BEFORE THE TRIBUNAL OF LEARNED ARBITRATORS, LAHORE.

Claim for Arbitration qua the Dispute Between Bank of Punjab Ltd.
and JS Bank Ltd.

Arbitration Claim under Chapter II and all other Enabling Provisions

of the Arbitration Act, 1940.

Respectfully,

This claim is being referred to you in pursuance of your Letter dated

28.06.2021, for recovery and settlement of dispute between Bank of
Punjab, a banking company incorporated under the laws of Pakistan
and having it’s registered office at BOP Tower, 10-B, Block E-II, Main
Boulevard Gulberg III, Lahore (referred as BOP or Claimant) through
it’s authorized representative
____________________________________________________ and JS
Bank Ltd, a banking company incorporated under the laws of Pakistan
and having its registered office at 1st Floor, Shaheen Commercial
Complex, Dr. Ziauddin Ahmed Road, Karachi, (referred as JS Bank).
This reference has emanated from Service Provider Agreement for
Branchless Banking executed between BOP and JS Bank on 01.04.2020
(referred as the Branchless Banking Agreement). The Parties have
appointed you as arbitrators to resolve the dispute between them
hence, formally filing the Reference before you. The facts and claim in
this regard are as under: (Authority Letter/Power of Attorney
attached as Annexure ___________________________)

Facts:

1. That the brief facts leading to the filing of the instant Arbitration
Reference is that BOP entered into an agreement with
Government of Punjab, wherein BOP was obligated to use
 Branchless Banking (referred as the BB) to disburse bulk amount
from Government of Punjab to
specified/agreed/selected/deserving persons (referred as the
Beneficiary/s) residing in specified tehsils & districts of Punjab
only, hence, to accomplish the purpose BOP entered into
Branchless Banking Agreement with JS Bank on 01.04.2020 for
using branchless banking network services from JS Bank
whereby JS Bank agreed to provide it’s trust worthy agents
network for the disbursement under specified mandates. It is
highly relevant to mention here that there were various
characteristics/categories of Beneficiary/s who were suppose to
use this Branchless Banking Service from JS Bank. (Copy of
Branchless Banking Agreement dated 01.04.2020 attached as
Annexure ________________)

2. It’s pertinent to mention here that JS Bank has been entrusted

with necessary powers and highly sensitive mandate mainly
under the State Bank of Pakistan Act, 1956 (as regulator referred
the SBP) and the Banking Companies Ordinance, 1962,
Branchless Banking Regulation and Framework for the
Branchless Banking Agent Acquisition and Management (later is
hereinafter referred as “Agent Acquisition Framework” and
collectively referred as the “Regulations”) to regulate and
supervise the activities of banks, appointment of agents,
redressing complaints, taking due care for the completion of
transaction under BB etc. Said laws and Regulations, have
statutory force, hence, same are strictly applicable upon the
JS Bank.

3. It’s very important to inculcate the importance and sensitivity of

JS Bank’s authorized agents, under Branchless Banking
Agreement; who were obligated to pay money to the
Beneficiaries as per law, Regulations and guidelines issued by
SBP from time to time with the help of equipment/machine,
 supplied & developed by JS Bank, through which Agent get
information/verification of the Beneficiary. (hereinafter referred
as the JCash). With the help of JCash machine Agents were
running BB service which enables Beneficiaries & Agents to
complete (successful or unsuccessful) transactions end to end.
(List of dully appointed Agents by JS Bank attached as
Annexure _________________________)

4. Ideally speaking, branchless banking allows banks to use agent

based banking by involving non-bank outlets. However delivery
of services via this channel, if not appropriately managed, can
potentially increase one way or the other risk for banking sector
and their repute. Consequently dependence on third parties i.e.
Agents, may also be harmful to the customers at large. Banks
therefore, need to effectively manage the risk associated with
agent banking through the Regulations for the sound and
prudent risk management practice. Agents are the face of
branchless banking and hence, the need for a robust and efficient
agent network imperative. Agent Acquisition Framework aims
to facilitate the implementation of agent banking, in a sturdy,
liable, safe and sustainable manner whilst safeguarding
consumer interest and confidentiality. The Agent Acquisition
Framework operates on the premise that banks retain the
ultimate responsibility and accountability of all agents based on
branchless banking activities and protection of branchless
banking customers.

IDEAL TRANSACTION TO WITHDRAW CASH.

5. Ideal transaction for Beneficiary to withdraw cash from Agents
was very simple and flawless. Beneficiary has to visit JS Bank’s
authorized Agent’s outlet to withdraw cash and supply his valid
CNIC; on availability of Beneficiary’s details, Agent shall input
Beneficiary’s thumb impression in JCash machine. Then Agent
 shall pass on all this information to JS Bank system which shall
further transfer information to the BOP’s Biosys system and
finally BOP’s Biosys system shall send verification information
to the NADRA and accordingly NADRA has to transmit
information back through the said channel. In the result of
verification flow, it was job of system to generate, pre-decided,
codes for successful or failed transaction codes. In case of
successful cash withdrawals, Agents send SMS on the registered
mobile number of the Beneficiary. Said System is supposed to
finally transmit response code to the Agent for successful or
failed transactions as follows;

For Successful Transaction/Verification

Response Code 100
Response Msg Successful
Secondary Citizen Name _________

For Failed Transaction/Verification

Response Code 404
Response Msg Object

(Copy of Verification of Information Flow Explained in

Pictorial Form and attached as Annexure ________________)

6. That there were various types/categories/characteristics of cash

facilities/aid which were being provided from Government of
Punjab to the different categories of beneficiaries. Before going
live User Acceptance Testing (referred as the UAT) of JS Bank
had to be signed off from UAT as access gate for the Agents.
Sign-off documents clearly manifested that biometric verification
(hereinafter referred as BVS) transactions were not approved
and that those would be tested in a subsequent phase because JS
Bank had realized that BVS was showing errors during testing
(UAT). Since the errors were known and had been noted by JS
 Bank during testing (UAT) that BVS had failed, astonishingly
instead of paying any heed to their observation, JS Bank
continued to allow the BVS transactions through their Agents,
on their devices and systems. (Copy of Signing-off before going
live attached as Annexure ______________)

7. That earlier in the month of April 2020 the matter came under
observation of BOP officials that aid available under the name of
Khidmat Card, is being withdrew, even when withdrawal of
which was never agreed between BOP and JS Bank, in terms that
withdrawal volume was too unusual, settlement of large number
of accounts in short abnormal time, frequency, timing and
typology (e.g. an agent handling extraordinary volume of cash
out of accounts outside the Beneficiary’s own tehsil by Agents
serving other tehsil) and out of practice cash was being
withdrawn. Resultantly BOP received various types of
feedbacks/complaints from the Beneficiaries that Agents
informed them that their money had already been withdrawn.
During the period i.e. 02.04.2020 to 22.04.2020, there were 18,731
incidents of fraudulent transactions that had taken place through
JS Bank’s Agents network, which involved 15,611 Beneficiaries
involving amount Rs. 247,587,000/-. There were total 55 Agents
who were running JS Bank’s BB system through their out lets
and thereby fraudulently withdrew Rs.
247,587,000/-. (Summery of Cash Withdrawals Located at 55
Agents Locations attached as Annexure __________________)

8. The BOP also discovered that all these fraudulent transactions

were carried out by the JS Bank’s Agents as they were holding
JCash machines and it was in their knowledge that by just
lodging the withdrawal process whole system will honor the
withdrawal as JS Bank did not block the system to honor such
withdrawals.
9. That in the light of Branchless Banking Agreement JS Bank is
bound by the terms & conditions stipulated in the said
agreement, few of which are like, (i) application of State Bank of
Pakistan Act, 1956, Banking Companies Ordinance, 1962, any
other statute or any other applicable regulations or directive of
SBP or any other authority, (definition clauses 1.1.1-4-8-9, 4.4,
interpretation clauses 1.1.4 & Applicable Laws 15.2) (ii)
appointment of Agents ( 1.1.2, 4.2, ) and (iii) Indemnification
(10.1).

10.As the system was not blocked to stop transactions, so JS Bank’s

Agents and their co-conspirators successfully exploited this fact
in negative.

11.That during the period i.e. 02.04.2020 to 22.04.2020, BOP officials

through various communications warned and cautioned JS Bank
officials about the ongoing illegal withdrawals and fraudulent
transactions but negligently JS Bank blocked these transactions
with a procrastination on 23.04.2020, when massive losses due to
the fraudulent transactions have had perpetrated by the JS
Bank’s delinquent Agents. During said period BOP not only
tried to warn and awaken the JS Bank officials but also tried to
block the fraudulent withdrawals that was only possible by the
first hand involvement of JS Bank because channel to withdraw
cash was starting from the JS Bank’s end. (Copies of
email/letters regarding communications attached as Annexure
__________)

12.Thereafter, BOP wrote a detailed letter dated 03.06.2020 to JS

Bank for redressing the grievances which was simply responded
by the JS Bank vide letter dated 02.07.2020, however, no actions
was taken by the JS Bank against it’s Agents. (Copy of Letters
dated 03.06.2020 & 02.07.2020 attached as Annexure
____________________).
13.That the BOP communicated termination letter of it’s legal
relationship established with the JS Bank under Branchless
Banking Agreement, vide letter dated ___________________ and
JS Bank dully accepted the same under letter dated 08.12.2020.
(Contract Termination Correspondence attached as Annexure
____________)

14.It’s obligation of BOP towards GOP, to deliver money to the

Beneficiaries and after fraudulent withdrawals through various
communications BOP has undertaken before GOP to indemnify
the GOP for the loss occurred due to JS Bank’s Agent’s negligent.

15.The analysis of BOP based on thumb impression used during

fraudulent transactions and captured in the JCash machine held
with Agent, revealed that the thumb impressions used were
inauthentic and fraudulent. It is further revealed that inauthentic
thumb impressions could only be used with the assistance,
facilitation and collusion of JS Bank’s Agents in whose sole
control lied the devices. (Copy of BVS Results attached as
Annexure ________)

JS Bank’s Negligence Due to Which Fraudulent Transactions

were done Successfully

a. Responsibilities of JS Bank in Line with Regulations

Under Section 40 of Banking Companies Ordinance 1962 it is

duty of SBP to safeguard interest of the public and under
section 41 of said Ordinance it is prerogative of SBP to issue
prudential & regulations, SROs, circulars and notifications
which have statutory force and thereby binding upon the
subjects i.e all banks regulated by SBP. Accordingly,
Regulations issued by SBP under said provisions are binding
upon the J S Bank.
 Regulations are only applicable to the banks which have
obtained license/confirmation from SBP to run branchless
banking. In case of JS Bank, it has undertaken before SBP that
it shall strictly comply with the Regulations. It’s evident that
while supplying BB service to the BOP, JS Bank has
committed serious violation of Regulations.

b. Transactions noted in Non-Working Hours.

During the month of April 2020, due to COVID 19 and strict

lockdown, working hours were restricted. It’s pertinent to
mention here that around 55 Agents were running their
businesses which were supposed to close that during
lockdown. Following details given below are gross violation
of Regulations issued by SBP and specifically SBP has given
guidelines to minimize the risk.

i. During the period between 01.04.2020 and 22.04.2020 a

particular set of 1,405 transactions amounting to Rs.
19,732,000/- Million were carried out by 28 Agents
carrying their business in the name of “Mobile Shop”
between time interval of 12:00 AM and 06:59 AM. This fact
further authenticate the commission of scam at the end of
JS Bank’s Agents that out of said transactions total amount
of Rs. 690,300/- was recovered from 44 transactions
conducted by said 28 Agents. (Copy of Proof Establishing
the Total Transactions were Recovered and Detailed list
of said Agents attached as Annexure __________ &
________, respectively)
ii. During the Relevant Time a particular set of 760
transactions amounting to Rs. 10,893,000/- Million were
carried out by 11 Agents carrying their business in the
names of “Customer
 Service/Communication/Computer/Pan Shop/Toy
Shop” between time interval of 12:00 AM and 06:59 AM.
During the Relevant Time JS Bank’s authorized Agent
holding ID No. 1043223 conducted total 419 transactions
and withdrew Rs. 41,124,000/- total out of which 419
transactions amounting to Rs. 5,678,000/- were done
between time interval of 12:00 AM and 06:59 AM.

c. JS Bank’s Action upon Complaints filed by Beneficiaries

That BOP various times approached/communicated the JS Bank

to take action against the culprits (Agents) which was obligation
of JS Bank under the Regulations and yet JS Bank did nothing
against it’s Agents. Even there were 117 transactions against
which complainants/ Beneficiaries filed complaints which were
settled as follows;

i. Out of 117 transactions/complaints 17

transactions/complaints were redressed by the JS Bank in
the form of recovery from 13 Agents amounting to Rs.
257,500/-. It’s further surprising that out of said 13 Agents
5 Agents were located in Fazil Pur Tehsil through whome
7,216 transactions amounting to Rs. 95,904,000/- were
conducted and 2 agents were located in Liaqat Pur Tehsil
through whome 1,579 transactions amounting to Rs.
23,073,000/- were conducted.
ii. Out of 117 transactions/complaints 41 amounting to Rs.
459,000/- were recorded and said complaints were
redressed by JS Bank only in the form/response that as
Agents had supplied CNICs of Beneficiaries, hence, there
was no reason to proceed further with complaints.
However it has been observed that two transactions were
held against CNIC No. 33100-0927165-6 on 16.04.2020
which CNIC was expired on 06.03.2020. (Copy of CNIC
attached as Annexure ______________)
iii. Out of 117 transactions/complaints 4 complaints
amounting to Rs. 43,000/- were redressed by JS Bank in
response that as Beneficiaries had stated that they received
Rs. 43,000/- and did not file complaint against Agent.

iv. Out of 117 complaints 1 compliant was responded by the

JS Bank that Agent has provided proof with thumb
impression, hence, no reason was left to proceed with
complaint.

While on the other hand BOP being complainants’/

Beneficiaries’ account manger (having best knowledge,
information and access to the Beneficiary) contacted
complainant/ Beneficiary and came to know that
grievance of the complainant/Beneficiary had not yet been
redressed.

Under Regulations, it has been specifically prescribed that

there should be a withdrawal limit for particular day so
that in such circumstances Agent should not exceed his
limit. To make the BB ideal, it has been further prescribed
that bank should design it’s system to automatically stop
the transaction if Agent tries to honor transaction beyond
his prescribed limit. If JS Bank had fixed such sealing of
Agent in compliance of Regulations such incident would
not have taken place. Prima facie it’s evident that JS Bank
ignored Regulations and caused huge loss not only to the
BOP but also to the repute and sanctity attached to the
Banking System.

Under Regulations it was core duty of the JS Bank to make

best possible efforts so that even a single scam should not
 have happened. In case of any complaint filed by the
account holder there’s a detailed & very ideal procedure
prescribed in the Regulations to deal with complaint end
to end.

That upon lodging complaints JS Bank neither ever

supplied the details of said Agents nor ever prosecuted
them for their act which is in grave violation of the
Regulations and other enabling laws.

c. Difference Between Districts & Tehsils of Beneficiaries &

Agents

There are two types of differences observed during the cash

withdrawals in the name of Beneficiaries by the Agents.
Firstly , out of 18,731 transaction the 15,512 transactions were
done where district of Beneficiary and Agent do not match
and secondly, out of 18,731 transactions the 17,744 cash
withdrawal transactions were done where tehsil of
Beneficiary and Agent do not match. This anomaly very
clearly establishes that Agents were withdrawing the
amounts in some gross irregular manner and during that
period there was no regulator to observe.

d. Failure to Provide Credentials of Agents.

From bare reading of scheme of Regulations, it’s very obvious

that Agents were part of JS Bank, and in the light of
Regulations it would be considered that after conducting a
thorough due diligence JS Bank had appointed it’s Agents to
conduct BB transactions. Surprisingly, unto now JS Bank is
badly failed to supply the credentials of it’s Agents who were
appointed after following guidelines issued by SBP and even
 as of now JS Bank has failed to produce it’s agents before any
forum looking into the matter of Beneficiaries.

By perusing complete Agent Acquisition Framework it’s clear

that Board of Directors and Senior Management of JS Banking
were directly responsible to comply with the Agent
Acquisition Framework. Said framework includes
Compliance, internal audit, appointment of creditable Agents,
formation of Agent structure, activities of Agents, prescribing
roles & responsibilities of Agents, to centralize the
management of Agent policy, due diligence of Agents,
procedure of Appointment of Agents, risk management of
risks attached to the duty of Agents, training of Agents,
independent contracts with Agents in compliance of BPRD
Circular No. 09 dated 13.07.2007, complaint handling &
consumer awareness policy, assurance of service delivery,
development of code of conduct of Agents, management of
Agent related activity, formation of fraud prevention & Agent
blacklisting policy. JS Banking badly failed to comply with all
duties framed under the Agent Acquisition Framework.

16.JS Bank’s Agents under whom JCash devices were being

controlled and used to conduct the fraudulent transactions are
still working with JS Bank Branchless Banking network and have
neither been blacklisted by JS Bank as per SBP Regulations nor
even reported in this regard to SBP. Consequently, BOP filed the
complaint before FIA for it’s redressal.
(Copy of Complaint Submitted before FIA attached as
Annexure ____________)

17.That in the light of narrations made above, it’s crystal clear that
JS Bank has acted in grave violation of law, prudential,
Regulations issued by SBP and failed provide single iota of
 evidence in the light of threshold prescribed by Qanoon-e-
Shadat, Ordinance 1984.

18.That in Compliance of Clause 15.4 of Branchless Banking

Agreement, BOP wrote a letter dated ___________ to make it’s
best effort to settle the matter with JS Banking but in response to
said letter all efforts of BOP remain failed, hence, this claim.
(Copy of Letter dated ___________ attached as Annexure)

19.That, in the light of above said, BOP is filling the instant

reference in accordance with the terms and conditions of the
Branchless Banking Agreement, laws, Regulations and the
Arbitration Act, 1940, as no other adequate alternate remedy is
available.

PRYER:

In view of the above, Claimant prays that this Learned Tribunal

may be pleased to pass an award for payment of Rs. 247,587,000/-
(Two Hundred & Forty Seven Million Five Hundred and Eighty Seven
Thousand Rupees Only) by the Respondent to the BOP.

Further interest on the claim amount @ _______________________

from April 2020 till the realization of recovery.

Cost of legal expenses of Rs. _____________ may also be awarded.

For on Behalf of Bank of Punjab

Through

Farah Malik Salman Faisal

Advocate High Court Advocate High Court

PLH-39049 BP 53212

Yasir Kalim Abrar Nawaz

Advocate High Court Advocate High Court