The Central Bureau of Investigation (CBI) has tied itself up in knots in the 2G licences and spectrum allocation case with the way it has filed the latest chargesheet against the Essar and Loop Telecom promoters and three companies in the group.

This is evident from a recent application filed by the Centre for Public Interest Litigation, the petitioner in the case, alleging that law minister Salman Khurshid is interfering in the case.

The petitioner has drawn the attention of the supreme court to the curious revelation by a daily newspaper that the CBI”s director of prosecution, Abdul Aziz, had advised the agency against filing criminal charges against Loop and Essar group promoters and companies while his son was employed in an Essar group company. Aziz thought the facts of the Loop case, at the most, amounted to a contractual violation.

Aziz later reportedly recused from the case but then the CBI could not file charges against any public servant in this particular chargesheet, prompting the Loop group accused to move the Delhi high court arguing that cheating can only be tried by a magistrate.

Now, this set of accused will do the rounds of the high court, and the apex court, and all of this will further delay the trial.

The main thrust of the chargesheet alleging cheating and conspiracy by Essar group vice chairman Ravikant Ruia, promoter Anshuman Ruia and others like IP Khaitan, Kiran Khaitan and Vikash Saraf, besides three group companies, is a violation of the guideline number 8 in the United Access Service Licences Guidelines of 2005, which were adopted for allocation of licences of 2007 also.
 
The CBI said that during its investigation “an allegation surfaced that a Mumbai-based private telecommunication firm, which had obtained 21 UAS licences [Loop Telecom] and 2G spectrum from the DoT in 2008-09, was a front company of another Mumbai-based telecom corporate group [Essar Teleholdings Limited] and was being controlled by it under a corporate veil in violation of Clause-8 of the UASL Guidelines dated December 14, 2005”.

The investigation established that M/S Loop Telecom Ltd (Shippingstop Dot Com India Pvt Ltd, the applicant for the 21 licences) was functioning as a subsidiary and thereby an associate of M/S Essar Teleholdings Ltd under a complex corporate veil, fraudulently created for this purpose by accused persons and companies. Investigation has established that M/S Loop Telecom Pvt Ltd was, in fact, an alter ego of M/S Essar Teleholdings Ltd/Essar group, the CBI said.  

Para 40 of the chargesheet further says: “That on the date of application of UAS licences (Sept 3, 2007), the funding of M/S Shippingstop Dot Com (India) Pvt Ltd (later Loop Telecom Ltd) for complying with the paid up capital and authorized capital requirements was, in fact, received from M/S BPL Mobile Communications Ltd and M/S BPL Communications Ltd which, in turn received the funds from M/S Essar Teleholdings Ltd. 

“It has also (been) revealed that all four directors on board of Shippingstop Dot Com were employees of Essar group or working under the direct control of persons connected with M/S Essar Teleholdings/Essar Telecom business group.”

The 50-page chargesheet names Essar group promoters as the alleged conspirators and does not implicate the employees. The agency believes these employees issued/signed documents in good faith on the information supplied by their directors/bosses.

It is in stark contrast to the chargesheet in the Swan Telecom case in which three Reliance Anil Dhirubhai Ambani group officials are named but the chairman of Reliance Communications Ltd, and in fact ADAG group chief Anil Ambani is left out.

The chargesheet in the Swan case is similar to the argument in the Loop-Essar case. As pointed out by the petitioner in an application seeking that a Special Investigation Team be set up and that Anil Ambani also be investigated, the CPIL said:

“The CBI has stated – Investigation regarding M/s Tiger Traders Pvt Ltd (TTPL) has also disclosed that the source of funds to raise equity and also to subscribe shares of other companies has also come from group companies of Reliance ADA group. Further the source of funds, i.e., Rs 3 crores during January 2007 and Rs 95.51 crore during March 2007, utilized by TTPL to subscribe to majority shares of M/s Swan (STPL), has been arranged through the group companies of Reliance ADA group. Moreover, a sum of Rs 992 crores, which constituted bulk of the net worth of STPL, was also paid by Reliance Telecom Ltd...”.

But the CBI placed all the blame at the door of senior official Gautam Doshi (group managing director, Reliance ADAG), who allegedly took all the commercial decisions, the CPIL said in its application.

The Swan Telecom-Reliance Telecom story is a far more elaborate façade than the Loop story. The CBI’s investigative skills look charmingly innocent in the former case.

The CPIL’s application for the SIT is also yet to be decided.

In the case of the CBI’s director of prosecution, the CBI has filed a reply in sealed cover before the supreme court bench hearing the 2G case. The petitioner has no access to it and the application is yet to be listed for arguments.