The proposed merger of NIC Bank and Commercial Bank of Africa may now have to wait longer following a legal battle was initiated on Friday to suspend the process.
In a suit filed by activist Okiya Omtatah against the National Treasury Cabinet Secretary and the Attorney General, Mr Omtatah claimed that due process was not followed in the process that led to a tax waiver of the two companies as well as announcement on the merger.
He claimed that the process has also been done secretively and that the tax waiver, which was granted on July 26, but was only announced to the public on August 18, is irregular.
He also claimed that there was no sufficient public participation and that taxpayers stand to suffer a great loss estimated at Sh350 million in lost tax revenues that would otherwise accrue to public coffers.
“This Court must intervene immediately to stop this abuse and improper use of power by the National Treasury CS,” said Mr Omtatah.
In the filed case documents, he argued that the decision to exempt the instruments executed in respect of the transactions relating to the merger should not be allowed to stand.
He alleged that the legal notice date July 26 which granted the two companies a tax waiver is yet to be published in either the regular weekly issues of the Kenya Gazette or as a special issue of the Gazette.
He also alleged that there is no evidence to show that the said legal notice was published as he tried in vain to look for it as well as purchase it from the Government Printer’s bookshop on Haile Selassie Avenue, Nairobi, but could not find it.
“This matter is extremely important because the impugned tax waiver was enacted through a process that blatantly violates express provisions of the Constitution and legislation, including the rule of law, transparency, public participation, the responsibilities of leadership and the use of executive power,” said Mr Omtatah.
He added: “Orders sought are required to preserve the petition from being rendered nugatory where successful and to protect the public from violations of the Constitution and statute.”
In May, the Competition Authority of Kenya (CAK) approved the proposed merger between the two companies.
At the time, CAK indicated that it expected the resultant merged entity, with a market share of 10.67 per cent, to still face competition from tier I banks who, together, control 55.32 per cent of the 42-bank market.
Both CBA and NIC have indicated a possibility of branch closures where overlaps exist but will also retain all the employees for at least one year when the merger is effected.
The activist wants the decision to exempt the instruments executed in respect of the transactions relating to the merger of the two banks from tax declared unlawful.
He also wants the disputed July 26 legal notice on tax waiver be quashed.