Raja's Swan song was interest in a firm

 Exactly a year before the 2G spectrum allotment scandal broke, the CBI and the Income Tax Department had clandestinely accessed information that indicated that then Telecom Minister Andimuthu Raja and a “middleman” close to him had equity interest in one of the companies that benefited from the scam.

According to some classified documents in the possession of Deccan Herald, the CBI stumbled upon explosive information based on which it filed a case (RC DAI 2009 A 0045), investigation of which led the agency to establish criminal conspiracy “between certain public servants and private persons in grant of UAS licence in the year 2007-08”. The IT authorities, chiefly its investigation wing, mounted a telephone interception on the middleman — actually a woman — Nira Radia, who heads Vaishnavi Corporate Consultants, Noesis Strategic Consulting Services, Vitcom and Neucom Consulting. The tapped conversation revealed “some direct conversations between Radia and (the) Telecom Minister”.

The intercepted  telephone conversations clearly reveal that Raja was “instrumental in getting licenses and spectrum to Swan Telecom, Aircell, Unitech wireless and Datacom”.

‘Commercial interests’

“The group also interferes in the appointment of ministers so as to dovetail the same to the commercial interests of their clients”, the investigating agencies said in their highly confidential exchanges.

The Comptroller and Auditor General’s damning report, which sank Raja, has only confirmed the depth and extent of wheeling-dealings that Radia did to “influence policy changes and decisions of the various government departments to suit the commercial requirements of clients”. To this extent, the CAG’s report matches with the CBI and IT investigations.

Of particular interest to the IT department, as also the CAG, was Swan Telecom which applied for grant of UAS licence in 13 service areas in March 2007. While declaring its equity structure, Swam Telecom disclosed that Tiger Traders Pvt Ltd held 89.29 per cent of shares and two entities with an identical name, Reliance Telecom Ltd, held 9.81 per cent and 0.90 per cent of the shares.

In its report, CAG said: “From the above declaration of the company for UAS licence, it was evident that at the time of applying for UASL, the equity stakes of Reliance Telecom Ltd in Swan Telecom Private Limited was 10.71%. Since Reliance Telecom Ltd were operating in all the service areas for which Swan Telecom Limited had applied for UASL, the application of Swan Telecom was not in conformity with the UASL guidelines, and hence was not eligible to be considered.”

The Department of Telecom did not have any mechanism to verify the correctness of the share holding pattern of the applicant and hence the matter should have been referred to the Ministry of Corporate Affairs (MoCA) as was advised by the Finance Wing of the Department.

No reference, however, was made to the MoCA and instead Swan Telecom was given an opportunity to resubmit a revised stake holding pattern in December 2007, nine months after its date of application, which declared that Reliance Telecom Ltd had divested its entire stakes. This was accepted by DoT and Swan Telecom was given the benefit of seniority from the date of its initial application in March 2007.

Audit also found the basic claim of the paid up capital of Rs 110 crore by Swan Telecom “itself was false” as the authorised share capital of the company as on the date of application, March 2, 2007 was Rs 4 crore only.

IT department documents reveal a darker side. On paper, Swan was backed by a Mumabi-based real estate company, Dynamix Balwas group. But UAE’s telecom giant Emirates Telecommunications Corp (Ethisalat) controls about 45 per cent of Swan Telecom for up to about $900 million.

According to the substantial equity guideline issued by DoT in 2005, no single company or legal person, either directly or through its associates, shall have substantial equity holding in more than one licencee company in the same service area for the access services (fixed and cellular). Substantial equity means equity of 10 per cent or more.
In December 2007, Swan told DoT that Reliance Telecom had divested its entire minority stake (9.8 per cent) and also its holding of preference shares. The new shareholding pattern of Swan showed that Tiger Traders continued to hold 90.10% equity in Swan, while Delphi Investments Ltd (a foreign company) had 9.8 per cent. The preferential shares earlier held by Reliance Telecom were now with Dynamix Balwas Infrastructure Pvt Ltd.

What is clear to the CAG was “that Swan Telecom, while applying for the UAS licenses in 13 service areas, was acting as a front company for RTL.”

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