2G scam: After Kani, will it be Ambani, Tata?

With the Supreme Court ordering DMK heiress and Member of Parliament Kanimozhi's arrest in the 2G spectrum scam on Friday, the burning question now is: What next? Will corporate chieftains Anil Ambani, Prashant Ruia and Ratan Tata be prosecuted too?

The answer to this million-dollar question may lie behind certain recent developments. Shahid Usman Balwa, Swan Telecom promoter and an accused in the 2G scam case, on May 18 took objection to the Central Bureau of Investigation naming Ratan Tata as a 'victim' in the scam thus granting him the benefit of the doubt.

Balwa alleged before the trial court that the Tata Group chairman was one of the greatest beneficiaries in the allocation of radio waves and came forward with many arguments and produced correspondence between Tata and the prime accused and former telecom minister A Raja in support of this claim.

This is a very interesting development, according to legal eagles handling the case on behalf of the various accused in the case.

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Already, last month in the Supreme Court, petitioner Prashant Bhushan presented a note on the direct involvement of Reliance Communications chairman Anil Ambani, Tata Teleservices chairman Ratan Tata, and Loop Telecom chief Prashant Ruia.

Accused Balwa and petitioner Bhushan's contentions nailing Tata are very much in sync. When Balwa's lawyer Vijay Aggrawal was pressing for his client's bail he told special Central Bureau of Investigation judge O P Saini that the bureau was trying to shield Tata by giving him a clean chit.

If the other accused too, like Balwa, start pressing for Ambani, Tata and Ruia's prosecution, the buck will have to stop somewhere and someone will have to answer why they should not be prosecuted and arrested, says a senior lawyer appearing for the arrested accused in the 2G scam.

Importantly, a senior CBI officer, on condition of anonymity, told rediff.com on May 19: "Our senior officers are divided on the matter of prosecuting Anil Ambani and Ratan Tata. We are told that if the investigation reaches their doorstep, the Indian economy will collapse!"

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On July 6, the Supreme Court is likely to give its opinion on Bhushan's plea for an 'experts' panel' to assist the court in monitoring and supervising the investigation into the 2G scam by the Enforcement Directorate, the Income-Tax Department and the CBI.

In fact, this plea is the original one made by Bhushan when he got involved in the case. The government is opposing any such move and that is one of the reasons the CBI is showing some impressive results in last few months.

Bhushan argued before the court that the expert panel is required to nail the real bigwigs involved in the case.

Explaining why Anil Ambani should be prosecuted by the CBI, Bhushan's note to the Supreme Court pleads that 'the CBI has filed two chargesheets in the 2G scam case. The first chargesheet established the criminal culpability of Reliance Communications and Swan Telecom. The said chargesheet states that the accused, former telecom minister A Raja, entered into criminal conspiracy with the accused Shahid Balwa and Vinod Goenka (of D B Realty) for favouring Swan Telecom.'

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Bhushan argued further before the two-judge bench that the CBI chargesheet 'also states that the accused Gautam Doshi, Surendra Pipara and Hari Nair (who are all employees of the Anil Ambani-controlled Reliance and now arrested) in furtherance of their intention to cheat, created Swan Telecom out of funds arranged from Reliance Communications for applying for licenses in 13 circles where Reliance Communications did not have GSM spectrum.'

'The CBI has contented that Swan Telecom was held by Anil Dhirubhai Ambani Group companies through the funds raised by Anil Ambani-controlled businesses,' Bhushan's note says.

'The CBI, in its first chargesheet of April 2, 2011, details the complex web of structuring that was done by the said Reliance employees to hide the fact that Swan was fully a R-AGAG company. These people (arrested and jailed officers) are just the professional employees of the ADAG, and are not the beneficiaries of this scam. The real beneficiary is Anil Ambani, who holds a majority stake and is chairman of the group. The CBI has tried to shield him and has only chargesheeted the employees,' argues Bhushan.

Giving more 'details' of Ambani's alleged culpability in the scam, Bhushan wrote to the Supreme Court: 'At the time of application for UAS licence, Swan had about 9.9 per cent equity in Swan, while the remaining 90.1 per cent equity was held by Tiger Traders Pvt Ltd, in which the above stated three persons (employees of R-ADAG) were the directors, fronting for Reliance ADAG. The entire money was provided by R-ADAG.'

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The CBI has stated, 'Investigation regarding M/s Tiger Traders Pvt Ltd has also disclosed that the source of funds to raise equity and also to subscribe to shares of other companies has also come from group companies of Reliance-ADAG. Further, the source of funds, i.e., Rs 3 crore (Rs 30 million) during January 2007 and Rs 95.51 crore (Rs 955.1 million) during March 2007, utilised by TTPL to subscribe to majority shares of M/s Swan Telecom Pvt Ltd, has been arranged through the group companies of Reliance ADAG. Moreover, a sum of Rs 992 crore (Rs 9.92 billion), which constituted bulk of the net worth of Swan Telecom, was also paid by Reliance....'

However, the CBI has wrongly stated that Gautam Doshi (arrested and jailed) took all the commercial decisions, insists Bhushan to the Supreme Court.

In fact, the CBI is currently investigating the sequence of events and chronology of cash payments done by Reliance. The CBI believes that, 'Amitabh Jhunjhunwala, who is the chief executive officer of Reliance Capital Limited and also group managing director at Reliance Anil Dhirubhai Ambani Group, would have more knowledge (about the goings-on) than the three officers who have been arrested and are now in Tihar jail.'

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Arguing further his case against Anil Ambani, Bhushan says, 'A senior official of the ICICI Bank has stated to the CBI that only Anil Ambani or his wife Tina Ambani were authorised to make payments of Rs 10 crore (Rs 100 million) and above. There is no possibility of an employee of the company having taken such an important decision of massive investments running into hundreds of crore of rupees. Therefore, the payment made of over Rs 100 crore (Rs 10 billion) from Reliance account on October 19, 2007 to Swan (the same day Reliance got the dual-tech license), could not have been made without the concurrence of Ambani.'

'Moreover, the benefit of dual-technology spectrum was accrued to Ambani, as the majority shareholder, whereas the employees had no financial benefit at all. In the second chargesheet the CBI has established the money trail that establishes serious offences of bribery, corruption, fraud, cheating and conspiracy.'

'It is only the dominant shareholder of the ADAG that stood to benefit the most. Most important, it was not possible for an employee to divert Rs 990 crore (Rs 9.90 billion) of public listed company Reliance Communications through its subsidiary Reliance Tele to Swan Telecom and subscribe to Re 1 preference shares bearing 8 per cent interest at a premium of Rs 999.'

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'It had to be done by the board and the executive director, the chief executive officer and the majority shareholder. Naming three employees of Reliance-ADAG as the accused without naming Anil Ambani is a serious and deliberate omission,' he alleged.

'The transfer of Swan Telecom could not have taken place without the consent of Ambani who had the foreknowledge that his application for dual technology would be granted. If the dominant shareholder, who is also the CEO, is allowed to escape accountability, then it will set a new benchmark to evade corporate criminality,' argued Bhushan.

Bhushan, while talking about Ratan Tata's culpability the in 2G scam, told the Supreme Court that 'the CBI in its first chargesheet goes on for several pages as to how Tata Teleservices is a victim in the entire 2G spectrum scam. As per the CBI, since Tata was an existing operator, it had preference over all new applicants, and therefore since it was not given licence before applicants like Swan, it was a victim.'

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'The CBI disregards that DoT was following a procedure of FCFS (first come first served) and an application of Tata for the same GSM spectrum came in at the end, on 19/22.10.2007, i.e., after 575 applications were pending, and three weeks after the original cut-off date of 01.10.2007.'

'The CBI disregards that as per policy, new operators were encouraged to increase competition and were assured a level playing field. Hence, there is no question of the existence of any policy that states that an existing operator would be given preference. In fact, the policy stated to being followed was of FCFS. On 10.01.2008, Tatas got GSM spectrum in 20 circles and were a major beneficiary of the policies followed by accused A Raja.'

Bhushan tells the court that 'the CBI ignores the clear evidence of quid pro quo between Tata and A Raja's party the DMK. The above has to be considered along with the conversation Niira Radia (Tata's lobbyist) had with Rajathiammal (wife of former chief minister of Tamil Nadu M Karunanidhi) wherein the name of the Tatas is clearly mentioned.'

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'The transcript of the said conversation is already on record as A1 of the additional affidavit. It has also come in the public domain as to how a big land in Chennai worth Rs 500 crore (Rs 5 billion) was given by Tatas to the family of the (former) Tamil Nadu chief minister.'

A letter written by Tata Group chairman Ratan Tata to then Tamil Nadu chief minister Karunanidhi has also come into the public domain wherein he praised the spectrum allocation policies of former telecom minister A Raja.

Bhushan argues that it 'shows that the Tatas were one of the biggest beneficiaries of the actions of Mr Raja during his stint as telecom minister. The above has to be seen with the fact that Niira Radia lobbied heavily to ensure the return of the accused Raja as telecom minister and in one of the conversations she clearly states that her client Tatas were a beneficiary of the tenure of accused Raja.'

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Bhushan has also alleged in his note to the judges that 'the petitioners have now learnt that the CBI is sitting over a crucial lead wherein telecom companies who got 2G licences made payments to a Tamil cultural NGO of which Kanimozhi (accused) is a director. The said NGO received payments from telecom companies including Tata just before the licences were awarded on 10.01.2008.'

Arguing the case against Prashant Ruia's involvement in the 2G scam Bhushan said, 'Petitioners have learnt that while the CBI might be following the case of Loop Telecom which made huge benefits, the investigation has gone cold over the involvement of Prashant Ruia and his family members who through a complex web of transactions set-up Loop Telecom to defraud and cheat the government for the award of 2G spectrum and licences.'

Prashant Ruia is the CEO of Essar Group Ltd. The group is part of the Vodafone-Essar-Hutch Telecom service provider. Bhushan told the court that 'the telecom watchdog, one of the petitioners herein, had made a detailed complaint as to how Ruia is the real face of Loop. Now the Enforcement Directorate and the Reserve Bank of India have already confirmed this,' said Bhushan.

The CBI officers who want to go by the rulebook argue: 'Who can do business of more than Rs 200 crore (Rs 2 billion) in a matter of two-three days without directions from the highest level? We know these so-called living legends of the corporate world are neck-deep in the issue. As of today the 2G spectrum case is handled by many agencies and institutions. We hope the Income-Tax Department, the Enforcement Directorate, the Supreme Court, the lower court, the Joint Parliamentary Committee or our own agency, at the highest level and at an appropriate time, will debate threadbare the issue of Anil Ambani and Ratan Tata's actual involvement in the 2G scam.'