Business Today

Confused signals

Sunny Sen | Print Edition: Jan 22, 2012

The dust refuses to settle in the telecom industry. The 2G spectrum scam, in which nearly every telecom operator has been taken to court, is not quite behind us, and now there is a fresh kerfuffle in the wake of Ravi Ruia's resignation in late December 2011 as Chairman of Essar Energy, an Essar Group company listed in London. Ruia stepped down after the Central Bureau of Investigation, or CBI, filed a chargesheet against Essar and Loop Telecom for violation of Universal Access Service, or UAS, licence conditions.

The CBI says the company violated Clause 8 of the UAS Licence, which states that no single company, directly or through associates, can have a substantial equity holding in more than one licensee company in the same service area. Substantial equity in this respect is defined as 10 per cent or more.

However, Essar says it is innocent. Business Today has copies of letters from the Essar Group to CBI , the Department of Legal Affairs and the Department of Telecommunications, or DoT, stating that the group holds just 2.15 per cent in Loop Telecom, which nullifies criminal and civil wrongdoing.

"CBI has completely ignored the opinions of DoT and the corporate affairs and law ministries," says Mahesh Agarwal, legal counsel for the Essar Group. "The government is confused."

He points out that, contrary to CBI's claims, there is no association between the businesses apart from some initial assistance and the fact that Loop Telecom's promoters, Kiran Khaitan and her husband I.P. Khaitan, are related to the Ruias. Agarwal argues that criminal charges against Essar on this basis are unjustified.

However, telecom analyst Mahesh Uppal says: "The spirit of the law, irrespective of technicalities, was not respected." He says two companies with such associations should have been especially cautious.

The charges are unrelated to the 2G scam, in which CBI has pronounced Essar and Loop clear of wrongdoing. Repeated phone calls from Business Today to Prashant Ruia, interim chairman of Essar Energy after his uncle Ravi stepped down, went unanswered.

A CBI spokesperson said the agency stands by the case. "We do not file a chargesheet if we are not sure," she said. "We have everything backed by proof."

Neither the CBI's nor the Ruias' case looks crystal clear. Siddharth Luthra, senior counsel in the Supreme Court, who is also handling the case for Essar, sidestepped questions about the charges.

"Whether a certain case justifies the premise of investigation or not should be figured out," he said. Such issues affected not only the economy but also society at large, he said.

  • Essar used Loop Telecom as a front to get 2G licences
  • It violated a clause that prevents a company from owning more than 10 per cent of another in the same circle
  • Loop conspired with DoT officials to prevent its licence from being cancelled
  • Loop Telecom is not an associate of or front for Essar
  • Essar has only a 2.15 per cent stake in Loop's holding companies or subsidiaries
  • CBI has ignored the opinions of DoT and the law and corporate affairs ministries

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