Co-operative Bank has won the first round in its battle with Nairobi County after the High Court refused to stop the lender from recovering a Sh692.6 million payroll advance by deducting money from the county's revenue collection account.
In a ruling delivered by Justice David Mburu, the court found that the disagreement between the county government and the bank arises from a banking agreement and not a constitutional issue. The judge therefore dismissed the county's request for urgent orders stopping the bank from accessing the funds.
The case was filed last month after Nairobi County accused the bank of holding on to public revenue instead of remitting it to the County Revenue Fund as required by law. The county said the account receives collections from parking fees, business permits, market acess and other charges paid by residents.
The bank defended its actions, telling the court it was exercising its contractual right to recover money advanced to the county after it moved its payroll services to another financial institution before clearing the outstanding amount.
According to court documents, Co-operative Bank advanced Sh692,586,116 to the county to ensure employees received their salaries before funds from the National Treasury were released.
Justice Mburu ruled that Nairobi County had not shown that the matter raised constitutional issues that would justify the court stepping in at this stage.
“A determination pertaining to such commercial rights and obligations is not a constitutional question but a commercial dispute that ought to be heard and determined in a different forum,” the court said.
Acting County Attorney Boniface Waweru argued that the money being withheld was needed to run county operations. He said the funds were required to pay salaries, pensions, suppliers, support healthcare services, sanitation programmes, infrastructure projects and meet other financial obligations under the approved budget.
Co-operative Bank acknowledged that it retained part of the county's revenue but maintained that it acted within the terms of a Memorandum of Understanding signed in July 2025. The lender said Nairobi County failed to repay the payroll advance, forcing it to recover the money through its contractual right of set-off.
The bank further told the court that the payroll advance was issued to prevent delays in salary payments before Treasury funds reached the county, insisting that its recovery process was allowed under the agreement signed by both parties.