DoT, MCA Lax on Loop: chargesheet by CBI Claims Telco’s Part of Essar

NEW DELHI: The Central Bureau of Investigation has alleged that the corporate affairs ministry and telecom department failed to stop Loop Telecom from obtaining mobile permits that it was not entitled to.

The chargesheet, a document which outlines the police case in detail, filed by the CBI says that the telecom department had received several complaints that Loop Telecom was a front for the Essar Group, thus violating rules barring companies from holding more than 10% in two telecom service providers.

The DoT referred the matter to the MCA, whose detailed probe established the violations. But the MCA chose not to send a definite opinion and instead furnished a ‘vague report’ leading to DoT taking a ‘broad view’ of the matter even though many of its officials recommended that showcause notices be issued to Loop Telecom for termination.

The CBI has suggested these officials be penalised, according to people familiar with the contents of the chargesheet.

Earlier this week, the CBI charged industrialists Ravi Ruia and Anshuman Ruia, the promoters of Essar Group, its director for strategy and planning Vikas Saraf and Loop promoters I P Khaitan and Kiran Khaitan with fraud and conspiracy as part of a sprawling court-monitored investigation into telecom sector.

The CBI has alleged that the three companies were beneficiaries because Loop had paid only Rs1,455 crore for mobile permits in 21 regions while these licences were worth Rs 5,092 crore, a figure which it has arrived by multiplying Rs 1,455 crore by 3.5.

The multiple, 3.5, was arrived at on the logic that aggregate gross revenue per megahertz of frequency spectrum was 3.5 times more in January 2008, when Loop got its licences, compared with 2001 when the all-India licences were auctioned. The government has never used such a calculation, people familiar with the telecom sector say.

Chargesheet details, loop history

According to the people familiar with the chargesheet, the document delves deep into the history of Loop to support the CBI theory that it was part of the Essar Group.

According to the CBI, the company that came to be known as Loop started life as Shippingstop Dot Com, an Essar Group company when it applied for longdistance licences in 2005. Later, in 2007, when it applied for mobile permits, it was funded by BPL Mobile Communications and BPL Communications, which in turn were funded by an Essar Group company, the agency alleged.

At the time of application, all four directors on the board of Shippingstop Dot Com were employees of the Essar Group. The CBI said its investigations revealed that Shippingstop Dot Com was majority owned by BPL Mobile Communications — now called Loop Mobile — which in turn was controlled by BPL Communications, a partnership firm.

The CBI has alleged that Essar Group, through its companies controlled this partnership firm. This is because, according to the Indian Partnership Act, decisions are taken by majority of the partners and not majority shareholders.

The CBI has, therefore, alleges that the Essar Group exercised full control of Loop Telecom through this partnership firm. According to the CBI’s version of events, Vikas Saraf, who at that time was heading the Essar Group’s telecom business, along with the other accused, had directed Essar employees to apply for mobile permits on behalf of Loop Telecom.

It has also alleged that all the five accused made what it described as “false representations” to the government that Loop Telecom was in full compliance with telecom guidelines. The chargesheet also details how Loop’s operations were managed by Essar executives, who according to the CBI did not know that the company was owned by the Khaitans and had not heard of them.

The CBI claims that Loop Telecom initially did not reveal the identity of its promoters, but on being questioned by the telecom department, had fresh documents in 2008, stating that it was owned by the Khaitans. Even these documents did not reflect a true picture, the CBI chargesheet claims.

The chargesheet provides details to support the CBI’s claim that the entire Rs1,454 crore paid by Loop Telecom was allegedly sourced from various companies of the Essar Group.

Officials aware of the CBI chargesheet said that CBI had also alleged that many board meetings of Loop Telecom during 2006-09 were held at the offices of the Essar Group. The CBI said its probe unearthed several emails between Loop and Essar Group that established the active involvement and influence of the latter in the functioning of Loop.

It has also cited a lawyer’s report discovered in Loop Telecom’s office which indicated that it was an ‘associate’ of the Essar Group in violation of Clause 8 of telecom guidelines as well as rules notified by the corporate affairs ministry.

The Essar Group refused to comment and referred to its earlier statement that said ‘it had held only 2.15% in Loop during the time of the application and therefore did not violate clause 8’.

In going ahead with the charges, the CBI has ignored the opinion of its legal team, which has stated that the alleged violation of Clause 8 was not a criminal act and similar violations in the past have never attracted penal action.

India’s law ministry also recently said that there did not appear to enough evidence to file criminal charges against the Essar executives, though it clarified that its views were based on a representation from the oil-to-BPO conglomerate.

The CBI had submitted its chargesheet in a Delhi special court on Monday. The Judge presiding over the court, OP Saini, will decide whether to take cognizance of the chargesheet on December 17 or transfer it to lower court.

If the case is heard in Saini’s court, then he will issue summons to the accused and proceed with the trial which could go on for as long as CBI takes to examine more than 100 witnesses, which it intends to do.