After Raja arrest,CBI focuses on ‘favours’ shown to telcos

It is understood the CBI probe confirms some aspects of the Comptroller and Auditor General’s ‘reservations’ about this particular deal which it had made clear in its November report,tabled in Parliament.

After this report was made public,pressure mounted on A Raja to resign and the Opposition shut down the whole Winter Session of Parliament demanding a Joint Parliamentary Committee probe into the irregularities.

CBI officials said on Wednesday that the outcome of A Raja’s interrogation is very important at this stage if it has to meet the March deadline for filing a chargesheet.

Swan Telecom had bagged the licence in January 2008 for 13 circles for Rs 1,651 crore and then expanded its equity base by inducting UAE-based Etisalat which now holds over 45 per cent stake in the joint venture after paying $900 million.

Highlighting irregularities in 2G spectrum allocation,the CAG had said Swan Telecom appeared to act as a “front company” on behalf of Reliance teleservices and doubted the latter’s “intention”.

In its report tabled in Parliament,the CAG said Swan Telecom’s application was “in effect against the intent and spirit” of the Unified Access Service Licencing (UASL) guidelines as it was among those beneficiaries which “suppressed facts,disclosed incomplete information and submitted fictitious documents” to the Department of Telecom.

The audit by CAG found that the e-mail ID of the corporate as well as registered office of Swan Telecom Pvt Ltd in its application dated March 2,2007 was shown as hari.nair@relianceada.com,the report said,adding the same e-mail ID was also given for the correspondence address and the authorised contact person of the applicant company.

The CAG said the Company Secretary Hari Nair had given a certificate while applying for a UAS licence for J&K service area in January 2007 that the Tigers Traders Private Limited held the shares of Swan (then Swan Capital Private Limited) as trustees of Indian Telecom Infrastructure Fund and these corporate beneficiaries are not part of Reliance ADA Group and neither Anil Ambani nor his family or Reliance ADA Group companies holds any shares in these companies.

However,”the total equity/stakes of Reliance Telecom Ltd (RTL) in Swan Telecom was of Rs 1002.79 crore against equity holding of Rs 98.22 crore by the majority share-holder Tigers Traders Pvt Ltd”,the CAG said,adding it “raises doubts about the intention of the RTL and the control it would exercise in a new company incorporated barely few months ago”,the audit report said.

“Hence,the application of such company to enter telecom sector goes against the intent and spirit behind the UAS guidelines,” the CAG said,while noting that the ‘substantial equity’ was defined as equity of 10 per cent or more.

“Thus,it would appear that Swan Telecom Pvt Ltd,while applying for the UAS licences in 13 service areas,was acting as a front company on behalf of RTL and their application was,in effect,against the intent and spirit of the UAS licensing guidelines,” the report observed.

It noted that it was “evident” that at the time of applying for UAS licence,the equity stakes of Reliance Telecom Ltd in Swan Telecom Pvt Ltd was 10.71 per cent.

“Since Reliance Telecom Ltd was operating in all service areas for which Swan Telecom Ltd had applied for UASL,the application of Swan Telecom Pvt Ltd was not in conformity with the UASL guidelines and hence was not eligible to be considered,” the CAG said.

Later,the Ministry of Corporate Affairs,however,gave a clean chit to Swan Telecom and said Anil Ambani-led Reliance Communication never had more than 9.90 per cent stake in the company.

The Ministry of Corporate Affairs’ response comes in the wake of the Telecom Ministry’s request to examine the share-holding pattern of Swan Telecom to ensure the eligibility of the company to get the licence and 2G spectrum in 2008.

In its report,the MCA has said that with effect from January 31,2006,Reliance Communications had no equity share holding or voting rights in Tiger Trustees Private Limited,Swan Advisory Services Private Limited and Swan Infonet.

Telecom Minister Kapil Sibal had ordered an inquiry in the stake-holding pattern of the company following allegations that it was the front company for RCOM. Government auditor CAG had also alleged violation of substantial equity clause in its report on the issue.

Apart from having 9.90 per cent equity,the MCA said Reliance Telecom also invested Rs 992 crore in preference shares but these shares never carried any voting rights.

Swan Telecom (Etisalat DB) has been served a showcause notice seeking an explanation why its licence should not be cancelled in view of the allegations levelled against it.