CFC Stanbic Bank will have to deposit a Sh51.9 million cash surety if it wants to enjoy temporary stay orders against Kenya Revenue Authority (KRA), the High Court has ruled.
The financial institution is embroiled in a legal battle with the taxman over alleged unpaid tax on a software it acquired.
The court ruled that the bank should offer the guarantee within 45 days, failure to which KRA will be allowed to demand its claim.
CFC moved to court protesting that it had already paid more than Sh80 million, but High Court judge Isaac Lenaola made the ruling to ensure the bank enjoys temporary orders and at the same time safeguarding KRA’s interest in the case.
The bank lost the first round in the tax case but asked the court to put on hold its verdict to allow its appeal. In the case, the bank had asked the court to restrain the taxman from collecting the monies or recovering it by attaching its accounts until the case is heard and determined.
The financial institution got the relief that after the court agreed that pending the hearing and determination of the appeal, the status quo would be maintained.
And this meant that the respondent was restrained whether by themselves, agents or assigns from collecting or recovering by way of distress, attachment of the applicant’s bank accounts or by any other means whatsoever the sum of Sh51,987,891 or any sum over and above this as regards to penalties and interest in respect of software costs pending the outcome of the appeal.
But the court cautioned: “The above orders are granted on condition that within the next 45 days, the petitioner shall issue a bank guarantee to the respondents in the sum Sh51,987,891 as security should the intended appeal not succeed.”
At the centre of the legal dispute between CFC and KRA is monies that were allegedly not paid in 2010. CFC Stanbic argued that it had been given a waiver by the National Treasury and thus it did not owe the taxman anything.
The court heard that if the bank was not issued with the temporary orders, its intended appeal would be rendered “useless”.
On its part, the tax authority told the court that it was not aware of the tax waiver and that the best thing was to dismiss the application launched by the bank.
Justice Lenaola however disagreed with the bank on KRA’s ability to refund the money in case it won the appeal.
“As to whether the intended appeal would be rendered nugatory and/or academic if the orders sought are granted, the sum in issue is large by any measure but again there is no evidence that the respondents would be unable to refund it should the intended appeal succeed. It’s a matter of common knowledge that the first respondent routinely refunds much larger sums to deserving parties.”
The judge noted that he had to strike a balance by having the bank enjoy temporary orders and at the same time secure KRA’s interests.