CAG report says Anil was beneficiary

However, the former Telecom Minister struck a defiant note despite his indictment by the CAG and said he has not done anything wrong and was ready for a probe. Meanwhile, the Supreme Court (SC) has questioned the Prime Minister's alleged inaction in 2G scam.

2G scam: Swan Telecom acted as front for Reliance Telecom

Highlighting irregularities in 2G spectrum allocation, the CAG has said Swan Telecom, one of the companies that got the licence, appeared to act as a "front company" on behalf of Anil Ambani-led Reliance Telecom and doubted the latter's "intention".

In its report tabled in Parliament, the CAG said the 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 the 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.

RCom contests CAG claim

Anil Ambani group questioned the government auditor's report that states Swan Telecom was a "front company" for Reliance Communications, saying it had no shareholding in the firm that got a licence in 2008.

"Our group had no shareholding in Swan Telecom (now Etisalat DB) at the time of grant of licence to them or any time thereafter, and that issue is accordingly not relevant to our company," an RComm spokesperson said in a statement.

Highlighting irregularities in 2G spectrum allocation, CAG doubted the intention of RComm, saying Swan Telecom, one of the companies that got the licence, appeared to act as a "front company".

Reliance Communications, the statement said, has always been in full compliance with all applicable laws, rules and regulations. There has been no violation of our licence conditions at any stage on account of cross-holdings in excess of 10 per cent.

CAG report says Anil was beneficiary

CAG indicts Raja in 2G scam; says every rule flouted

The CAG highlighted that the entire process of allocation of Unified Access Service licences "lacked transparency" and was undertaken in an "arbitrary, unfair and inequitable manner", in the process "flouting every canon of financial propriety, rules and procedures."

The 77-page report of the CAG tabled in Parliament said due diligence was not followed and even the recommendations of the telecom regulator TRAI were "not followed in spirit".

The report said the "presumptive" loss caused to the exchequer through spectrum allocation to 122 licencees and 35 dual technology licences in 2007-08 was Rs 1,76,645 crore. It pegged the figures on the basis of 3G auction held earlier this year in which the government mopped up over Rs 67,000 crore.

It said there was an "imperative need to fix responsibility and enforce accountability for the lapses highlighted in the audit report."

Elaborating on the lapses and irregularities, the government auditor said Prime Minister Manmohan Singh had "stressed on the need for a fair and transparent allocation of spectrum" while the Ministry of Finance had sought for the decision regarding spectrum pricing to be considered by an EGoM (Empowered Group of Ministers).

"Brushing aside their concerns and advices, the Department of Telecommunications, in 2008, proceeded to issue 122 new licences for 2G spectrum at 2001 prices, by flouting every canon of financial propriety, rules and procedures," the CAG said.

The DoT also did not do the requisite due diligence in the examination of the applications submitted for the licences, leading to the grant of 85 out of 122 licences to the "ineligible applicants" as all these firms did not have stipulated paid-up capital at the time of application.

Further 45 out of 85 licencees were issued to companies which failed to satisfy conditions of main object clause in the memorandum of Association (MoA), it said.

The CAG said the process of giving dual technology licences to leading telecom firms including Reliance Communications and Tata Teleservices "lacked transparency and fairness", and equal opportunity was denied to other similarly placed operators who could apply for use of dual technology only after formal announcement of the policy.

Noting that this approval (dual technology use) had violated Cabinet decision of 2003 to allow additional spectrum at 2001 prices, the auditor said, "Deviation from a Cabinet decision should normally be with the approval of Cabinet.

"However, in the present case, such a crucial decision to permit service providers to offer access using combination of technologies (CDMA, GSM and/or any other) under the same licence with dual spectrum allocation was taken without the matter being referred to the Cabinet."

It said the dual technology was introduced in October 2007 in a "hasty and arbitrary manner" and in-principle approval was given to three operators on a day prior to announcement of the policy, which gave "the perception of discrimination against other players in the field."

The companies which got the licences, were created barely months earlier and "deliberately suppressed facts, disclosed incomplete information, submitted fictitious documents and used fraudulent means for getting licences and thereby access to spectrum.

"Onus of these licences, obtained at unbelievably low price, have in turn sold significant stakes in their companies to Indian/foreign companies at high premium within a short period of time," the auditor said.

The premium earned by these "new entrants" to the telecom sector was nothing but the true value of the spectrum, which should have normally accrued to the public exchequer, "had the transparent and fair market mechanism been followed" for the allocation of these licences, the CAG said.

In the report, the CAG noted that the ministry of communication and IT "decided to go ahead with arbitrarily deciding that the cut-off date for issuance of Letters of Intent would be advanced to September 25, 2007 and applications received would be decided on FCFS (first-come first-served) basis."

In November, 2007, Prime Minister Manmohan Singh had written to the telecom ministry suggesting introduction of "transparent methodology" of auction, "revision of entry fee" in the "backdrop of inadequate spectrum and large number of applications received for fresh licences."

The CAG highlighted that the Law Ministry had suggested setting up of an Empowered Group of Ministers to discuss thelarge number of applications and spectrum pricing, but the telecom ministry rejected it saying "the need for forming and EGoM arises when a new policy is being framed and in this particular issue no new policy for grant of UASL (unified access service licences) was being framed."

The auditor, however, said the "contention of the DoT is untenable as the rejection of the advice" of the Law Minister to have detailed deliberations on the issues in the EGoM on the ground that changes in policy might lead to litigation "goes against the well established and time-tested procedures of functioning of the government and the collective responsibility of the Union Cabinet."

CAG report says Anil was beneficiary

Supreme Court questions PM's inaction

The Supreme Court (SC) has questioned the Prime Minister's alleged inaction in 2G scam. The apex court made the observation on Janata Party Subramaniam Swami's complaints against A Raja.

The Janata Party leader had sought the court's intervention on grounds that his application before the PM seeking his sanction to prosecute A Raja for corruption is pending for the last two years.

The petitioner told the court that there is no need for the PM's nod since Raja has resigned as a minister. There was another plea by petitioner Prashant Bhushan on the CAG report on licences issued to ineligible companies at 2001 prices.

During the last hearing on October 29, the Supreme Court had slammed the CBI for its "slipshod" investigations into the 2G Spectrum allocation issue and even wondered how Raja was continuing in office. The Telecom Ministry had claimed that new licences and 2G Spectrum was distributed as per the existing policy which were followed by all the predecessors of Raja.

I did no wrong, ready for probe, says defiant Raja

Striking a defiant note despite his indictment by the CAG over the 2G spectrum allocation, former Telecom Minister A Raja on Tuesday said he has not done anything wrong and was ready for a probe.

"I want to reiterate that I went as per the telecom policy of 1999, as per recommendations of Telecom and Regulatory Authority of India and vision contemplated by the Government. If there have been any procedural lapses... let it be investigated... no problem at all", Raja told reporters shere two days after he unceremoniously put in his papers.

On a day the Comptroller and Auditor General's report was tabled in Parliament, he said, "Let the law take its own course. "I have already put forth my defence before Supreme Court. My conscience is clear. The stand of the government has been ventilated through the affidavit before the court. I cannot be separated from the government as long as I was in power. I can have no separate comment".

"What do you mean by guilt?", he retorted to a question from a reporter. After a series of meetings with his DMK party president M Karunanidhi, Raja met the Prime Minister at his residence two days ago and tendered his resignation.

Raja has been the Opposition's primary target since many days and even though he resigned, the BJP has been demanding a Joint Parliamentary Committee (JPC) probe and has been stalling proceedings in both Houses during the ongoing winter session.

Source: PTI

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