AFTER ANIL AMBANI, it was the turn of Essar Group Chief Executive Officer (CEO) Prashant Ruia to feel the heat in the 2G spectrum scam as he was grilled by investigators at the Central Bureau of Investigation (CBI) headquarters in New Delhi on 17 February.
According to sources, Ruia was quizzed extensively about Essar Group’s alleged links with Loop Telecom and various other front companies that reportedly held stakes in Loop Telecom on his behalf. He was also questioned about the allegation that Loop Telecom acted as front company for Essar, which has nearly 33 percent stake in the Vodafone-Essar joint venture. As per Department of Telecommunications (DoT) guidelines, a firm can’t hold more than 10 percent stake in two service operators.
But what could upset the applecart for Essar and its claim that it doesn’t hold equity more than 9.9 percent in Loop Telecom is the status report (TEHELKA has a copy of it) prepared by the Enforcement Directorate (ED) based on a complaint forwarded by the Central Vigilance Commissioner. What is shocking is that the probe by ED’s Mumbai zonal office reveals that Essar, through convoluted holdings, owns more than 10 percent stake in Loop Telecom.
ED officials came across various discrepancies and allegations against front companies, chiefly against Santa Securities, widely believed to be a front for the Ruias. Kiran Khaitan, sister of Shashi Ruia, owned Santa Securities. There were allegations that it was an associate company of Essar into which the latter has pumped in more than Rs 1,000 crore.
After a preliminary probe, ED sent directives to five companies — Loop Mobile, BPL Communications, Essar investments, Essar Teleholdings and Santa Trading.
Based on the findings and a detailed analysis of the reply sent by these companies, ED officials discovered that Santa Trading was a company of Khaitans, who are relatives of Ruias and have a substantial stake in Loop Telecom.
What gave further credence to the allegation was that it was merged with Loop Mobile Holdings India Ltd, previously known as BPL Communications. And BPL communications, one of the holding companies of Loop Mobile, has close to 70 percent stake in it, with Loop Telecom being the other major stakeholder with 21.9 percent.
What is interesting in this arrangement is Loop Mobile holds 51.95 percent shares of Loop Telecom, thereby giving Khaitans a sizable presence in it. Around 27 percent shares of Loop Telecom are held by Kaif Investment and Aasni Multitrade.
One of the ED’s interesting findings was in all five companies there was crossholding of shares by the entities and various Mauritius-based companies such as Capital Global, Gypsy Rover, Deccan Asian infrastructure, Inditel Holdings, Black Lion and Aidtel Holdings. The registered address of Capital Global is the same as that of Essar companies based in Mauritius.
In its status report, the ED wrote that “since the shareholding pattern of the companies indicate a substantial stake owned or controlled by the Ruia family and the relatives, there appears to be substance in the allegation that Essar has more stake in Loop Telecom through other fronts”.
During the probe, it was revealed that Kaif Investment is the only direct investor from abroad. However, it emerged that many overseas entities have indirect investment in Loop Telecom. They are Deccan Asia Infrastructure (Mauritius) Ltd, Indital Holdings, Black Lion Ltd, Aidtel Holdings (Mauritius) Ltd, Capital Global Ltd and Gypsy Rover. The ED is investigating the source of funding and ownership pattern of these firms.
The ED had also written to the Reserve Bank of India (RBI) about reports that the bank had issued clean chits to Loop Telecom. The RBI replied that there are no violations as far as foreign investment policy is concerned. it added that the DoT would be in a better position to answer whether the telecom policy was violated.
Interestingly, it says, “Through a series of transaction involving Santa Trading, BPL communications, Loop Mobile and Loop Telecom, Essar Group has acquired indirect stake in Loop Mobile and Loop Telecom, circumnavigating the telecom policy and escaping the DoT’s regulatory purview.”
ED investigation reveals that Essar owns more than 10 percent stake in Loop Telecom
The ED has issued fresh directives to all these companies directing them to furnish more information. Apart from that, all the relevant Indian entities have been asked to furnish their complete profiles and details of subsidiaries and their respective parent companies.
THE STATUS report has also been shared with CBI and other investigating agencies involved in the 2G scam probe. Apart from the ED, the CBI has also issued a letter rogatory to the Mauritius government asking for information about 11 companies, including Kaif Investment.
However, this is not the only cause of Essar’s worries. According to the Comptroller and Auditor General’s report, in which CBI has filed a case in 2009, Shipping Stop Dot com (india), later changed to Loop Telecom, had submitted its applications for grant of Unified Access Services (UAS) licences for 21 service areas on 3 September 2007 to DoT. However, the company changed the main object clauses to include the telecom sector to meet the eligibility criteria only on 28 September 2007.
When contacted, Essar Group denied all the allegations. “Essar has no direct shareholding in Loop Telecom,” says Essar Group spokesman Parikshit Kaul. “We have an indirect equity interest in Loop Telecom of less than 10 percent as permitted under UAS guidelines as on the date of application and at all times thereafter.”
