Telecom’s new loop PDF Print E-mail
Tuesday, 20 September 2011 00:00
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Given the CBI’s case in the 2G scam has suffered a definite setback, it’s hardly surprising that jailed ex-telecom minister A Raja had a smirk on his face when the Patiala House trial court passed its judgment on Monday on the ‘associate’ matter. One of the points central to the CBI’s prosecution of companies like

Reliance Telecom—and even the CAG report on this—was that Swan Telecom, to whom A Raja gave licences to, was an ‘associate’ of Reliance Telecom. This ‘associate’ relationship is also the one the CBI is working on in the case of the Essar Group and Loop Telecom. Under Clause 8 of the Universal Access Service Licence (UASL), associates are not eligible for licences if the main/parent firm already has a licence in the service area.

Although the CBI followed the CAG’s line that an ‘associate’ meant a company which was influenced by another—in the

Reliance case, the CAG based its ‘associate’ argument on the fact that of Swan’s capital base of R1,100 crore, R1,000 crore was given by Reliance Telecom in the form of direct equity or preference capital. When the matter reached the corporate affairs ministry, it was in favour of defining ‘associate’ as one where at least a 20% voting right was held by the other company. Later, the telecom ministry asked the law ministry for its opinion, and it went even further to say that if Company A and B were to be considered ‘associates’, then A or B must be a holding company or a subsidiary of the other; alternately, another company, say, C, must own more than 50% of the shares in both A and B. Since this disingenuous definition

completely knocked the bottom of the CBI’s case, it chose not to take the law ministry’s view on record, arguing that it had not asked for the law ministry’s opinion. The court has now ruled that it doesn’t matter whether the CBI asked for the law ministry’s opinion or not, given that the opinion has been signed by the law secretary and has the approval of the law minister, it has to be taken on record. Which means the various accused can now use this opinion to demolish the conspiracy charge. Given that the law ministry’s opinion also uses an unheard of interpretation to say Clause 8 only applies to ‘licensees’ and not to ‘applicants’ (which is what Swan or Loop were before they got the licences), this knocks another plank of the CBI’s argument. What’s curious, though, is that the judgment says the law ministry’s “report is largely legalistic in

nature clarifying a law point only” and “the prosecution is not

likely to suffer any prejudice by its production”.


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