National Bank sues Nairobi County in Sh336 million row

The National Bank of Kenya (NBK) has sued Nairobi County, seeking more than Sh336 million in unpaid dues.

In the case filed before the Commercial Court in Nairobi, the lender alleged it inked a deal with the county to provide automated revenue collection in 2019, but the county has refused to honour its end of the bargain.

According to the bank, the county agreed to pay 4.5 per cent of the net value-added tax calculated from the total value of each successful transaction.

“The bank rendered its services to the county in accordance with the agreement. In breach of the contractual obligations under the agreement, the county failed, refused and or neglected to fully honour its financial obligations under the agreement,” argued NBK in its case filed by Manjanja, Luseno and Company Advocates.

The government-owned bank said the county had admitted owing it money. However, it has allegedly refused to honour its end of the bargain. “Any further delay in paying the sums due is prejudicial to NBK, which did discharge the contractual obligations under the agreement,” the bank noted.

NBK’s senior manager Francis Kioko told the court that the agreement was to have the county pay the lender on the first day of every subsequent month upon the bank raising an invoice.

He stated that they also agreed that the county would pay all the money owed under the contract if and when it was terminated.

He said that eventually, the county terminated the deal but failed to pay the money it owed the bank. He asserted that the case should not be tried in full, as the county had admitted that it owed Sh336 million.

“In view of what has been deponed to hereinabove and from the documents contained in the list of documents filed herein, I verily that the defendant has no defence that can resist the plaintiff’s claim as the same would be flivorous and or mere sham intended to delay the matter,”  said Kioko.

Kioko urged the court to enter a summary judgment against the county. In the agreement, NBK had committed that any dispute between it and the county would be subjected to arbitration by an arbitrator to whom both parties would agree to settle the issues.

Nevertheless, it wrote to the county demanding Sh366 million. In response to the demand, the county admitted in court papers, that it was yet to pay the outstanding debt.

“The city-county has planned this as a priority payment. Unfortunately, the County Appropriation Bill for the financial year 2020-2021 is still waiting for the approval of the County Assembly of Nairobi,” said  Allan Igambi, the then county’s Finance and Economic Planning member.

“The county has, however, requested the County Assembly to fast-track the passage. This is, therefore, to give you the assurance that we shall pay the demand of Sh366 million by the close of business on September 18, 2020.”

Documents filed by the bank in court indicate that between June 2019 and February 2020, the county collected Sh3.5 billion in revenue from the Co-operative Bank of Kenya, while NBK had at least Sh2.8 billion.

The county’s head of intelligence unit Carnoly Otieno wrote to the chief officer of Finance and Economic Planning on July 13, 2020, recommending that the money be paid.

The bank’s then managing director Paul Russo, had written to former governor Ann Kananu indicating that the county had been paid Sh250 million in October 2020 but was yet to clear a balance of Sh346 million.

“We implore your urgent intervention to have our fees settled forthwith to enable us to continue the seamless provision of revenue collection services, especially noting the criticality of this current period which the Nairobi City County citizens pay their various annual license fees,” said Luso, who is the current Kenya Commercial Bank (KCB) boss.