New Delhi: Despite failing 14 eligibility conditions, Swan Telecom was given a second chance following the personal intervention of former telecom minister A. Raja, a scrutiny of the documents of the department of telecommunications (DoT) and the charge sheet filed by the Central Bureau of Investigation (CBI) shows.

The latest evidence, if it holds up to legal scrutiny, only reinforces CBI’s claim of criminal conspiracy by Raja for extending special favours to select telecom companies. Raja is in CBI custody and could not be immediately reached for comment.

After the DoT scrutiny on 8 November 2007 showed that Swan (now Etisalat DB Telecom India Pvt. Ltd) had failed several eligibility criteria, the company’s application should have been rejected.

This logic was only reinforced after DoT’s licensing finance branch inserted a clause on 23 November 2007, saying that a company must be eligible on the date of application to qualify for the award of licences.

However, a review of DoT documents shows that Raja made explicit notings on the licensing finance branch’s intervention, which directed the department to ask all companies to resubmit their applications.

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Accordingly, a letter asking all the companies to resubmit their applications was despatched on 10 December 2007, effectively giving Swan a second chance to correct the anomalies in its submission.

The modus operandi to allegedly favour Swan has been alluded to in general terms in the CBI charge sheet without specifically mentioning Swan. The charge sheet says: “Because the revision of LoI (letter of intent) proforma as suggested by DoT officers would have throttled his design prematurely, he therefore directed that a separate letter seeking duly signed copies of all the documents submitted at the time of applying for UASL (Unified Access Service Licence) as per existing guidelines may be obtained, thereby mandating eligibility on the date of application was essential requirement."

LoI is a letter given by DoT to operators based on which they can ask for spectrum and start operations.

The lack of compliance included crossholdings by another telecom operator, Reliance Telecom Ltd, which according to the DoT scrutiny exceeded the permissible cap of 10% in Swan.

Based on the documents submitted by Swan, DoT claimed that the holdings of Reliance Telecom, the 100% subsidiary of Reliance Communications Ltd (R-Com), held over 10% equity in the company. R-Com has disputed this claim.

An R-Com spokesperson referred Mint to its 18 November statement, in which the company said that subsidiary Reliance Telecom had held 9.9% of the paid-up equity in Swan only till 5 December 2007. This equity was divested and Reliance Telecom had no holdings in Swan when the telecom licence was issued to the company on 10 January 2008.

Similarly, the DoT scrutiny of Swan’s application also flagged concerns about net worth. Its application for the Jammu and Kashmir circle licence in January 2007 put it at .96 crore, whereas the application on 2 March for 16 circles pegged it at 1,100.28 crore.

“It is to be noted that the net worth of the company has increased from 30.96 crore to 1,100.28 crore (an increase of about 1,070 crore) within a span of less than one-and-a-half months," according to the DoT report.

“Since the certificates enclosed are photocopies and not certified by the company secretary, it needs to be decided whether to accept the above information for checking the application for the eligibility criteria," the report says.

DoT guidelines require Swan Telecom to have a net worth of 1,030 crore and paid-up equity capital of 10 crore, said the same document.

According to the DoT scrutiny in November 2007, Swan Telecom’s estimate of its net worth included the preference shares issued to Reliance Telecom.

Reliance Telecom and Swan Telecom promoter DB Realty did not respond to email queries and telephone calls from Mint, while Etisalat DB, as Swan Telecom is now known, said: “The matter is sub judice and hence it would be inappropriate to make any comments at this stage."

Swan Telecom promoter Shahid Usman Balwa is under arrest over alleged wrongdoing in the the allocation of second-generation (2G) telecom spectrum, which CBI says may have generated a loss of 30,984 crore to the exchequer.