NCBA Group PLC has announced plans to appeal a High Court ruling that invalidated a KSh 384.5 million stamp duty waiver granted during the 2019 merger of NIC Bank and CBA Bank—a deal that birthed Kenya’s third-largest banking institution.
The judgment, delivered by Justice Chacha Mwita on Friday, declared Legal Notice No. 112 of 2019 unconstitutional, faulting the National Treasury for failing to follow due legal process in issuing the exemption.
The merger, structured as a share swap, gave NIC Bank shareholders a 47 per cent stake in the merged entity, while CBA Bank shareholders—including members of the Kenyatta family—took a 53 per cent shareholding.
Following the ruling, NCBA’s board instructed its legal team to proceed with an appeal, arguing that the exemption was legally granted and aligned with the public interest.
“We believe the stamp duty exemption was lawfully and procedurally secured and was in the broader public interest. We intend to pursue all legal avenues to affirm this position,” the bank stated.
Justice Mwita, however, ruled that the exemption lacked public interest justification and instead appeared to benefit private individuals.
“After reviewing the submissions and evidence, I find that the exemption failed to satisfy the public interest test as outlined under Section 106(1) of the Stamp Duty Act,” the judge stated in his decision.
He further added that the request for the exemption appeared to be driven by private interests, in violation of Article 21 of the Constitution.
Busia Senator Okiya Omtatah, who filed the case challenging the waiver, hailed the decision as a significant victory for accountability in public finance. He claimed the tax break was granted secretly and benefitted a profit-driven entity with political ties.
“This exemption was never properly gazetted or subjected to public scrutiny. The court’s verdict ensures that public funds are not lost through such backdoor deals,” Omtatah said.
He added, “It’s a major win for taxpayers. The fight for transparency and fairness in taxation must continue.”
The tax waiver had previously come under scrutiny by President William Ruto’s administration, which pointed to it as one of the privileges allegedly extended to companies linked to politically influential families. In 2023, then-Treasury CS Njuguna Ndung’u formally withdrew the exemption and directed the Kenya Revenue Authority to recover the unpaid duty.
NCBA, in response, secured a temporary court order halting the recovery, arguing that the retrospective revocation infringed on the bank’s constitutional rights.
The outcome of the appeal could set a precedent on how tax exemptions tied to major mergers and acquisitions are handled in Kenya going forward.