Telecom Scam: Is Swan Telecom being let off?

Is the UPA Government serious about investigating the 2G Spectrum Scandal? While the investigating agencies are pursuing all aspects of the scam, the government seems to be busy giving clean chit to companies already under the cloud of suspicion.

Canary Trap, in a post on November 2, 2009, reported about the complaint sent to the Central Vigilance Commissioner (CVC) with regard to Swan Telecom. The most important issue that the original complaint raised was “who owned Swan Telecom and who actually benefited from the sale of those licenses to other companies at a higher market price later.”

Now, another complaint has been sent to the CVC with regard to Swan Telecom. According to the letter (produced below), the Ministry of Corporate Affairs (MoCA) and its senior officers are involved in a criminal conspiracy for cover up in the 2G scam by giving a clean chit to Swan Telecom. For a complete understanding of the issue and the alleged irregularities, read below and also the communication between the Department of Telecom and MoCA regarding Swan Telecom.

Read the complaint submitted to the Central Vigilance Commissioner on December 30, 2010:

To
Chief Vigilance Commissioner
New Delhi

Complaint against the Minister of Corporate Affairs and other officials for cover up in the 2G scam.

Kindly refer to my complaint on the 2G scam dated 13/5/09 and registered as complaint no 416/09/2. The complaint was enclosed as an annexure in the writ petition filed before the Hon’ble Supreme Court and was read out in Court by the learned Counsel.

This complaint relates to reference made by DOT to Ministry of Corporate Affairs  regarding the ownership of Swan Telecom. By giving Swan Telecom a clean chit , MoCA  and its senior officers are involved in a criminal conspiracy to cover up and this complaint is directed against them. The clean chit given to Swan Telecom vide MoCA letter in file no 3/92/2010/CL-II  dated 24/12/10 is enclosed.. As the enclosed letter has been issued with the approval of the Corporate Affairs Minister (last line of the letter), the Minister too is  involved.

The clean chit has been given by certifying that Reliance Communication through its subsidiary Reliance Telecom never held more than 10% (9.9%) of equity shareholding of Swan Telecom. It has also been certified that Reliance Communication or its subsidiary Reliance Telecom did not hold any shares in Tiger Trustee, the company which held 90% of the shares of Swan Telecom. It has been stated that preference shares is not capital but more in the nature of debt and cannot be added to equity shares for the purpose of computing the percentage shareholding.

The certificate of clean chit given to Reliance Communication and the ADAG group is assailed on the following grounds and is to be seen as an act of cover up and corruption: .

Is it not true that the promoters of Reliance Communications held more than 66% of the shares of the company throughout the period of the scam that is from 2/3/07 to 16/12/07? Kindly refer to the filings on the shareholding pattern of Reliance Communication with the National  Stock Exchange.

Is not true that there are 11 individuals and 23 corporate bodies who have been identified as the promoter group in the filings made with the NSE?

Is it not true that the UAS guideline provided “ No single company/ legal person either directly or through associates shall have substantial equity holding in more than one licensee  company in the same service area…The ceiling for substantial equity was notified at 10%..

Does the guideline mean that only the company cannot hold more than 10%  in another company or that the promoters of the company too cannot hold more than 10% of the shares in another company with a license. It definitely means the latter because if it was the former then Tatas, Mittals and the Ambanis , not to forget the Essars (who incidentally  are in a similar Swan Telecom like situation) would float companies by the dozens and corner as many licenses as possible.

Can  the ROC and the Minister give a certificate that no money has been invested directly or indirectly by the eleven individuals and the various shareholders of the 23 companies who promoted Reliance Communications? Can they give a certificate that Anil Ambani as the head of the ADAG group did not control Tiger Trustee?

Is it not true that more than 90% ( 90.09% to be precise ) of the shares of Swan Telecom were held by Tiger Trustee Pvt Ltd). Refer Auditors report for 31/3/07 and 313/08..

Is it not true that Swan Telecom was registered as Swan Capital Pvt Ltd, was incorporated on 13/7/2006.

One share was allotted to Himansu Agarwal and 4999 shares to Powersurfer Interactive (India) Private limited and that the address of both the shareholders was Reliance Energy Centre, Santa Cruz (East), Mumbai, 400055. In addition another 5,000 shares was subscribed by Reliance Energy Management Services Private Limited with the same address. The persons signing  the Memorandum and Articles were all having the same address of Reliance Energy Centre, Santa Cruz (East), Mumbai, 400055.

Can the Minister certify that the directors of Swan Telecom/Tiger Trustee who were also directors in a large number of ADAG group of companies (over thirty companies) and that none of these companies in which directors are common hold shares as promoters in Reliance Communication?

If all the statements made above in the form of questions are true then the clean chit given to Swan Telecom is an extension of the ongoing corruption in the 2G scam.

The decision of the MoCA that the ADAG group had nothing to do with Swan Telecom group is further assailed on the following grounds:

If the incorporation of Swan Telecom (registered as Swan Capital) with the registered office address, the subscribers of the share capital and the directors of the company was not sufficient evidence of the company being a 100%  ADAG group company, then one wonders what would be evidence?

Swan Telecom was a company, incorporated owned and controlled by the ADAG group.

It was among the various shell companies that the Reliance group keeps on forming for multifarious activities depending on what is the requirement of the day. Most of them are investment companies in which the ownership is to be layered so that the identity of the true owner has to be concealed as India is the ultimate destination of hot money and crony capitalism. It is the vehicle through which the political masters are bribed and become part owners of the business they help to benefit through their illegal decision making process.

It is because of this reason alone that these shell companies are formed and kept ready in time of need. They can also be the vehicle of major frauds and bribes .

In fact transfer of  Swan Telecom was the bribe paid for the license given to Reliance Communications on 18/10/07 and it was transferred to the benami of the politicians on the very same day.

This is how it happened:

Swan Capital was the original name at the time of incorporation and it’s  name was changed to Swan Telecom on 15/2/07 since the company was needed for the telecom sector.

The company needed a capital on paper of over Rs 1100 crores to comply with minimum capital requirement norms for applying for license in the thirteen circles..

The GSM license for which application was made by Swan Telecom was not pan India but for only those circles in which Reliance Communication did not have GSM license. The application was made for thirteen circles as Reliance Communication had GSM license for Bihar, Himachal Pradesh, Kolkata, Madhya Pradesh, Orissa, West Bengal. The fact that  licenses for only thirteen circles were applied for and that only those circles in which Reliance had GSM license was excluded shows that the ADAG  group was the owner and in control of Swan Telecom through its proxy directors.

Second and more important, the company needed to have capital and reserves of over 1100 crores in the balance sheet to apply for the license for 13 circles, according to the fee that was paid in 2001 in the bidding process for the fourth operator.

Whether the ADAG group had clairvoyant powers of  anticipating the future telecom policy of A Raja of allotting licenses on 2001 prices on a first come first serve basis or were a conspirator in dictating the policy can be decided by the quantum of investment made in Swan Telecom and the circles for which the application made seven months before the policy was announced .

The greater dilemma was to get 1100 crores in Swan Telecom and also not apparently violate the licensing norms of an existing telecom company not owning more than 10% of the shares in another telecom company.

The money was there in the public listed company Reliance Communication from where it had to be re routed. It was not there in any of the privately held ADAG companies. The old model of using money from the public listed company and retaining control off the shares by privately held company was used. While 90% of the money was invested by a subsidiary of Reliance Communication, a public listed company (1002 crores), a little less than 10% of the shares of Swan Telecom  were allotted to the ADAG group subsidiary of Reliance Communication. This was done by Reliance Communication subscribing to preference shares at 8% interest at an unimaginable premium of 99900%. for an amount of Rs 992 crores.

The rest of the shares 90% were allotted to a company registered on 20/6/06 as Tiger Traded Private Limited which  was rechristened as Tiger Trustee with the approval of the Registrar of Companies. (Will be referred to as Tiger Trustee to avoid confusion)

It is this company which in effect was the owner of Swan Telecom, which has been ignored in the investigation by the MoCA deliberately. In fact it is this company which is at the root of the fraud and bribe giving. It is therefore not surprising that the Minister has chosen to ignore the holding company of Swan Telecom –  Tiger Trustee – while giving a clean chit. The omission is deliberate, malafide and smacks of a quid pro quo.

Tiger Trustee registered address was Reliance Energy Centre, 3rd Floor, Santa Cruz (East), Mumbai, 400055. It had two directors, Ashok Karyekar and Paresh Rathod. The residential address of both the directors was Reliance Energy Quarters, Chembur. While Ashish Karyekar held directorship in 13 companies of the ADAG group whose name began with Reliance, Parash Rathod was a director in 12 ADAG companies.

The paid up capital of Tiger Trustee was one lac. The capital remained at one lac, till 17/10/07, that is well beyond the unrevised cut off date of 1/10/07 for applying for fresh telecom (UAV) license. Tiger Trustee owned 90% of the share capital of Swan Capital, while contributing only 10% of the funds and the balance was contributed by the public listed ADAG company Reliance Communication subsidiary.

Given the address of the holding company Tiger Trustee, the directors and their addresses, the paid up capital of mere one lac, and fact that over 1000 crores of money was siphoned off from the public listed company (inspite of the so called independent directors) into Swan Telecom to make it compliant with capital norms; can there be any doubt that Swan Telecom was anything but a Anil Ambani Company?

If Anil Ambani was not the owner of Tiger Trustee then it has to be either the Congress party (or its nominee) or DMK or A Raja or some other leader of a major political party who was the actual owners of  Tiger Trustee which in turn owned Swan Telecom. This is because Anil Ambani will invest 1000 crores either to benefit himself or the politicians involved as crony capitalist.

None of the people involved in the cover up have answered the question as to who was the owner of Tiger Trustee from 2/3/07, the date on which the application was filed to 18/10/07, the date on which pan-India license was given to Reliance Communication and on which date the company Tiger Trustee was transferred to Balwa and Goenka for a paltry investment of 4.99 crores? That was the bribe for the license given to Reliance Communication on 18/10/07, one day before the policy was announced.

A K Agrawal
Bangalore
30/12/10