the transaction was exempted from stamp duty tax by the Treasury.
The court in April 2025 said the decision to exempt that bank from paying the stamp duty following the merger was not made in the public interest.
Last week, the High Court declined to freeze the rider for the payment of the Sh384.5 million.
“It would be inappropriate and possibly contrary to article 2(4) of the Constitution for this court, as the trial court, to grant a stay of its decision declaring the gazette notice exempting payment of stamp duty unconstitutional,” stated the ruling rejecting the bank’s bid.
The top owners of the lender are families of the late President Mzee Jomo Kenyatta and former Central Bank of Kenya Governor Phillip Ndegwa.
The Ndegwa family holds 14.94 percent stake through First Chartered Securities Limited, while the Kenyattas hold 13.2 percent through Enke Investments Limited.
In good faith
The lender maintains that the exemption application to the Treasury Cabinet Secretary, supported by the Lands Cabinet Secretary, in 2019 was made in good faith and in strict compliance with the laws.
The court dispute traces back to Legal Notice No.112 of 2019, dated June 26, 2019, during the tenure of retired President Uhuru Kenyatta, when the Treasury exempted NCBA from paying stamp duty on merger documents.
Activist Okiya Omtatah (now Busia Senator) successfully challenged the decision in court.
In April 2025, slightly over two years after Mr Kenyatta’s retirement in September 2022, the High Court allowed Mr Omtatah’s petition and declared the waiver unconstitutional, citing violations of the Stamp Duty Act and Article 201 of the Constitution on equitable tax burden sharing.
NCBA returned to court seeking to halt the payment pending appeal, arguing that immediate enforcement would destabilise its operations and harm depositors.
“Immediate enforcement of the judgment will occasion great hardship on the applicant’s (NCBA) operations because the applicant will be compelled to pay over Sh384.5 million excluding interest and penalties,” said the bank’s lawyers.
“It may result in irreversible business consequences.”
NCBA sought an injunction order restraining the respondents, including the Collector of Stamp Duty and Kenya Revenue Authority (KRA), from demanding or initiating enforcement action to levy or collect stamp duty on the instruments executed in relation to the merger between NIC Group PLC and CBA.
The bank warned that forcing it to pay upfront would disrupt liquidity and shareholder value, given that the merger’s financial structure relied on the tax waiver.
“Enforcement of the decree at this stage will cause substantial and irreversible harm because stamp duty waiver was a central element in the financial structuring of the merger,” said the advocates.
They contended that payment of the amount would result in substantial loss to NCBA, which they argued KRA would not be able to refund should the appeal succeed.
They also said that KRA lacked a legal mechanism to refund the money if NCBA’s appeal succeeded, an argument that the court said was incorrect.
“Executing the judgment will affect the applicant’s (NCBA) customers and necessitate immediate drawing from operational funds, including deposits held for the public,” the advocates submitted.
Unconstitutional waiver
However, Mr Omtatah countered that the court had no authority to suspend its own invalidation of an unconstitutional act, emphasising that Article 2(4) of the Constitution voids illegal actions instantly.
The judge agreed, stressing that permitting a stay would amount to reviving an unconstitutional waiver-a move contrary to precedent.
He noted that the Court of Appeal had previously barred such suspensions in similar cases, including a 2024 judgment, where judges emphasised that “public interest cannot preserve laws already deemed invalid.”
The judge dismissed NCBA’s fears of irreparable loss, stating KRA-as a public entity-could refund the taxes if the appeal succeeded.
“KRA is a public entity and is capable of refunding money should the appeal succeed. I do not think the applicant’s fear that it will not get a refund is well-founded. The argument that the applicant will suffer substantial loss is also not well-founded,” said the court.
In the application, NCBA had also argued that the payment of the contested stamp duty threatens to undermine the commercial and strategic foundations of the merger, thereby discounting shareholder value; planned integrations and future business projections.
This is because the financial implications of enforcing the judgment are significant and immediate, according to the bank’s lawyers.
“Execution of the decree now will place an undue financial burden on the applicant, thereby disrupting its capital allocation, liquidity planning and compliance with regulatory obligations,” they stated.
“The merger involved two significant financial institutions in the banking sector with direct implications on the market stability, investor confidence and economic growth,” they added.
The high-profile corporate dispute is now pending at the Court of Appeal, where the bank argues that the High Court “erred by misapplying the public interest principle in relation to the tax waiver granted for the merger transaction and the constitutional principle on sharing tax burden in Article 201 (b) (i) of the Constitution”.