Swan. Zebra. Tiger. Parrot. Giraffe. Cheetah.
No, one is not alluding to wildlife conservation of any kind. Nor, for that matter, is this article about a visit to the nearest zoo or a lesson in fauna.
It is instead about the infamous second-generation (2G) telecommunications spectrum scam. Only, that these were prefixes used by promoters of companies to conjure up new players and participants in a frantic bid to bag lucrative telecom licences.
That's the really 'wild' aspect of the issuance of new Unified Access Services Licences (UASL) and subsequent allocation of 2G spectrum.
Irregularities and anomalies in the granting of licences, thereby causing a huge loss to the exchequer, had been revealed in the damning report by the Comptroller and Auditor General (CAG) of India in November 2010.
But what the chargesheet filed by the Central Bureau of Investigation (CBI) on Saturday (April 2) has done, is to lay bare the extent to which companies associated with the Reliance ADAG (Anil Dhirubhai Ambani Group) headed by Anil Ambani allegedly indulged in financial subterfuge through a complex maze of transactions.
The revelations in the CBI chargesheet are not only about proxy companies that Reliance ADAG purportedly propped up, but also about ownership patterns being allegedly concealed so that these firms would not be rendered ineligible to apply for telecom licences as per official guidelines.
And when these companies were floated, names of endangered animals were probably the first thing that came to the mind of top executives in companies that are part of Reliance ADAG.
Among companies that have been investigated by the CBI include Swan Telecom Private Limited, Tiger Traders Private Limited (later Tiger Trustees Private Limited), Zebra Consultancy Private Limited, Parrot Consultants Private Limited, Cheetah Corporate Services Private Limited, and Giraffe/Siddartha Consultancy Services Private Limited.
In January 2008, Swan Telecom jumped the queue to obtain licences with spectrum that were allotted by the Department of Telecommunications (DoT), headed then by Union minister for communications and information technology Andimuthu Raja who has been behind bars in New Delhi's Tihar Jail since February 2.
That's what the CAG report said. But CBI, in its chargesheet, has claimed that its investigations have revealed that Gautam Doshi, Surendra Pipara and Hari Nair (group managing director, group president and senior vice president, respectively, of Reliance ADAG) created Swan Telecom in January-February 2007 out of funds arranged by Reliance Telecom and/or its associates.
This company applied for licences in 13 telecom circles (or geographical districts), according to the chargesheet, in a way that Reliance Telecom was sought to be deliberately kept out of the picture.
This, they needed to do since Clause 8 of the UAS licence agreement read: 'No single company/legal person, either directly or through its associates, shall have substantial equity holding in more than one licensee company in the same service area for the access services namely; basic, cellular and Unified Access Service. 'Substantial equity' herein will mean 'equity of 10 per cent or more'. A promoter company/legal person cannot have stakes in more than one licensee company for the same service area.'
Reliance ADAG allegedly tried to circumvent this clause with Swan Telecom where Reliance Telecom owned 9.81 per cent of equity shares and 0.90 per cent of redeemable preference shares.
Since DoT did not have the mechanism to verify the shareholding patterns, Reliance at that time got away by allegedly not conforming to the guidelines, the CBI contended in its chargesheet.
Tiger Traders, which held majority stake in Swan Telecom, was also said to be an associate company of Reliance ADAG. Both companies had no more than an 'on-paper' existence. The day-to-day affairs of both these companies were supposedly managed by Messrs Doshi, Pipara and Nair.
As Swan Telecom did not meet the eligibility criteria on the date of application, its application should have been rejected and the company directed to apply afresh.
Meanwhile, the Reliance ADAG executives, as per the CBI chargesheet, set up two other companies -- Zebra Consulting Private Limited and Parrot Consultants Private Limited. Till April 2007, when Swan Telecom had applied for telecom licences, 50 per cent of shares of Zebra Consulting and Parrot Consultants were purchased by Tiger Traders.
All three ended up cross-holding each other in an inter-locked way: each held 50 per cent shares of the other two. No one, therefore, was the absolute holder of any of the companies.
The Reliance ADAG officials had allegedly conveyed an impression to the DoT that Tiger Traders was owned by India Telecom Infrastructure Fund, according to the CBI chargesheet.
The source of funds for Tiger Traders to raise its equity allegedly came from group companies of Reliance ADAG, the CBI has claimed.
A sum of Rs 992 crore (Rs 9.92 billion) which constituted the bulk of the net worth of Swan Telecom was paid by Reliance Telecom allegedly under the guise of subscribing to preference shares of Swan Telecom.
These preference shares (which do not carry voting rights) were purchased at an extraordinarily high premium of Rs 999 per share against the face value of Rs 1 per share of the company which had otherwise no business inventories.
The entire amount of Rs 992 crore, the CBI said, was returned by Swan Telecom as an advance to a purchase order.
Swan Telecom bagged the licence for these 13 circles and then expanded it equity base by inducting UAE-based Etisalat which now holds over 45 per cent stake in the joint venture. It was renamed Etisalat DB in September 2008 after Etisalat, based in the United Arab Emirates, picked up the stake in the company for $900 million.
After taking over as telecom minister, Kapil Sibal wrote to the Union ministry of corporate affairs in December asking whether Reliance Telecom had violated norms by having 10 per cent equity in Swan.
The latter gave a clean chit to Reliance saying that Reliance Communications or Reliance Telecom did not have more than 9.90 per cent voting rights in Swan and that preference shares of Reliance Telecom did not carry voting rights.
Promoters of Swan Telecom include Shahid Balwa, currently in jail. And there is the alleged Balwa-Reliance link. As per a January 2007 agreement, Swan had agreed to use Reliance Telecom equipment and infrastructure, the chargesheet alleged. The deal was that Reliance Telecom could continue as minority stakeholder.
Interestingly, the CBI chargesheet and supporting documents (running into 129 pages), photocopies of which were distributed to the media on Saturday does not have a page numbered 54.
The previous page ends with the CBI alleging that during investigations, the Union ministry of corporate affairs had confirmed vide a report of the Registrar of companies, Mumbai, that Swan Telecom was an associate of Reliance Telecom and Reliance Communications. The CBI claimed its investigations showed that Reliance Telecom had invested in Swan Telecom in the form of minority equity stake and preference shares.
The CBI's assertion goes against what the ministry of corporate affairs had been insisting on. Salman Khurshid, the minister for corporate affairs, had told CNBC-TV 18 in December 2010, 'Swan Telecom as far as we are concerned, up to the present, is only in compliance of conditions that were posed by DoT, on the basis of which licenses were issued. As of now we have no reason to believe as far as company law is concerned there have been violations.'
The page (55) after the missing one says that investigations also revealed that certain complaints alleging substantial stake of Reliance ADAG in Swan Telecom as on the date of application, had been received by the DoT.
However, these were not taken due cognisance of by then telecom secretary Siddhartha Behura and then telecom minister A Raja. Instead, Swan Telecom was declared eligible for issuing of the letter of intent for UAS licence.
