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Petitioner: Digital Bridge (Private) Limited through authorized representative VS Respondent: Federation of Pakistan through Ministry of Information Technology and Telecom and 6 others
Court Name: Sindh High Court Judge(s): Syed Hassan Azhar Rizvi Title:Digital Bridge (Private) Limited through authorized representative vs
Federation of Pakistan through Ministry of Information Technology and Telecom and 6 others Case No.: Suit No.985 of 2020 Date of Judgment:2021-11-03 Reported As: 2023 CLC 560 Result: Application dismissed Judgment ORDER SYED HASAN AZHAR RIZVI, J. C.M.A. No.6876/2020 under Order XXXIX, Rules 1 and 2 read with Section 151, C.P.C., filed by the plaintiff, seeking to restrain the defendant No.3 from performing any functions as a Third Party Service Provider (TPSP Licensee). 2. Brief facts of the case as narrated in the memo of plaint are that plaintiff is a private limited company incorporated under the Companies Act, 2017. The plaintiff was awarded a 'License to Establish, Maintain and Operate as Third Party Service Provider (TPSP) for financial and applications services in Pakistan. The Information Memorandum was jointly issued by the defendant No.2 and the State Bank of Pakistan in April, 2017. As per Section 2 (xxviii) of the PTA Regulations for Technical Implementation of Mobile Banking, 2016, a TPSP is defined as:- "A Class Applications Service Provider for technical support of mobile banking service, licensed by PTA and authorized by SBP to provide technical services for channeling, routing and switching transactions for branchless/mobile banking only: (Note: TPSP shall be for interoperability purpose within branchless banking domain, whereas Payment System Operators (PSOs) and Payment Service Providers (PSPs) shall provide an electronic platform for clearing processing, routing and switching of electronic transactions under Rules for PSOs and PSPs issued and as amended by Statement Bank of Pakistan from time to time)." 3. It is averred in the plaint that the plaintiff as over the course of the past three years worked consistently towards and invested heavily in developing and testing a viable solution as a Third
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Party Service Provider in order to bring easily accessible and convenient mobile banking services to hitherto unserved segments of the country's population. This initiative to expand financial inclusion is referred to as the Assan Mobile Account Scheme (AMA Scheme). It is stated that currently the plaintiff is the only TPSP in the country which has successfully established its own independent unified USSD channel platform, which is a requirement of the TPSP License and the Information Memorandum. The plaintiff informed defendant No.2 of completion of deployment of their USSD platform in compliance with Clause 1.4 of the TPSP License and upon the plaintiff's request, the defendant No.2 inspected and approved the plaintiff's technical solution on 09.4.2019. Thereafter, the plaintiff requested for the Commencement Certificate, the defendant No.2 has still not issued the Commencement Certificate to the plaintiff. Such an inordinate, unexplained and inexcusable delay by defendant No.2 has caused detrimental effects for the plaintiff, as it has been unable to offer the Licensed Services as stated in Clause 1 of the TPSP License. It is also averred that the defendant No.2 has exhibited blatant partiality in favour of the defendant No.3 and has in effect hindered and prevented the plaintiff from achieving the same milestones as defendant No.3; assuming without conceding that the defendant No.2 does grant the Commencement Certificate to the plaintiff, the effect of such a grant would be inconsequential, as it would not rectify the uneven playing field created through the mala fide and illegal action of the plaintiff. The preferential treatment in favour of the defendant No.3 and the active discrimination against the plaintiff is in clear violation of the plaintiff's fundamental rights to trade and equality under the law. This preferential treatment is evidenced by the fact that even though the defendant No.3 has still not met the technical requirements of the TPSP License which mandate the Licensee to establish their own independent USSD channel platform, the defendant No.2 had issued a letter dated 08.6.2020 regarding the 'Readiness for Commercial Launch of AMA Scheme', which certified that the defendant No.3 had 'implemented its USSD platform as per clause 1.4 of its licensed. It is further averred in the plaint that TPSP License and the Information Memorandum contain no such proshsion or reference for issuance of a letter certifying 'Readiness for Commercial Launch'. Defendant No.2's action of issuing a certificate for 'Readiness for Commercial Launch of AMA Scheme' is an illegal invention to mislead the defendant No.1, the SBP, the Banks/ AFIs, and the Telecom Operators. Further, defendant No.2's actions of granting defendant No.3 a certificate of Readiness for Commercial Launch stating that they have set up their own USSD platform and deliberately not responding to the plaintiff's concerns shows the lack of transparency, discrimination and inconsistency in the decision making process by defendant No.2. These actions contravene the plaintiff's right to equality before the law, both in terms of the privileges conferred and liabilities imposed, as provided under Article 25 of the Constitution of Pakistan, 1973, hence the plaintiff approached this Court by filing the instant suit with the following prayers:- "I. DECLARE the defendant No.2's letter dated 08.06.2020 certifying defendant No.3's 'Readiness for Commercial Launch of AMA Scheme' to be illegal and void ab initio. II. RESTRAIN the defendant No.3 from offering any Licensed Services until they have met all requirements according to the relevant laws and governing documents. III. SET ASIDE the Circular No.24 of 2018, dated 18.12.2018. IV. DIRECT the defendant No.2 to take appropriate penal action against the defendant No.3 for the prima facie violations of the terms of the TPSP License as highlighted in the instant plaint, including cancellation of their TPSP License if appropriate. V. DECLARE the agreements entered into between defendant No.3 and SCO in AJ&K. and GB to be in violation of the TPSP License and the Information Memorandum and hence illegal and void ab initio. VI. RESTRAIN the defendants Nos.4-7 from obtaining any Licensed Services from defendant No.3 until they have met all requirements according to the relevant laws and governing documents.
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VII. DIRECT the defendant No.2 to issue the Commencement Certificate to the plaintiff in accordance with the law and the terms and conditions of the Information Memorandum and the TPSP License. VIII. GRANT any other relief deemed appropriate in the facts and circumstances of the suit. IX. GRANT costs of the suit." 4. I have heard arguments of the learned counsel for the parties on application under Order XXXIX, Rules 1 and 2 read with section 151, C.P.C. and perused the material available on record. 5. Mr. Haider Waheed, learned counsel for the plaintiff, in support of the listed application has argued that the plaintiff's standing to sue arises from the fact that if its competitor i.e. defendant No.3 is allowed to begin commercial operations without establishing its own USSD Gateway as mandatorily required by the TPSP License, then it will capture the market and any resultant First Mover Advantage accruing to defendant No.3 would be based on illegal, mala fide, and unlawful actions. He has contended that the plaintiff's shortcomings, if any, do not mean that defendant No. 3 can be allowed to operate with impunity, especially in light of the instances of mala fides, and ill- intentioned actions already taken by them, including inter alia the 14th August advertisement, the 8th June 2020 letter and the allegations of harassment and pressure as claimed by defendant No.2 in their Contempt Application. He has also contended that the Honourable Court, in the event of the defendant No. 2's deliberate failure or compromised ability to do so, must ensure that defendant No. 3 acts in a fair and transparent manner so that the public interest is not harmed. He has submitted that if defendant No. 3 is allowed to continue flouting legal provisions, then the public at large Will suffer the consequences. The plaintiff's alleged short-comings are outside the scope of the instant suit. The plaintiff is Dominus Litus and hence the suit and the stay application must be confined to the four Comers of the plaint and the plaintiff's arguments. The plaintiff is working towards meeting the legal requirements for being granted a Commencement Certificate, and throughout this entire process has a legitimate right to be treated in accordance with the law, which also encompasses the right that any illegalities or mala fide actions of the defendant in this regard be curtailed and remedied. The plaintiff has alleged mala fides, collusive behaviour/actions, and ill intentions on the part of defendant No.2 and defendant No.3. Hence, the plaintiff has standing to sue and this Court has jurisdiction to take cognizance of the instant suit under Section 9 of C.P.C., which provides that the Civil Courts shall have jurisdiction to entertain any suit in relation to any civil matter except the same is expressly or impliedly barred by the law as the Civil Court has the power to examine the orders passed by an Authority if the action itself was tainted with mala fide. In support of his submission, learned counsel has placed reliance a recent judgment of this Court passed on 30.11.2020 in Suit No.1479 of 2008. 6. Learned counsel for the plaintiff has argued that the letter dated 8 June 2020 is an artificially manufactured and unlawful document which attempted to, in essence, illegally grant defendant No. 3 the authority to begin commercial operations despite them not having fulfilled the necessary requirements. He has further argued that it is not a Commencement Certificate, but the plaintiff apprehends that the reason that such authority was attempted to be granted by way of this letter was to ensure that defendant No.2 has plausible deniability if the matter was ever brought to the attention of the court. He has further argued that the defendant No.2 finding itself under the scrutiny of the this Court and availing the protection offered by the same has itself filed a Contempt Application before this Court, wherein it has stated under oath that the alleged contemnor Viz. CEO of Defendant No.3 is "continuously trying to pressurize and harass the officials of the defendant No.2. He has argued that the defendant No.2 was being influenced by Defendant No.3 to mala fidely give them preferential treatment and excuse their blatant violations of the TPSP License. It was only after the interim order dated 18.08.2020 was granted that defendant No.2 inspected defendant No.3 and found it lacking in the Inspection Report. It must be noted that the
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findings of the Inspection Report are completely at odds with the statement made by the defendant No. 2 in their letter dated 8th June 2020. He has also stated that the rare fact that a Regulator has come to the Court to claim the protection of the Court shows the extent to which defendant No. 3 is influencing and pressurizing defendant No.2, as apparent from the contempt application. Learned counsel in order to further highlight the preferential treatment afforded to defendant No.3 has drawn the attention of this Court to a letter dated 23.05.2019. As is apparent in Para 3(iii) of this letter, the defendant No.2 had given the unlawful concession of establishing a "USSD Platform including USSD Gateway" within 06 months of the pilot launch. Such a concession is not contemplated within the TPSP licensing regime; the TPSP Licensees including the plaintiff and the Defendant No.3 are required to have already established the USSD Platform and Gateway. This letter also lends credence to the fact that the existence of a USSD Platform including a USSD Gateway is an essential requirement for a TPSP, which fact the defendant No. 3 has attempted to now challenge before the PTA and before this Court. He has stated that the letter dated 20.12.2019, which contains the minutes of the meeting regarding the possibility of a single code for the AMA Scheme, further reiterates not only the claim regarding defendant No.2's preferential treatment, but also the fact that the existence of 'a USSD Gateway is a mandatory requirement under the law. As per Para 4 of this letter, defendant No.2 had suggested that the resources of the plaintiff in terms of its USSD Gateway be shared with defendant No.3. He has referred to emails stating that defendant No. 3 used Ufone's USSD Platform concretely establish that defendant No. 3 did not deploy its own USSD Platform, clearly mentions that the Proof of concept ("POC") conducted by defendant No. 3 was on Ufone's USSD Platform. A scenario where a TPSP conducts its POC on a Telco's USSD Platform has not been envisioned or allowed by the TPSP governing law and documents, but was still malafidely accepted by defendant No.2. He has argued that as per the recommendations of the USSD Committee created by PTA it is apparent from Para-03 that the Telcos do not look favorably upon defendant No. 3 dependence on their USSD Platform. They also fortified the Plaintiff's view that such dependence is against the public interest as it will affect the functioning of the system. He has also argued that the Telcos again reiterated their reservations in another letter dated 29.04.2019 to defendant No. 2. The last bullet point of this letter states as under:- "CMOs also brought to the notice of the Authority that one of the TPSPs has tot deployed any USSD platform and intends to use the platform of the CMOs. Not only is this not acceptable to CMOs because it will entail investment into our platforms at our cost but this model is against license obligations of the TPSP." 7. Learned counsel for the plaintiff has argued that defendant No.3 had submitted that the Telcos' comments on its USSD system are based on their own vested interests, as the Telcos do not want to invest in a USSD Platform and would rather have defendant No. 3 invest in its own USSD Platform. It is submitted that the concern of the Telcos is not only valid but logical, as it is the TPSP Licensee itself which should be capable of implementing a USSD platform without any third party interference. He has submitted that public interest demands that a TPSP Licensee must be completely capable of operating independently, and should not be, reliant on a Telco's system, otherwise the system can crash and affect the millions of people who will be using this service as part of the AMA Scheme. He has submitted that despite these factors and the concerns given by the Telco's, the defendant No. 2 still chose to issue the letter dated 8 June 2020 certifying defendant No.3's "Readiness for Commercial Launch." He has urged that defendant No.3 had concluded Agreements with SCO, which were in clear contravention to Clauses 1.3.1 and 1.3.2 of the TPSP License, which state that a TPSP cannot operate in AJ&K and GB. He has also urged that the fact that these agreements were signed inherently implies that VRG intended to operate in AJ&K and GB. Moreover, PTA's failure to rectify or penalize this violation of the TPSP license further evidences its male fides. He has urged that despite the plaintiff having sent the letter dated 30.06.2019
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outlining in detail defendant No. 2 preferential treatment towards defendant No. 3 and defendant No. 3's violations. He has also urged that all the TPSP License violations which were ignored by PTA at that time were again listed in the PTA Inspection Report which was carried out when this Honorable Court had directed PTA to proceed in accordance with law. He has, therefore, prayed that the injunction application may be granted as prayed for. 8. Mr. Wasif Riaz, learned counsel for the defendant No.2/PTA, at the very outset, has categorically denied that defendant No.2 has given any preferential treatment to defendant No.3. He has argued that defendant No.2 has taken serious notice of activity of defendant No.3 wherein defendant No.3 has claimed commercial operations of Asan Mobile Account in print media. He has drawn attention of this Court to Gause 16 of the license, a commencement inspection is required before issuance of commencement certificate for commercial operations. Therefore, on the advertisement of defendant No.3 dated 14.8.2020 whereby- it claimed to be commercially operational with SCO and Jazz, PTA immediately took actions on the same day by issuing the press release and directed the defendant No.3 to immediately stop any commercial operations. He has contended that defendant No.3 requested the defendant No.2 to expedite commercial arrangements to enable PTA for commencement inspection and subsequent commercial operations of the AMA scheme subject to confirmation of the same. As such, the defendant No.2 has not issued any readiness certificate for readiness of VRG for commercial launch. He has contended that commencement certificate to defendant No.3 will be issued only after fulfilling license conditions and satisfactory commencement inspection as per Clause 16.2 of License dated 20.11.2018. He has further contended that defendant No.2 thoroughly considered the application of the defendant No.3 and conducted. pre-requisite inspections essential for issuance of commencement certificate. He has submitted that inspection makes it evident that defendant No.3 has miserably failed to meet the several codal, technical, regulatory, terms and conditions of License and QoS KPIs parameters required for commencement certificate, therefore, the competent authority has decided not to issue the commencement certificate unless the short-falls are addressed according to law and till such time the defendant No.3 has been directed not to execute or publicize any commercial activities till commencement certificate is issued by the authority. 9. On the other hand, Mr. Ijaz Ahmed Zahid, learned counsel for the defendant No.3, at the very outset, attacked the maintainability of the instant suit as the plaint does not disclose a cause of action, so also barred by law. He has argued that the plaintiff is primarily seeking an injunction that defendant No.3 should be restrained from performing functions as a Third Party Service Provider ("TPSP") until a certificate for commencement of business is issued by defendant No. 2. He has argued that neither defendant No. 2 nor defendant No. 3 has ever stated that defendant No. 3 can commence operate as a TPSP unless a certificate for commencement of business is issued by defendant No. 2. This position was unequivocally stated by defendant Nos,2 and 3 in their respective press releases dated August 14, 2020. As such, no cause of action ever existed in favour of the plaintiff and more so upon the issuance of the aforesaid press releases. Accordingly, plaint is liable to be rejected under clause (a) of Rule 11 of Order VII of the Code of Civil Procedure, 1908. He has urged that even if it is assumed for the sake of argument that plaintiff has any right to question the grant of certificate of commencement of business to defendant No.3, such right will only arise from the fact that plaintiff is also a TPSP licensee. The license rights are entirely and exclusively governed by Pakistan Telecommunication (Re-organization) Act, 1996 (Act XVII of 1996) ("Telecom Act"). Any grievance in respect of any decision of defendant No. 2 can only and exclusively be agitated by way of an appeal under section 7 of the Telecom Act. The suit therefore is barred under section 9 of the Code of Civil Procedure, 1908. Accordingly, the plaint is liable to be rejected under clause (d) of Rule 11 of Order VII of the Code of Civil Procedure, 1908. He has contended that it is an
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admitted position, which was reiterated by the plaintiff's counsel several times during his submissions, that plaintiff has not fulfilled the conditions for the grant of certificate of commencement of business and has not even filed any application for grant of such certificate. He has contended that on the other hand, defendant No. 3 has satisfied all the conditions for grant of such certificate which is manifested by the fact that State Bank of Pakistan vide letter dated 09.04.2020 it has already issued its authorization of operation for commercial launch to Defendant No. 3 and its request for grant of certificate of commencement of business is pending with defendant No. 2, which is the final step of the process. He has, urged that the sole purpose of filing this suit is to make the matter sub judice and delay the process at defendant No. 2's end so that the plaintiff can gain more time to comply with its obligations before a certificate is granted to defendant No. 3. He has also urged that the plaintiff has purposely twisted the facts in a self- serving manner though the plaint is liable to be rejected purely on legal grounds. 10. Learned counsel for the defendant No.3 has argued that Third Party Service Providers (TPSP) is a traditional mode of providing banking services through various branches. The State Bank of Pakistan introduced branchless banking in 2008 by framing Branchless Banking Regulations, 2008. In branchless banking, a bank can sign a bilateral agreement with one or more telecom operators for providing banking services without the need to visit a branch, except for some specific purposes like opening an account. He has argued that the Mobile banking is an advance form of branchless banking to widen the services and a mobile phone user can open and manage a bank account with any bank without the need for visiting the bank for any purpose. He has further argued that Mobile banking involves use of two regulated services 1.e, banking and telecommunication, which are regulated by two independent regulators namely State Bank of Pakistan and Pakistan Telecommunication Authority. He has submitted that the interaction between the two services, which is generally referred to as "interoperability" is accordingly governed by a' dual regulatory framework. It is pertinent to mention that licensing of TPSPs is governed by "Class Value Added Services Licensing and Registration Regulations, 2007" framed by defendant No. 2-PTA and a summary of the applicable legal framework is also set out in the Information Memorandum for Third Party Service Providers (TPSPs) Licensing. 11. Learned counsel for the defendant No.3 in order to demonstrate his argument that the current status of the plaintiff and defendant No.3, he has drawn the attention of this Court to a flow chart of TPSP licensing process available at Page No.161 in Part one of Court file. This chart shows an 11-step process. He has submitted that defendant No. 3 has completed 10 steps with the issuance of authorization of operation for commercial launch to defendant No. 3 by State Bank of Pakistan vide letter dated 09.04.2020. However, for the last and final step of issuance of certificate of commencement of business, defendant No. 3's application dated 04.08.2020 is pending with defendant No. 2. He has stated that this has been achieved by defendant No. 3 through hard-work and persistent efforts since grant of license in 2018. He has submitted that on the other hand, plaintiff has not even fulfilled some of the most elementary steps in the process. In this regard, the following are the most significant points: (i) a licensee is required to maintain a minimum paid-up capital of Rs.200 million as required by Regulation 5 of SBP's Mobile Banking Regulations and Regulation 7 of defendant No. 2/PTAs Mobile Banking Regulations. Plaintiff's own document available on record shows that its total authorised capital is Rs. 1,000,000/- which is only 0.5% of the required paid-up capital. (ii) an authorization from SBP is a mandatory requirement for any licensee to commence service under Regulation 3(4) of SBP's Mobile Banking Regulations and Regulation 6(8) of defendant No. 2/PTAs Mobile Banking Regulations and clause 16.1 of the PTA licence.
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(iii) Service commencement certificate from defendant No. 2/PTA is a mandatory requirement under clause 16.2 of the PTA licence. Admittedly, neither the plaintiff has even applied to SBP nor PTA for such authorisation. 12. Therefore, he has submitted that it is manifestly clear that the plaintiff having failed to fulfill the mandatory requirements for commencement of services has filed these proceedings merely to delay the issuance of commencement certificate to defendant No. 3. 13. Learned counsel for the defendant No.3 has next contended that on 14th August, 2020, being the national independence, a large number of corporate organizations published felicitation messages in the press and refers to their achievements. In the same spirit, defendant No. 3…
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