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DoT yet to request for probe into Swan funds

DoT yet to request for probe into Swan funds
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First Published: Tue, Feb 17 2009. 11 40 PM IST
Updated: Tue, Feb 17 2009. 11 40 PM IST
New Delhi: The department of telecommunications (DoT) may be dragging its feet over a letter it drafted, but never sent to the ministry of corporate affairs (MCA), asking it to probe the relationship between Swan Telecom Pvt. Ltd and the Reliance-Anil Dhirubhai Ambani Group (R-Adag).
The letter, drafted in January, has not yet been sent to MCA, the government’s arm responsible for such investigations, two senior government officials told Mint. An executive at Swan Telecom declined comment and an R-Adag spokesperson said on Tuesday that RCom did not own any stake in Swan.
Siddharth Behura, secretary, DoT, had told Mint two weeks ago that he did not recollect the letter. He did not answer subsequent calls.
Swan Telecom, controlled by the Dynamix Balwas Group owned by Mumbai businessmen Vinod K. Goenka and Shahid U. Balwa, had borrowed Rs992 crore from Reliance Communications Ltd (RCom) at an undisclosed date. That amount was returned before December 2007, according to Swan Telecom. RCom is the flagship company of R-Adag.
A Mint review of Swan Telecom’s filings with the Registrar of Companies shows further links between R-Adag and Swan Telecom. At least four directors on the Swan Telecom board, according to these filings, also have a presence on various Ambani-chaired firms.
Swan has been in the spotlight since September, when Etisalat (formerly Emirates Telecommunications Corp.) announced it was acquiring a 45% stake in Swan for $900 million (Rs4,428 crore today).
MCA is already investigating the shareholding pattern of Loop Telecom Pvt. Ltd, another phone firm aspirant, on whether the company may have violated a telecom ownership rule in spirit. According to the rule, the same company or business group may not own more than 10% in two or more licensed phone firms offering services in the same operating area.
At the core of that controversy is the Essar group, which, through group-owned firms and debt extended to a company controlled by the family of a sister of group chairman Shashi Ruia, may be controlling Loop Telecom without owning it. Essar group, through firms registered in India and Mauritius, already owns 33% in mobile phone services provider Vodafone Essar Ltd.
In the case of Swan Telecom, a letter drafted by DoT’s deputy director general of access services, A.K. Srivastava, and addressed to Anurag Goel, secretary, MCA, made a case for an investigation of the involvement of R-Adag in Swan Telecom’s funding and shareholding, based on complaints made by two members of Parliament, Dharampal Sabharwal and Subramanian Swamy.
Senior DoT officials confirmed the letter had been drafted, but had not left the department.
“So far, the ministry has received no letter from DoT, hence it has not yet started inspecting the case of Swan Telecom,” said a senior MCA official, who did not want to be identified.
DoT’s draft letter, which has been reviewed by Mint, says that at the time of applying for a so-called unified access service licence in 13 circles in March 2007, the shareholding of Swan Telecom included 90.13% held by Tiger Traders Pvt. Ltd and 9.87% owned by Reliance Telecom Ltd, an RCom arm.
The letter noted that as early as December 2007, Swan Telecom had told DoT that Reliance Telecom had divested its entire minority stake (9.8%) and also its holding of the preference shares. “Consequently, Reliance Telecom has no interest in the company,” it concluded.
RCom disclosed in its annual report for fiscal 2007 that the company directly owned shares worth Rs10.79 crore in Swan Telecom and had bought preference shares worth Rs992 crore in the firm. An RCom executive late in 2007 had told Mint that his firm had sold its minority stake in Swan Telecom, but did not reveal to whom.
Sabharwal, the member of Parliament, in a letter dated 6 November addressed to Prime Minister Manmohan Singh, alleged that Swan Telecom’s application was illegal to begin with. At the time of application for a licence in the Jammu and Kashmir service area in March 2007, he wrote, Swan Telecom was 100% owned by RCom and its associates, namely Reliance Telecom, Tiger Trustees Ltd, Swan Infonet Services Pvt. Ltd and Swan Advisory Services Pvt. Ltd.
“Instead of rejecting the invalid applications, concerned officers of the department (DoT) processed this application and gave the licence to Swan,” says the letter.
Sabharwal confirmed that he had written a letter to this effect and told Mint: “It (the government’s response) is taking time. I don’t remember offhand, but I may have also sent a reminder.”
The four members on Swan’s board who also figure on the boards of some R-Adag companies are: Paresh Rathod, who is on the board of Reliance Com Ltd and Reliance Health Sciences Ltd; Surendra Pipara, a director with Reliance Power and Energy Resources Pvt. Ltd and Reliance Thermal Energy Ltd; Anand Bhatt, a director with Reliance Capital Trustee Co. Ltd; and Dinesh Modi, who is a director in Reliance World, Reliance Com and Reliance Health Sciences.
It could not be independently verified if these four people are still on the R-Adag and Swan Telecom boards.
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First Published: Tue, Feb 17 2009. 11 40 PM IST