Business Today

Loop Telecom, Loop Mobile on ED radar in 2G scam

Loop Telecom is a subsidiary of Loop Mobile and both companies are on paper owned by the Santa Group of Khaitans, who have family ties with the Ruias of Essar Group.

Kumar Rakesh | August 18, 2011 | Updated 15:14 IST

Even As the CBI is probing Loop Telecom for being a beneficiary of the 2G scam allegedly perpetrated by former telecommunications minister A. Raja, the Enforcement Directorate (ED) has now slapped a show cause notice on Loop Telecom and Loop Mobile, formerly BPL, for alleged Foreign Exchange Management Act (FEMA) violations.

Loop Telecom is a subsidiary of Loop Mobile and both companies are on paper owned by the Santa Group of Khaitans, who have family ties with the Ruias of Essar Group. An ED source said their probe has found FEMA violations to the tune of Rs 164 crore and Rs 200 crore by the two companies, respectively.

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"We have issued them notices and are waiting for their replies. The case will go to the adjudicating authority who will take a final call on the fine to be paid by both the firms," the ED source said.

According to rules, the ED can slap a penalty of up to three times the amount of FEMA violations by the two companies.

Both companies had received a total foreign direct investment (FDI) of Rs 364 crore. The two companies are alleged to have not properly followed the Reserve Bank of India's (RBI) guidelines for FDI. Mauritius-based Gypsy Rover had picked up a stake in Loop Mobile while another Mauritius-based firm, Capital Global, had bought a stake in Loop Telecom.

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The ownership of both firms has long been under scrutiny as equity patterns in them have changed rapidly - moving from the hands of Essar to Khaitans now. ED sources said the ownership issue is under their scanner as well but the CBI was primarily probing the matter.

Most of the firms allegedly involved in the 2G scam have been found to have violated FEMA norms and the ED has slapped notices on these companies. Sources said Estel is next in line to be issued a notice as a probe has found the company to be in violation of FEMA rules.

The ED has already decided to attach the properties of Unitech Wireless and Swan Telecom and has informed the Supreme Court, which is supervising the probe by the CBI and the ED.

Loop Telecom, which was given telecom licenses for 21 circles by former telecommunications minister A. Raja, could be in further trouble if the CBI decides to charge sheet the company for hiding its ownership under a convoluted holding arrangement as the agency suspects it to be a front for Essar.

On paper, the firm is owned by the Khaitans, who are based abroad, but the agency has been insisting that it was just a front for Essar. Loop and Essar have been denying the allegations, insisting they are clean.

A positive report by the ministry of corporate affairs, which said Loop was not an associate company of Essar, has slowed the CBI's probe and the agency has been forced to turn to the law ministry. The agency would submit its findings to the ministry.

Whether or not it would charge sheet them would depend on the ministry's decision.

Courtesy: Mail Today

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