IN THE COURT OF O. P. SAINI: SPL. JUDGE, CBI (04) (2G Spectrum Cases), NEW DE LH I. CC No. 01(B)/11 Case RC No. 45 (A)2009, CBI, ACB, New Delhi. CBI Vs. (1) Ravikant Ruia (A-1); (2) Anshuman Ruia (A-2); (3) I. P. Khaitan (A-3); (4) Smt. Kiran Khaitan (A-4); (5) Vikash Saraf (A-5); (6) M/s Loop Telecom Limited (A-6); (7) M/s Loop Mobile India Limited (A-7); and (8) M/s Essar Teleholdings Limited (A-8);
Order: Reserved on:
11.05.2012
Pronounced on:
25.05.2012
Presence/ Appearance: Sh. U. U. Lalit Sr. Advocate/ Spl. PP, Ms. Sonia Sh. A. K. Singh and Sh. A. K. Rao Sr. PPs and Inspector Manoj
Mathur Spl. PP,
for CBI with IO SP Vivek Priyadarshi
Kumar.
Accused Ravikant Ruia (A-1), Anshuman Ruia (A-2),
I. P. Khaitan
(A-3), Smt. K iran Khaitan (A-4) and Vikash Saraf (A-5) in person with Sh. Mukul Rohtagi Sr. Advocate
with Sh. Kavin Gulati, Sh. Mahesh Aggarwal and Ms.
Smriti Sinha Advocates for accused Ravikant Ruia (A-1) and
Anshuman
Ruia (A-2); Sh. Parag P. Tripathi Sr. Advocate with Sh. Anurag Advocate for accused I. P. Khaitan (A-3) and
Ahluwalia
Smt. K iran Khaitan (A-4);
Sh. Sidharath Luthra Sr. Advocate with Sh. Madhav
Khurana
Advocate for accused Vikash Saraf (A-5); Sh. Nilay Dutta Sr. Advocate with Sh. Arshdeep with Authorized representative Sh. Telecom
Singh
Advocate
Gaganpreet Sandhu for accused M/s Loop
Limited (A-6) and M/s Loop Mobile India Limited (A-7); Sh. Harish Salve Sr. Advocate with Ms. Neeha
Nagpal
Advocate
with Authorized representative Sh. G. Srikar for accused M/s Essar Teleholdings Limited (A-8).
ORDE R ON C HA R G E This order shall dispose of the issue relating to framing of charge against/ discharge of, accused persons.
2.
The brief facts of the case are that on 21.10.2009, the CBI registered
an FIR vide RC DAI 2009 A 0045 against unknown officials of Department of Telecommunications (DoT), Govt. of India, unknown private persons/companies and others for the offence punishable under Section 120-B IPC read with Section 13(2) r/w 13(1)(d) of Prevention of Corruption Act, 1988, on allegations of criminal conspiracy and criminal misconduct, in respect of allotment of Letters of
Intent, Unified Access Services (UAS) Licenses and spectrum by the DoT. Investigation of the case was taken up and charge sheet dated 02.04.2011 and First supplementary charge-sheet dated 25.04.2011 were filed before this Court.
3.
During the period such investigation was in progress an SLP (Civil)
Appeal no. 24873/2010 was filed by CPIL & Others before Hon'ble Supreme Court of India, in which Hon'ble Supreme Court of India granted leave vide an order dated 16.12.2010 and decided to monitor the investigation of this case. Vide the aforesaid order dated 16.12.2010 Hon'ble Supreme Court of India also directed that :"The CBI shall conduct thorough investigation into various issues highlighted in the report of the Central Vigilance Commission, which was forwarded to the Director, CBI vide letter dated 12.10.2009 and the report of the CAG, who have prima facie found serious irregularities in the grant of licenses to 122 applicants, majority of whom are said to be ineligible, the blatant violation of the terms and conditions of licenses and huge loss to the public exchequer running into several thousand crore. The CBI should also probe how licenses were granted to large number of ineligible applicants and who was responsible for the same and why the TRAI and the DoT did not take action against those licensees who sold their stakes/equities for many thousand crore and also against those who failed to fulfill roll-out obligations and comply with other conditions of license."
4.
The eligibility of all the companies which were allocated Letters of
Intent (LOI) on 10.01.2008 by the DoT was also investigated by CBI and during investigation allegations came to notice that M/s Loop Telecom Ltd, which had
applied for U AS licenses in 21 Telecom circles in September 2007 was a front company of M/s Essar Group. M/s Loop Mobile India Ltd. had been operating a UAS license since 2005 in the Mumbai Service Area. It was alleged that M/s Essar Group which already had a stake of 33% in M/s Vodafone Essar Ltd., a telecom operator in all the 22 telecom circles, was controlling substantial stake in the aforesaid two companies in violation of the U AS guidelines dated 14.12.2005 and UAS license agreements signed by M/s Vodafone Essar Ltd. with DOT. It was further alleged that the accused persons belonging to M/s Loop Telecom Ltd. /M/s Loop Mobile India Ltd and Essar Group of companies, fraudulently suppressed the facts of association of the two Loop companies with M/s Essar Group of companies while applying for new licenses to DOT, in order that DOT considers these companies as entities which are not substantially controlled by Essar Group or are associates of Essar Group. The said accused persons, therefore, dishonestly or fraudulently got the 21 new UAS licenses and continue to operate the Mumbai License of Loop in contravention of the applicable guidelines.
5.
Investigation has been carried out on the allegations that M/s Loop
Telecom Ltd., and associated persons including Essar group persons /companies, cheated the DoT, Government of India by concealing the actual stake holders of M/s Loop Telecom Ltd. behind a corporate veil, while applying for and getting 21 new UAS Licenses and got the 21 UAS Licenses and valuable spectrum for this company.
6.
The U ASL Guidelines dated 14.12.2005 were issued by DoT to ensure
fair competition in the mobile telephony and thereby bar same entity holding more
than one license in the same telecom circle.
7.
For finalization of NIT & Tender Document for inviting applications /
bids for fourth cellular operator, a meeting was held by the DoT. The officers deliberated upon the clause to be inserted to ensure competition. In this context, in another meeting dated 02.03.2001, DOT decided as below :"Substantial equity holding may be defined as equity of 10% or more. For the purpose of adding clarity with regard to ensuring competition and meaning of substantial equity, Para 1.3 (ii)/ Section IV of Commercial Conditions will be modified as below: "No single company/ legal person, either directly or through its associates, shall have substantial equity holding in more than one licensee company in the same service area for the same service. Substantial equity' herein will mean a n equity of 10% or more'. A promoter company cannot have stakes in more than one licensee company for the same service area."
8.
Accordingly under Section 4 (Commercial Conditions) of the tender
document following was mentioned at clause 1.3 "1.3 The licensee shall also ensure that: i.
Any changes in share holding shall be subject to all necessary statutory requirements.
ii.
No single company/legal person, either directly or through its associates, shall have substantial equity holding in more than one licensee company in the same service area for the same
service. Substantial equity' herein will mean a n equity of 10 % or more'. A promoter company cannot have stakes in more than one licensee company for the same service area. iii.
Management control of the licensee company shall remain in Indian hands."
Later, the aforementioned clause 1.3 also formed part of the license
9.
agreement signed by DoT with various Basic Telephony operators in 2001. It also formed clause 1.4 of the license agreement signed by DoT with Cellular Mobile Telephony Service operators subsequently. In the license agreements signed in 2004, this clause was included as clause 1.4.
Further, at this time the existing mobile telephony licensees of 1995-
10.
97 were also informed by DOT of amendments in their licenses as a consequence to migration to revenue sharing regime of New Telecom Policy 1999 vide letters. Vide these letters they were informed that the licensees shall forego the right of operating in the regime of limited number of operators after 1.8.1999 and shall operate in a multi-poly regime. In this context following proviso were also added in para (ix):"Notwithstanding anything approved under the Proviso described in (viii) above, the following shall always be complied with and shall never be violated : a.
The statutory prescriptions of any nature including but not limited to the provisions of the Monopolies and Restrictive Trade Practice Act -
1969. b.
No single company / entity shall have any equity in more than one licensee company in the same service area for same service.
c.
There shall be cap of 49% on foreign equity. Management control of the licensee company shall remain in Indian Hands.
11.
Similar license condition was subsequently adopted as part of UASL
Guidelines dated 14.12.2005 and the Clause 8 of the U ASL Guidelines dated 14.12.2005 provided that :"No single company / legal person, either directly or through its associates, shall have substantial equity holding in more than one LICENSEE Company in the same service area for the Access Services namely; Basic, Cellular and Unified Access Service. "Substantial equity' herein will mean a n equity of 10 % or more'. A promoter company /Legal person cannot have stakes in more than one LICENSEE Company for the same service area. A certificate to this effect shall be provided by the applicant's Company Secretary along with application."
12.
In the year 2005 M/s BPL Communications Ltd (now known as Loop
Mobile Holdings India Ltd -L MHI L), promoted by Sh. Rajeev Chandrasekhar and Sh. TPG Nambiar, was having U AS licenses in four telecom circles through its two subsidiaries viz. M/s BPL Mobile Communication Ltd (now known as M/s Loop Mobile India Ltd) for Mumbai circle and M/s BPL Mobile Cellular Limited for Tamil Nadu, Kerala and Maharashtra circles. At that time, the share holding of these companies was as under:-
A. M/s BPL Communications Ltd. (now, M/s Loop Mobile Holding India Ltd) :1
Shares held by Sh. Rajeev Chandrasekhar (through holding companies)
63.07%
2
Shares held by Sh. TPG Nambiar (through holding companies)
7.20%
3
Shares held by ICICI Trusteeship Services
9.30%
4
Shares hold by Overseas Companies including M/s Inditel Holdings Ltd., Mauritius, M/s Deccan Asian Infra, Mauritius, M/s Aidtel Holdings, Mauritius, M/s South Asian Regional Fund and M/s CDC Financial Services
20.43%
Besides the equity shares, M/s BPL Communications Ltd. had also issued some preference shares of Rs. 100 each and Non Convertible Debentures (NCD) as per details mentioned below :a) Companies held by Sh. Rajeev Chandrasekhar
200,500 preference shares
b) Companies held by Sh. TPG Nambiar
25,15,000 preference shares
c) M/s CDC Financial Services Ltd.
1,48,70,000 preference shares
d) ICICI Bank Ltd.
3 crore NCD of Rs. 100 each
A. BPL Mobile Communication Ltd. (now M/s Loop Mobile India Ltd.) 74% equity shares held by
: M/s BPL Communications Ltd.
26% equity shares held by : M/s French Telecom through M/s Dominance Holdings Ltd., Mauritius
13.
The said companies had internal disputes, in view of which Shri
Rajeev Chandrashekhar decided to sell the companies. The companies, if rendered litigation free, could command a lot of value. During this period accused Sh. Ravi N. Ruia approached Mr Rajeev Chandrashekhar for buying out these companies. To ensure that this was a serious offer, Rs 20 crore were paid to erstwhile promoters (holding companies belonging to Sh. Rajeev Chandrashekhar) in two instalments of Rs 5 crore on 19.05.2004 and Rs 15 crore on 02.06.2004. That the aforesaid amount of Rs. 20 crore was sourced from M/s Essar Shipping Ltd. (Rs. 5 Crore) and M/s Essar Investments Ltd. on behalf of M/s Essar Teleholdings Ltd (Rs. 15 crore). It was projected that the deal was to assign these companies to a third player. It was also clear that the deal had to meet regulatory conditions of DoT and be compliant to the extant rules and guidelines. These negotiations followed a social announcement by accused Sh Ravi N. Ruia in May 2004 that Essar Group was buying the aforesaid BPL group companies. That at this point of time Essar Group already had an effective shareholding of 33% in pan India licensee company M/s Hutchison Essar Limited (HEL) or its subsidiary companies, through M/s Essar Teleholdings Ltd. and its associates. (However, later on clarified at the bar that HEL was not having any telecom licence for Tamil Nadu, Kerala and Maharashtra circles). A fter having entered into a deal with Mr Rajeev Chandrashekhar, for purchase of his stake in M/s BPL Communications Ltd through its subsidiaries M/s BPL Mobile Communications Ltd and BPL Mobile Cellular Ltd, the aquisition was completed in various stages during May, 2004 to July, 2005.
14.
As per the Clause 1.3 of the CMTS license conditions, Essar Group
companies, directly or through associates, could not acquire more than 10% equity in the operating companies. Accordingly, the promoters of the Essar Group, in league with Mrs K iran Khaitan w/o Sh. I P Khaitan (sister of Sh Ravi N Ruia) & Sh. I.P. Khaitan (brother-in-law of Ruias), a Dubai based NRI, designed a scheme to acquire M/s BPL Communications Ltd. through M/s Santa Trading Pvt. Ltd. and other Mauritius based foreign companies, wherein equity was purportedly held by Mrs Kiran Khaitan and Sh. I P Khaitan, to circumvent the restrictive clause 1.3 of the CMTS License. Sh. Vikash Saraf facilitated the aforesaid persons in the said acquisitions. A Board meeting of M/s Essar Teleholdings Ltd. (ETHL), attended by Sh. Vikash Saraf, was held on 15 October, 2004 wherein resolution to this effect was passed by the board.
15.
In the board meeting of M/s Essar Teleholdings Ltd (ETHL) held on
15 October, 2004 and chaired by Sh. Vikash Saraf , it was resolved that ETHL will buy 9.99% equity of M/s BPL Mobile Communications Ltd. for Rs. 120 crore (USD 26 million) from M/s Asia Pacific Systems Ltd. (out of 26% proposed to be purchased by it from France Telecom). It is alleged that in October, 2004 itself M/s Essar Teleholdings Ltd. paid an advance of US$26million to M/s Asia Pacific Systems Ltd. (claimed to be a company owned by Mr. I.P. Khaitan), to enable M/s Essar Teleholdings Ltd. to purchase 9.9% equity of M/s BPL Mobile Communications Ltd. from M/s Asia Pacific Systems Ltd., out of 26% shares of M/s BPL Mobile Communications Ltd. to be acquired by it (M/s Asia Pacific Systems Ltd.) from M/s Dominance Holdings Ltd. Subsequently on 04th December,
2004 M/s Dominance Holdings Ltd., which held 26% shares in M/s BPL Mobile Communications Ltd., sold its entire stake to M/s Asia Pacific Systems Ltd. for USD 20 million (approx. Rs.92.3 crore). The aforesaid facts indicate that M/s Essar Teleholdings Ltd. funded the entire acquisition of 26% equity shares of M/s BPL Mobile Communications Ltd. from and held by M/s Dominance Holdings Ltd. The aforesaid transactions were designed to park 16.01% equity of M/s BPL Mobile Communications Ltd. and an amount of US$6 million in the aforesaid company claimed to belong to accused I P Khaitan. By this set of transactions M/s Essar Teleholdings Ltd., which already held substantial equity in M/s Hutchison Essar Ltd. or its subsidiary companies having pan India U AS Licenses, the UASL guidelines were bypassed by creating a corporate veil because documents indicated only 9.9% equity held by ETHL while actually entire 26% equity acquisition was funded by it.
16.
Accordingly on 04th December, 2004, M/s Asia Pacific Systems Ltd.
transferred 86,05,304 equity shares of M/s BPL Mobile Communications Ltd. to M/s Essar Teleholdings Ltd. Remaining 13790882 equity shares of M/s BPL Mobile Communications Ltd. comprising 16.01% stake were transferred by M/s Asia Pacific Systems Ltd to M/s Capital Global Limited, Mauritius on 31 st October, 2005. It may be pointed out that being a substantial effective share holder in a Telecom Licensee company i.e. M/s Hutchison Essar Ltd. (HEL), ETHL could not openly acquire more than 9.99% shares in another licensee company as per the gidelines.
17.
M/s Santa Trading Pvt. Ltd., earlier known as M/s Atul Bhagwat
Trading Pvt. Ltd., was acquired by Mrs. Kiran Khaitan by way of gift from her relatives Rishi and Saket Agarwal, who had business association with Essar group and no business association with accused I P Khaitan or his group companies, on 30th April 2005. This company was used to acquire shares of M/s BPL Communications Ltd from Indian companies including those owned by holding companies of the Sh. Rajeev Chandrashekhar/ Shri T.P.G. Nambiar, ICICI Bank / ICICI Trusteeship, etc. Sh. S. Shankarnarayanan and Sh. B. Shivakumar, both Essar Group employees, were the directors of M/s Santa Trading Pvt. Ltd. during 02.09.2004 to 02.06.2005, when most of the agreements were entered into by Essar group with erstwhile BPL group for acquisition of shares
of M/s BPL
Communications and M/s BPL Mobile Communications Ltd., which were assigned to M/s Santa Trading Pvt. Ltd. Directors of M/s Santa Trading Pvt. Ltd. thereafter were Mr I.P. Khaitan, Ms. K iran Khaitan & Ms. Sangeeta Lakhi.
18.
M/s BPL Communications Ltd. held 100% of M/s BPL Mobile
Cellular Ltd. having three Telecom licenses of Kerala, Tamil Nadu & Maharashtra. As indicated earlier M/s BPL Communications Ltd also held 74% of M/s BPL Mobile Communications Ltd. Shares of M/s BPL Communications Ltd were transferred by the erstwhile promoters (Mr. Rajeev Chandrashekhar and Mr. TPG Nambiar group) to new buyers as per details mentioned below :i. Sh Rajeev Chandrashekhar group held 63.07 % which was purchased for Rs. 304 Crore by Essar Group in the name of M/s Santa Trading Pvt. Ltd. For this amount, agreements were signed by erstwhile holding companies on behalf of Rajeev Chandrashekhar group during 19 th May 2004 to 16th July, 2005 with M/s Essar Teleholdings Ltd. The details of the said shareholders
are as mentioned below :Agreement Dated Between
No of Shares
Consideration Amount
16th March, 2005 M/s Tayana Consult Pvt. Ltd.19,97,98,770 sharesRs. 69 crore and M/s Essar Teleholdingsrepresenting 16.32% Ltd.(ETHL) (Revised from earlier 19,91,98,770 Shares & amount of Rs.65 crore) Amendment M/s Tayana Consult Pvt. Ltd.2,00,500 Preference Agreement dated and M/s Santa Trading Pvt.Shares 15.07.2005 Ltd.(STPL)
16th March, 2005 M/s Epsilon Advisers Pvt.4,50,07,284 sharesRs. 15 crore Ltd. and M/s Essarrepresenting 3.69% Teleholdings Ltd.(ETHL) 16th March, 2005 M/s Vectra Holdings Pvt. Ltd.,2,60,92,814 sharesRs. 70 crore Mr. Rajiv Chandrasekhar, M/srepresenting 2.14% Essar Teleholdings Ltd. (ETHL) and M/s BPL Communications Ltd. 16th March, 2005 M/s Coimbatore Cablenet Pvt.14,97,69,241 sharesRs. 38.50 crore Ltd. and M/s Essarrepresenting 12.26% Teleholdings Ltd.(ETHL) 15th July, 2005
M/s Epsilon Advisers Pvt.35 crore sharesRs. 111.50 crore Ltd. and M/s Santa Tradingrepresenting 28.66% Pvt. Ltd. (disputed holdings) Total
Rs. 304 crore
The details of the sources of funds for these transactions are as mentioned below :a. Rs. 20 crore were paid by Essar group as advance as mentioned before and were paid in two instalments of Rs 5 crore on 19.05.2004 and Rs 15 crore on 02.06.2004. The aforesaid amount of Rs. 20 crore were sourced from M/s
Essar Shipping Ltd. and M/s Essar Investments Ltd. b. On 18 March 2005, Rs. 30 crore was paid to holding companies of Mr. Rajeev Chandrashekhar group from the accounts of M/s Essar Investments Ltd. through M/s Essar Teleholdings Ltd. in three separate transactions of Rs. 5 crore, Rs. 5 crore and Rs. 20 Crore. It is alleged that the sale consideration of Rs. 304 crore has been paid by Essar group, out of which a sum of Rs. 50 crore had been paid by various Essar Group companies as advance before and at the time of signing of agreements. It is alleged that the said amount was sourced by ETHL from M/s Essar Investment Ltd (EIL) and M/s Essar Shipping Ltd. All the aforesaid agreements were signed by Sh Vikash Saraf on behalf of ETHL. The terms and conditions of the agreement included right to assign the share purchase agreement to third party. As such the agreement was assigned by ETHL to M/s Santa Trading Pvt. Ltd. A fter board resolution, the offer of assignment was accepted by STPL and the shares were transferred directly to STPL. However, there is no agreement between ETHL and STPL for this transfer of shares. These were assigned at par in a designed manner. ETHL wrote a letter to BPL for assigning these shares to STPL with a copy to STPL which was accepted in a Board resolution of STPL. On 15 July, 2005 STPL issued NCDs worth Rs. 50 crore to M/s Essar Investments Ltd. and book entries were made as STPL having returned Rs. 50 crore invested by Essar group. The aforesaid transactions were routed through M/s Oblique Trading Pvt. Ltd, a company owned by Saket Aggarwal, son of another sister of accused
Ravi Ruia. c. Remaining amount of Rs 254 crore was paid by M/s Essar Teleholdings Ltd (ETHL) to STPL in July 2005 against which M/s STPL issued 2.54 crore Non Convertible Optionally Redeemable Unsecured Debentures (NCD) of Rs. 100 each to ETHL for a total sum of Rs. 254 crore. In the board meeting of ETHL held on 13 July, 2005 which was attended by Sh. Vikash Saraf and others, the offer of STPL was accepted and it was resolved to invest Rs. 254 crore in the said NCDs of STPL. A fter receipt of this amount, the entire consideration of Rs. 254 crore was paid by STPL to the sellers. Thus it was just a paper adjustment and the entire investment to buy out Sh Rajeev Chandrashekhar stake came from Essar Group. That Shri Rajeev Chandrashekhar, as part of the agreement for a clean sale against a deferred payments scheme, invested entire amount of Rs.254 crore accumulated in his company M/s Jupitor Capital Advisors into ETHL which was later returned by ETHL to M/s Jupitor Capital Advisors along with an interest of Rs.11.115 crore. This amount was received by ETHL out of the sale consideration of M/s BPL Mobile Cellular Ltd. received by it from M/s Hutchison Essar Ltd. As allotment of 35 crore shares to M/s Epsilon Advisors Pvt. Ltd was disputed, the agreement for these shares could not be executed with ETHL. It was signed later on 15 July, 2005, directly between STPL and M/s Epsilon Advisors Pvt. Ltd. The agreement was signed by Sh. Rohit Dave on behalf of STPL. ii. It is alleged that earlier on 15 October 2004, ETHL board discussed and resolved that wherever possible, and permissible under the regulations, ETHL should also examine purchase of shares / debenture / preference shares of BPL Group companies for itself. Thereafter, as per the resolution
of the board, which was chaired by Sh. Vikash Saraf, ETHL purchased the entire equity shares from Nambiar group (which constituted less than 10% of total shares of M/s BPL Communications Ltd), entire debentures/preference shares held by ICICI Bank Ltd., TPG Nambiar Group and M/s Black Lion Ltd., Mauritius. The purchase was made during March 2005 to June 2005 as per details mentioned below:-
Security
Seller
Date of BoardTransaction Date Quantity Meeting
Amount (Rs.)
Payment Detail
Equity Shares M/s TPGJun 8,05 Nambiar group
Jul 15,05
88,477,418
99,84,85,358
Jul 15,05
Preference Shares
M/s TPGJun 8,05 Nambiar group
Jul 15,05
25,15,000
25,15,00,000
Jul 15,05
Preference Shares
M/s BlackMar 18,05 L ion Ltd.
Jul 26,05
1,48,70,000
133,83,00,000
Aug 5,05
Nonconvertible Debentures
ICICI BankMar 18,05 Ltd.
Mar 28,05
3,00,00,000
410,00,00,000
March 28, 05: 46 Cr Jun 30, 05: 228 Cr Nov23,2006-25 Cr Nov 30,06-91. 5 Cr Nov 30,06-19.
5 Cr Total Consideration Paid
668,82,85,358
That the 7.20 % equity and preference shares held by Sh. TPG Nambiar Group were bought for Rs 125 crore by ETHL, for which the entire payment was made through Essar Group of companies. This 7.20% equity of the holding company M/s BPL Communications Ltd, which held 74% equity of the operative company M/s BPL Mobile Communications Ltd, amounted to proportionate holding of 7.2x74, i.e. 5.3% holding of the operative company, was in violation of the U AS license condition as the cumulative holding became above 15.2%, much above the permitted 10% equity. However, this was subsequently assigned to STPL and STPL issued NCDs of the same value to Essar. That the share purchase agreement for the aforesaid acquisition was signed after meetings of Sh Ravi Ruia with sellers and subsequent negotiations were followed up by Sh Vikash Saraf. The said agreement dated 15 July 2005 was signed by Sh. Amit Gupta, an employee of Essar group on behalf of ETHL and by Sh TPG Nambiar on behalf of sellers. For making payment of Rs. 124.99 crore against aforesaid shares to the Nambiar Group, ETHL availed a loan facility of Rs. 350 crore from India Global Competitive Fund (managed by SREI Venture Capital Ltd.). As per the letter dated 15 July 2005 written by Sh. Vikash Saraf as authorized signatory, the sales consideration was directly transferred to the accounts of the sellers and the remaining loan amount was transferred to ETHL.
iii. ICICI Bank held NCDs worth Rs 410 crore of M/s BPL Communications
Ltd. which were purchased by M/s Essar Teleholdings Ltd (ETHL). Negotiations regarding this were held between the representatives of ICICI Bank Ltd. (headed by Sh. P. Suresh, AG M, ICICI) and Sh. Vikash Saraf on behalf of M/s Essar Teleholdings Ltd (ETHL). A fter negotiations ICICI Bank agreed to sell the NCDs for a total consideration of Rs. 410 crore. Agreement for Sale was executed on 28 March 2005 which was signed by Sh. Amit Gupta on behalf of ETHL. The total consideration of Rs. 410 crore was paid to ICICI over a period of time in five installments and was sourced from various Essar Group companies as shown below:Date
Paid by
28th March, 2005 30th June, 2005
Bank
Amount
Source of funds
M/s Essar TeleholdingsABN Amro Bank Ltd.
46 crore
M/s Essar Investment Ltd.
M/s Essar TeleholdingsABN Amro Bank Ltd.
228 crore
M/s Imperial consultant & Securities Pvt Ltd.
23rd 2006
November,M/s ETHL Capital
30th 2006
November,M/s GirishanING Vysya bank Investment Pvt. Ltd.
30th 2006
November,M/s ETHL Capital
GlobalState Bank of Mysore 25 crore
M/s Essar Steel Ltd.
91.5 crore
M/s Essar Investment Ltd.
GlobalState Bank of Mysore 19.5 crore
M/s Essar Investment Ltd.
iv. ICICI Bank Ltd. had sanctioned various loan facilities to BPL Group and the liabilities to the tune of Rs. 523 Crore had accrued on BPL as on 31 st March, 2003. Against the loan, the BPL Group had pledged certain equity of M/s BPL Communications Ltd (held by Nambiar Group) with the bank. The bank revoked the said equity shares towards the liabilities, when the loans
became bad, and sold them to ICICI Trusteeship for Rs. 80 crore. ICICI trusteeship in turn sold them to STPL at par i.e. for Rs. 80 crore. A ll the negotiations in this regard were held by ICICI Bank Ltd. and M/s ICICI Trusteeship merely acted as an agent for transfer of the shares. Agreement for Sale was executed on 27th June, 2006 which was signed by accused Mrs Kiran Khaitan on behalf of STPL. The payment was made by STPL to ICICI Trusteeship in two installments of Rs. 30 crore (received from M/s Essar Steel Ltd. out of HEL funds) and Rs 50 crore from M illennium Growth and Development Fund, created by Essar group Company and managed by M/s SREI Venture Capital Ltd. Against the said Rs 80 crore, STPL issued NCDs to the Essar group companies.
v. That 20.43% equity of M/s BPL Communications Ltd and few preference shares were held by Mauritius based companies, as per following details :Name of the Company
Equity Shares
Preference Shares
M /s CDC Financial Services (Mauritius) Ltd
3,69,74,507
1,48,70,00
M /s South Asian Regional Fund
88,73,507
Nil
M /s Deccan Asian Infrastructure (Mauritius)10,97,75,324 Inc(owned by A IG Asian Infrastructure Fund LP)
Nil
M /s Aidtel Holdings (Mauritius) Inc (owned by M/s2,81,01,000 Asian Infrastructure Development Company Ltd).
Nil
M /s Inditel Holdings ( through hold by different 6,57,33,662 funds)
Nil
That 3.76% equity and the preference shares held by M/s CDC Financial Services (Mauritius) Ltd. & M/s South Asia Regional Fund were purchased
by M/s Black Lion Ltd, Mauritius, purportedly beneficially owned by Mr IP Khaitan, for US $ 18.52 million (US$ 1.857 million towards preference shares held by M/s CDC Financial Services Limited). That the aforesaid preference shares were purchased by M/s Essar Teleholdings Ltd. from M/s Black Lion Ltd. for Rs. 133.83 crore (amounting to US$ 30.758 million), leaving the 3.76% equity for free with Mr. I. P. Khaitan held company and an excess of US$ 12.24 million after considering the entire stake purchase by M/s Black Lion Ltd. These funds were sourced from M/s Essar Investment Ltd. and M/s Essar Power Ltd. Negotiations on behalf of ETHL were held by Sh. Vikash Saraf purportedly with Sh. IP Khaitan, of M/s Black Lion Ltd. A fter negotiations, share purchase agreement was signed on 26 July 2005 by Sh. Amit Gupta on behalf of ETHL. The remaining 16.6% equity held by M/s Deccan Asian Infrastructure (Mauritius) Inc, Mauritius; M/s Aidtel Holdings (Mauritius) Inc and M/s Inditel Holdings, Mauritius was bought by M/s Capital Global Ltd purportedly owned by Sh IP Khaitan for US $ 48.1 million (US$ 8.533 million towards shares held by M/s Aidtel Holdings + US$ 19.063 million towards shares held by M/s Inditel Holdings + US$ 20.50 million towards shares held by M/s Deccan Asian Infrastructure). The source of the funds was purportedly from M/s Bluefield International Ltd., British Virgin Islands, claimed beneficially owned by Sh I P Khaitan.
19.
In March 2005, Mr. IP Khaitan purportedly acquired two Mauritius
based companies, that is, M/s Capital Global Limited (CGL) and M/s Black Lion Limited, for USD 2 each. As per the register of members of the company during the period 16.03.2005 to 23.03.2009, M/s Black Lion Ltd was earlier owned by
M/s Tiger Nominees Ltd. Similarly, M/s Capital Global Ltd. was earlier held by M/s Tiger Nominees Ltd. and M/s Orchid Nominees Ltd. jointly. As per the certificate provided by M/s International Management (Mauritius) Ltd. the M/s Tiger Nominee / M/s Orchid Nominee were holding the shares in their nominee capacity for and on behalf of Shri I.P. Khaitan as beneficiary.
20.
It is alleged that the entire funding for 83.4% equity and all other debt
instruments was sourced from Essar Group of companies. 21.
It is further alleged that M/s Essar Teleholdings Ltd. (through various
Essar Group companies) paid a total sum of Rs 919 crore (excluding 133.83 crore paid to M/s Black Lion) to various sellers in India either directly or on behalf of STPL. Not all these payments were routed through STPL, which was projected as the company holding M/s BPL Communications Ltd. etc., and book entries were made showing these amount as investments by Essar group companies in M/s Santa Trading Pvt. Ltd. in NCDs issued by STPL to Essar group companies. It is alleged that these transactions were mere paper adjustments as the NCDs issued by Essar group to STPL were at minimal interest rates as compared to market rates. 22.
By November, 2005, M/s Essar Teleholdings Ltd. /M/s Santa Trading
Pvt. Ltd. had acquired most of the shares / debentures of the M/s BPL Communications Ltd (holding company for BPL Mobile Communications Ltd and BPL Mobile Cellular Ltd) and M/s BPL Mobile Communications Ltd. Thereafter, the promoters and persons connected with M/s Essar Teleholdings Ltd. /M/s Santa Trading Pvt. Ltd. decided to sell the licensee companies i.e. M/s BPL Mobile Communications Ltd and M/s BPL Mobile Cellular Ltd., along with respective holding companies. As per M/s Essar Teleholdings Ltd.'s Board resolution dated
25.10.2004 the first right of refusal was to be offered to M/s Hutchison Essar Limited, which agreed to acquire the companies. During this time accused Sh Anshuman Ruia was a director on Board of M/s BPL Mobile Communications Ltd as well as M/s Hutchison Essar Ltd. Negotiations with M/s Hutchison Essar Ltd. on behalf of M/s Essar Teleholdings Ltd. /M/s Santa Trading Pvt. Ltd. were held by Sh. Vikash Saraf, who also signed the agreements in this regard. A fter negotiations following agreements were entered into with M/s Hutchison Essar Ltd.:i. Agreement dated 25.11.2005 between M/s Hutchison Essar Ltd., M/s BPL Communications Ltd and M/s BPL Mobile Cellular Ltd. for Rs. 1071 crore. However, due to delay in the payments, total amount of Rs. 1120 crore, inclusive of interest was paid by HEL. ii. Agreement dated 23.12.2005 between M/s Hutchison Essar Ltd. and M/s BPL Mobile Communications Ltd, M/s BPL Communications Ltd (74%), together with M/s Capital Global Ltd (16.01% share) & ETHL (9.99%) for Rs. 1412 crore.
23.
M/s BPL Mobile Cellular Ltd. which was holding three telecom
licenses in Kerala, Tamilnadu and Maharashtra, was successfully taken over by M/s Hutchison Essar Ltd. after payment of Rs. 1120 crore. However, since M/s Hutchison Essar Ltd. and M/s BPL Mobile Communications Ltd. both were holding mobile telephony licenses for the Bombay Circle, permission of DoT was required for merger of both these licenses. However M/s Hutchison Essar Ltd. could not get the requisite permission of merger from DoT within the agreed period till 31st March, 2006 and the validity of the agreement was extended to 31 st
July, 2006. The terms and conditions were also amended and consideration for M/s BPL Mobile Communications Ltd. was enhanced from Rs. 1412 crore to Rs. 1663 crore, of which Rs. 1617 crore had been paid by M/s Hutchison Essar Ltd. as advance.
24.
Out of the aforesaid payments of Rs. 1120 Crore and Rs.1617 crore, to
be paid by M/s Hutchison Essar Ltd. to M/s BPL Communications Ltd. /M/s Santa Trading Pvt. Ltd., an amount of Rs. 2737.25 crore (comprising of number of transactions Rs. 2265.11 crore paid to ETHL and remaining Rs. 472.14 crore as adjustment against rights issue of M/s Hutchison Essar Ltd. as subscribed by Essar group in it) was paid by it during October, 2005 to July, 2006 directly to M/s Essar Teleholdings Ltd. (ETHL), which was then transferred to M/s Essar Investments Ltd. In the books of accounts, however, these amount were shown as received by M/s Santa Trading Pvt. Ltd. and lent to M/s Essar Investments Ltd. against which M/s Essar Investments Ltd. issued Multiple Optionally Convertible Debentures (MOCD) of Rs.2421 crore to M/s BPL Communications Ltd. The remaining amount of Rs. 316 crore was reportedly paid by ETHL to M/s BPL Communications Ltd or to a third party on behalf of M/s BPL Communications Ltd. in tranches spread over a period of time from Aug 2005 to Feb, 2008.
25.
That the aforementioned Multiple Optionally Convertible Debentures
(MOCDs) did not carry any interest, but the returns from the NCD were governed by a prescribed structure on redemption. As per the redemption options each Outstanding Debenture (the MOCD) would get converted into one 12% Cumulative Redeemable Preference Share (CRPS) of Rs. 100 each at the expiry of
five years from the date of allotment (i.e. 21.09.2005). Till the expiry of 5 years M/s Essar Investments Ltd. had option to redeem the Multiple Optionally Convertible Debentures (MOCDs) at an amount as stated below: From date of allotment Period upto one year Period exceeding one year upto two years Period exceeding two year upto three years
Amount (Rs.) per debenture 100 105 110
Period exceeding three year upto four years
115
Period exceeding four year upto five years
120
26.
It is alleged that Multiple Optionally Convertible Debentures
(MOCDs) issued by Essar group to STPL said to be held by Khaitan group, prescribing a return of 20% over the period of four to five years (annual return less than 5%), were at a very minimal interest rate as compared to the market rates. It is important to note that a part of these funds was initially arranged by Essar group from M/s SREI Ventures Capital Ltd. at the interest rate of around 13-14% p.a. and were then lent to M/s Santa Trading Pvt. Ltd. as Multiple Optionally Convertible Debentures (MOCDs) at the return of less than 5% per annum.
27.
On 17th January, 2006, M/s BPL Communications Limited (later
renamed as M/s Loop Mobile Holdings India Limited) and M/s Essar Teleholdings Limited transferred their entire stake to M/s BPL Communication, a partnership firm as capital contribution. However, the shares continued to be held in the name of the companies (partners) as a firm cannot hold any share. This partnership firm was created by the promoters /persons /companies belonging to Essar group /M/s BPL Mobile Communications Ltd. / M/s BPL Communications Ltd. / M/s Santa Trading Pvt. Ltd. purportedly to avoid tax liability arising out of capital gains due
to the aforesaid transfer of shares amongst various holding companies, on the pretext that firms engaged in the business of Telecom were exempted from such tax. However, such an arrangement was primarily done to protect the investments made by Essar group companies in the name of Khaitans in M/s BPL Mobile Communications Ltd and its holding companies. This structure ensured that Essar Group had two partners - M/s Karthick Financial Services Ltd & M/s Essar Investments Ltd against single M/s BPL Communications Ltd holding more than 90% capital contribution / shares but having less than 10% interest. Essar group, therefore, had majority in the partnership firm to influence any decisions.
28.
It is pertinent to mention here that in a partnership firm the decisions
are taken by the majority of the partners irrespective of the investments made by a partner. In the aforesaid structure of the partnership firm it is worth noting that even though the two Essar companies had little profit sharing portion, these would prevail upon the single partner on behalf of BPL, if considered a separate entity. Thus, though effectively controlling the minority stake, less than the substantial stake, the formation of this partnership firm resulted into dual purpose - viz. keeping the direct equity of Essar group below 10% and still keeping the control over the company. Moreover, the partnership deed itself is a document suspected to have been altered, in view of the conspicuous shortcomings in the deed, as confirmed by GEQD expert during investigation.
29.
M/s Hutchison Essar Ltd. applied for DOT approval to merge M/s
BPL Mobile Communications Ltd. holding Mumbai circle license with itself for the Mumbai circle telecom operations. DoT examined the request. Share Purchase
agreement between M/s BPL Mobile Communications Ltd, M/s Hutchison Essar Ltd. and others was signed with on 23.12.2005 which was amended in March 2006 extending its validity till 31 July 2006, as approval of DOT did not come till then. That M/s Hutchison Essar Ltd. could not obtain the requisite permission from DoT even within the extended period valid till 31 July 2006.
30.
At this time the Share Purchase agreement of M/s BPL Mobile
Communications Ltd was terminated by M/s BPL Mobile Communications Ltd / M/s BPL Communications Ltd, on 1 August 2006, although the DOT accorded the approval for merger on 11 August, 2006. However, the agreement was not honoured by M/s BPL Mobile Communications Ltd / M/s BPL Communications Ltd and the technical defence of M/s Hutchison Essar Ltd. having defaulted by 10 days was stuck to. M/s Hutchison Essar Ltd. had already given advance payment for the said takeover, which remained with M/s BPL Communications Ltd. / M/s BPL Mobile Communications Ltd. / M/s Essar Teleholdings Ltd. / M/s Essar Investments Ltd. and the dispute regarding this takeover went to Hon'ble High Court of Bombay and the arbitration proceedings followed thereupon.
31.
During the same time M/s Hutchison was planning to exit from the
Joint venture M/s Hutchison Essar Limited and M/s Vodafone came in to purchase the stake of M/s Hutchison in the said joint venture. At this time Essar group planned to operate this Mumbai circle mobile telephony license in the name of M/s BPL Mobile Communications Ltd. as an independent operator in gross violation of UASL Guidelines dated 14.12.2005 under a corporate veil. The said license was operated by Essar group held M/s BPL Mobile Communications Ltd. till August,
2007 without being noticed by the regulator. The reason for not honouring the agreement for merger of M/s BPL Mobile Communications Ltd with Mumbai license of M/s Hutchison Essar Ltd. was in furtherance of the aforesaid plan of the Essar group to create an independent pan India telecom licensee company, which had escaped detection by the regulators. That Essar Group signed underwritten Put Option and Call Option agreements with M/s Vodafone to exit from the joint venture at a future date as per agreement signed in Aug 2007. As per the agreement Essar group had signed exit option agreements with Vodafone which was to be exercised between 3rd and 4th anniversaries of the starting date, i.e. August 2010 to July, 2011. This option has been exercised by Essar group recently. 32.
It is alleged that after the termination of Agreements between M/s
BPL Mobile Communications Ltd and M/s Hutchison Essar Limited regarding merger of Mumbai Circle Licenses, in August 2006, the accused persons belonging to Essar group, in conspiracy with Sh I P Khaitan and Ms. K iran Khaitan, designed a plan to operate the said Telecom licensee company in Mumbai circle concealing the real owners and making it appear that Essar group did not have a substantial equity in it. Accused Ravi N. Ruia, Anshuman Ruia and Vikash Saraf, all belonging to Essar group, remained as directors on the board of M/s Hutchison Essar Ltd. during the entire relevant period i.e. 2004 to 2010 (during 2007-2010 it was renamed as M/s Vodafone Essar Ltd.) and were looking after the telecom interests of the Essar group in the joint venture and elsewhere. The said accused persons were also directors, one or more of them, in other subsidiary licensee companies of the said joint venture M/s Hutchison Essar Ltd. /M/s Vodafone Essar Ltd. during said period. In furtherance of this conspiracy Essar group's entire stake held in M/s BPL Mobile Communications Ltd. was transferred to M/s. Santa Trading Pvt. Ltd. in December, 2006. Accordingly, equity shares worth Rs.94.6
crore, preference shares worth Rs.173.8 crore and NCDs worth Rs.410 crore held by Essar group were transferred to STPL without any cash payment. However, book adjustments were made for such transfer by STPL for issuance of NCDs of equivalent amount to M/s Essar Teleholdings Ltd. The terms & conditions for the NCDs were similar to earlier NCDs issued by STPL to ETHL for Rs. 254 crore in July, 2005. That NCDs issued by M/s Santa Trading Pvt. Ltd. were on a nominal effective interest rate of about 5-6% p.a. It is important to note that part of these funds was arranged by Essar group from SREI Ventures at the interest rate of around 13-14% p.a. Accused persons, acting through Sh Vikash Saraf, in the board meeting dated 16 December 2006 of M/s Essar Teleholdings Ltd. gave effect to this. As authorized by the board of ETHL, negotiations in this regard were held by Sh. Vikash Saraf who was also Director of the company. ETHL continued to hold 9.99% share holding in M/s BPL Mobile Communications Ltd as these shares were the subject of arbitration with M/s Hutchison Essar Ltd. Accordingly following equity/NCDs held by ETHL were sold to STPL:Security
Buyer
Date of BoardSale Date Quantity Meeting
Equity Shares
Santa TradingDec 16, 06 Pvt. Ltd.
Dec 2006
88,477,418
Amount (Rs.)
94,58,23,598
Preference Shares Santa TradingDec 16, 06 Pvt. Ltd.
Dec 2006
20,1,73,85,000
173,85,00,000
Non-convertible Debentures
Dec 2006
20,3,00,00,000
410,00,00,000
Santa TradingDec 16, 06 Pvt. Ltd.
Total Consideration Received
33.
Payment Date
Issue of NCDs on Dec 20,06
678,43,23,598
Apart from the aforesaid financial transactions, the design planned by
the accused persons belonging to Essar group, in league with Sh I P Khaitan and Ms. Kiran Khaitan, also included other changes in the management of the
operating / holding companies. These changes are summarized as mentioned below:-
a. During June-July, 2005 various persons belonging to Essar group joined the board of M/s BPL Mobile Communications Ltd. as directors which included Sh Vikash Saraf (Director of M/s Essar Teleholdings Ltd. and CEO, Essar Telecom Business Group), Sh Prem Rajani (Counsel of Essar group having received fee from Essar group and no such association with Khaitans /BPL Communications etc.) and Sh. Anshuman Ruia (Promoter of Essar group). By March 2006 the said persons constituted the majority of the directors on board. In September, 2006 Sh Ajay Madan, another employee of Essar group and CEO of M/s Essar Telecom Infrastructure Pvt. Ltd. joined the board as additional director. Later, in conspiracy with other accused persons and in furtherance of creating a complex web of holding companies with intention to eliminate chances of detection of obvious linkages with Essar group, Sh Anshuman Ruia resigned from the Board of directors of the company on 15 th December, 2006. b. Various persons belonging to Essar group, viz. Sh. Vikash Saraf, Sh. Ajay Madan, Sh. Amit Gupta, Sh. S. Subramaniam, Sh. T. Satishan, Pramod Saxena were appointed as authorized signatories in the bank accounts of M/s BPL Mobile Communications Ltd. from time to time, thereby exercising the control over finances of the said operating company. Accused Vikash Saraf was also authorized signatory of bank accounts of M/s Essar Teleholdings Ltd.
34.
It is alleged that accused persons / companies belonging to Essar
Group, acting in league with Sh I P Khaitan, Mrs. Kiran Khaitan and M/s Santa Trading Pvt. Ltd., successfully concealed the actual stake holders in a complex web of companies, as a result of which the purchase of M/s BPL Communications Ltd. and its subsidiaries, and operations of Mumbai license of M/s BPL Mobile Communications Ltd. by the said persons /companies remained unquestioned from DoT. It is alleged that the accused persons in furtherance of the conspiracy decided to spread the geographical reach of the services provided by the company and apply for 21 new U AS Licenses for remaining 21 telecom circles.
35.
It is alleged that applications for 21 new U AS Licenses were
submitted on 3.9.2007 in the name of M/s Shippingstop Dot Com (India) Pvt. Ltd. It is further alleged that the applicant company was incorporated on March 12, 1997 as M/s Onchannel Software Pvt. Ltd. On August 16, 2000 it was renamed as M/s Shipping Stop Dot Com (India) Pvt. Ltd. Applications were filed for 21 UAS licenses in 21 telecom circles other than Mumbai service area. In the Mumbai service area, its holding company M/s BPL Mobile Communications Ltd (now M/s Loop Mobile India Ltd.) was already operating a U AS License. Further on 21.09.2007 its name was changed to M/s Loop Telecom Pvt. Ltd. In the year 2009, it was converted into a closely held public limited company i.e M/s Loop Telecom Ltd.
36.
M/s Shippingstop Dotcom (India) Pvt Ltd was an Essar Group
company, when it had earlier submitted an application dated 17.11.2005 for license for operation of National Long Distance (NLD) Service. The said application was submitted / pursued in DOT by various Essar group officials including Sh. D. B.
Sehgal, Shri B. K. Syngal, Shri A jay Madan, Sh. Girish Sathe, etc. and the Administrative Office /Corporate Office of the applicant company was mentioned as Essar House, 11, Keshavrao Khadye Marg, Mahalaxmi, Mumbai - 400 034, which is the office premises of Essar group companies. In the application it was also mentioned that M/s Karthick Financial Services Limited, an Essar group company, held 100% shares of the applicant company. On 06.12.2005 the company also amended its object clause in Memorandum of Association to provide for services or business of telecommunications including Cellular Mobile Telephone Services, Basic Services, etc. and to acknowledge and comply with Unified Access Service License agreement. The License agreement for NLD Service was signed on 18.9.2006 between the DoT (Licensor) and M/s Shippingstop Dot Com (India) Pvt. Ltd. acting through Shri D. B. Sehgal.
37.
It is also alleged that similar facts also emerged regarding the
application dated 30.11.2005 for license for operation of International Long Distance (ILD) Service submitted by M/s Shippingstop Dot Com (India) Pvt. Limited to DoT. In the said applications the e-mail address has been furnished as a
[email protected]' and Shri A jay Madan, CEO has been designated as authorized person. The Letter of Intent for ILD License was issued by DoT on 14.06.2006. However, in view of the number of extensions sought by the company for signing license the license was not signed by DoT and the LOI was cancelled. M/s Shippingstop Dot Com (India) Pvt. Ltd. was represented in DoT through Shri D. B. Sehgal.
38.
In the aforesaid applications, the applicant company furnished
following details of the experience of the Promoters/ Partners /Sister concerns:-
Sl. No Partner / Promoter
Operating From the Year
Service
Ownership
1
Hutchison Essar Telecom Ltd.
1994
GSM in New Delhi
30.42% (effective Ownership) owned by Essar Group
Hutchison Telecom East Ltd.
1994
GSM in Kolkata
30.42% (effective Ownership) owned by Essar Group
A ircel Digilink Ltd.
1997
GSM in UP(E), Rajasthan,
30.42% (effective Ownership) owned by Essar Group
2 3
Haryana 4
39.
Hutchison Essar South Ltd.
GSM in 4 circles & UAS 30.42% effective Ownership of license in 2 Essar Group
In the aforesaid applications M/s Karthick Financial Services Limited
is shown as the promoter of the applicant company. The names of Chairman / Managing Director/ Directors of the applicant company are as under: 1. Shri G. K. Sathe, Chairman & Director 2. Shri Rajender Bohra, Director 3. Shri Madan Mundra, Director
40.
This admittedly Essar group company, was used to apply for 21 new
UAS Licenses. However, it was transferred to M/s BPL Communications Ltd. and M/s BPL Mobile Communications Ltd. just two days before the applications for UAS Licenses were submitted to DOT and its eligibility was achieved in a designed manner. That on 31 st August 2007, 49 lakh fresh equity shares of Rs. 10 each of M/s Shippingstop Dot Com (India) Pvt. Ltd. were issued to M/s BPL Communications Ltd. at a premium of Rs 275 each. Against the said allotment a sum of Rs. 139.65 crore was received by M/s Shippingstop Dot Com (India) Pvt.
Ltd. from M/s BPL Communications Ltd. It is also alleged that Rs. 140 crore was received by M/s BPL Communications Limited from M/s Essar Teleholdings Ltd. On 1 st September, 2007, M/s Karthick Financial Services Ltd sold 51,50,000 shares of M/s Shippingstop Dot Com (India) Pvt. Ltd. held by it to M/s BPL Mobile Communications Ltd. at par and 130 share held by it jointly with Sh. Girish Sathe to Sh S Subramanian jointly with M/s BPL Mobile Communications Ltd., while very previous day the company's shares were issued to M/s BPL Communications Ltd. at a premium of Rs. 275 each, indicating that the Essar group, which held this company earlier, and the BPL group, to which this company was now transferred, were one and the same. These transactions were clearly not prudent business transactions, and were rather in the nature of adjustments & manipulations. On 1 st September, 2007 itself M/s Shippingstop Dot Com (India) Pvt. Ltd. allotted 12 bonus shares for every share held by all shareholders. Accordingly, 5,88,00,000 bonus shares were allotted to M/s BPL Communications Ltd., 6,17,98,440 bonus shares were allotted to M/s BPL Mobile Communications Ltd and 1560 bonus shares were allotted to Sh S Subramaniam jointly with M/s BPL Mobile Communications Ltd. The share holding pattern of M/s Shippingstop Dot Com (India) Pvt. Ltd. after the aforesaid share transfers is as reflected below :Sl. No.
NA M E OF THE SHA RE HOLDE R
No. OF SHA RES A L LOTTED
1
BPL Communications Limited
58,800,000
2
BPL Mobile Communications Limited
617,98,440
3
Mr. S. Subramanian jointly with M/s BPL Mobile1,560 Communications Limited
41.
That on the date of application of UAS Licenses, the funding of M/s
Shippingstop Dot Com (India) Pvt. Ltd. for complying with the Paid up Capital and Authorised capital requirements was in fact received from M/s BPL Mobile Communications Ltd and M/s BPL Communications Ltd which in turn received
the funds from M/s Essar Teleholdings Ltd. It is alleged that all the four Directors on Board of M/s Shippingstop Dot Com (India) Pvt. Ltd. were employees of Essar group or working under the direct control of persons connected with M/s Essar Teleholdings Ltd. /Essar Telecom Business Group.
42.
That as per the statutory registers maintained by the various relevant
companies the holding structure of M/s Shippingstop Dot Com (India) Pvt. Ltd. (now, M/s Loop Telecom Ltd.) as on the date of UASL Applications - 03.09.2007 was as per the chart below :-
43.
It is alleged that that as on date of applications M/s Shippingstop Dot
Com (India) Pvt. Ltd. (later named as M/s Loop Telecom Ltd.) was held by M/s BPL Mobile Communications Ltd. (now named as M/s Loop Mobile India Ltd.) to an extent of 51%. M/s BPL Mobile Communications Ltd. in turn was controlled by M/s. BPL communication, a partnership firm. This partnership firm had three partners namely M/s BPL Mobile Communications Ltd. (95% profit sharing ratio), M/s Karthick Financial Services Ltd. (2% profit sharing ratio) and M/s. Essar Investment Ltd. (3% profit sharing ratio). It would show that although 95% of profit sharing ratio was in favour of M/s BPL Mobile Communications Ltd., said to be controlled by accused I.P. Khaitan, the other two partners belonged to Essar Group. As per Indian Partnership Act, the decisions in a partnership firm are to be taken by a majority of the partners, unless otherwise agreed to by the partners. As per the partnership deed dated 04.02.2006 between the aforesaid partners, M/s.
Essar Investment Ltd. and M/s Karthik Financial Services Ltd. were to provide administrative support and M/s BPL Communications Ltd. was to provide managerial support, but it has not defined that the decisions will not be taken by the majority. It is alleged that Essar group, through M/s Essar Teleholdings Ltd. exercised full control over M/s Loop Telecom Ltd. through the aforesaid partnership firm.
44.
It is alleged that Sh. S Subramaniam, the then CEO of M/s BPL
Mobile Communications Ltd., who was appointed by accused Vikash Saraf as CEO and was reporting to him, worked as CEO of the aforesaid company during 01.08.2006 to June, 2008. Sh A jay Madan, who joined Essar group in 2004, functioned as CEO of M/s Essar Telecom Infrastructure Pvt. Ltd. (ETIPL) from 2006 to 2008. He was reporting to accused Vikash Saraf, then CEO of Essar Telecom Business Group. In June /July, 2007, accused Vikash Saraf informed the aforesaid Essar officials that a subsidiary company was being formed to make applications for UAS Licenses in all the remaining 21 telecom circles, other than Mumbai, where M/s BPL Mobile Communications Ltd was already operating. Subsequently it was informed that M/s Shippingstop Dot Com (India) Pvt. Ltd., an Essar group company, that held National Long Distance / International Long Distance Licenses was to be acquired by both M/s BPL Mobile Communications Ltd. and M/s BPL Communications Limited.
45.
It is alleged that Sh. V. Ganeshan, Sh. Madan Mundhra and Sh. Girish
Sathe, all employees of Essar Telecom Business Group and functioning under supervision of accused Vikash Saraf and promoters of Essar group, were the
directors of M/s Shippingstop Dot Com (India) Pvt. Ltd. during period September, 2006 to July, 2007. In a board meeting of the company during July, 2007 the above mentioned directors decided to apply for U AS License to DoT. Subsequently on instructions of accused Vikash Saraf, Sh. S. Subramaniam, Shri Ajay Madan and Ms. Sangeeta Lakhi were inducted to the Board of M/s Shippingstop Dot Com (India) Pvt. Ltd in a Board meeting dated 16.08.2007. As per the design of accused Vikash Saraf, who in turn was reporting to promoter directors of Essar group including accused Ravi N Ruia and Anshuman Ruia, Sh. S. Subramaniam was to concentrate on the operations of M/s BPL Mobile Communication Ltd. and Shri Ajay Madan would be engaged in all the regulatory and technical work required for Shippingstop Dot Com (India) Pvt. Ltd. It was also decided by the accused persons that work on all financing for the license fee payments and guarantees required for DoT at the time of the application would also be done by a team from Essar.
46.
It is alleged that during August /September, 2007, 130 shares (out of
total of 51,50,000) shares issued by the company) held by Shri Girish Sathe jointly with M/s Karthick Financial Services (the previous owners of M/s Shippingstop Dot Com (India) Private Limited) were transferred to Sh. S. Subramaniam jointly with M/s BPL Mobile Communications Ltd. Consequently, financing facilities were arranged by the Essar Finance team whose CFO at that time was Shri V.G. Raghavan. Corporate guarantees for the loan facilities sought by M/s Shippingstop Dot Com (India) Private Limited were given by M/s Essar Steel Limited and M/s Essar Power Limited.
47.
It is alleged that accused Vikash Saraf, in conspiracy with promoters of
Essar group including Ravi N. Ruia and Anshuman Ruia, asked following persons belonging to Essar group to assist in the process of making applications for U AS Licenses to DOT :-
4. Sh. P. R. Karnik, posted as DGM (Transmission and Planning), M/s Essar Telecom Infrastructure Pvt. Ltd., Essar House, Mahalaxmi, Mumbai during 2006 to 2009. 5. Shri A jay Madan, CEO of M/s Essar Telecom Infrastructure Pvt. Ltd. and later appointed additionally as Chairman and Director of M/s Shippingstop Dot Com (India) Private Limited 6. Shri Amit Gupta, Vice-President, M/s Essar Teleholdings Ltd. 7. Shri Jayan D'souza, General Manager, M/s Essar Teleholdings Ltd. 8. Shri Anupam Gupta, Executive, M/s Essar Teleholdings Ltd. 9. Shri Durgesh Dingankar, Company Secretary of M/s Shippingstop Dot Com (India) Private Limited
48.
It is alleged that Essar group was having an Essar Telecom Business
Group which was looking into all telecom related companies / projects / investments of Essar group, which included M/s Essar Telecom Infrastructures Pvt. Ltd., M/s Mobile Store Ltd., M/s Essar Teleholdings Limited, M/s Essar Telecom Investments Limited, M/s Essar Communications Limited, Mauritius, and Essar Com Limited, Mauritius, M/s Vodafone Essar Ltd., etc. The affairs of the said
Essar Telecom Business Group were being managed by S/ Shri Vikash Saraf, CEO, Amit Gupta, A jay Madan and Rajiv Aggarwal. Later accused Vikash Saraf was appointed as Group President -Strategy and M & A, of Essar Group, and continued to supervise Essar Telecom Business Group.
49.
It is alleged that all the applications of M/s Shippingstop Dot Com
(India) Private Limited were examined in DOT. DOT raised queries about the eligibility of the company. Accused Vikash Saraf, in conspiracy with accused Ravi N. Ruia, Anshuman Ruia, Ishwari Prasad Khaitan and Ms. K iran Khaitan, knowing well that M/s BPL Mobile Communications Ltd. was fully owned /controlled by Essar group under a complex corporate veil created by them, intentionally made false representation that M/s Shippingstop Dot Com (India) Private Limited was in compliance of substantial equity' clause of UASL Guidelines. The DOT officials, in this manner, were made to believe that Essar group was having less than 10% equity in M/s Shippingstop Dot Com (India) Private Limited.
50.
It is alleged that accused Vikash Saraf asked Sh. Amit Kumar Gupta to
assist Shri Ajay Madan, CEO of M/s Essar Telecom Infrastructure Pvt. Ltd. and Director of M/s Shippingstop Dot Com (India) Private Limited in preparation of Financial Projections of the company for the applications. Shri P.R. Karnik of M/s Essar Telecom Infrastructure Pvt. Ltd. was in charge for putting together the applications. Sh. Amit Kumar Gupta asked Shri Jayan D'souza and Shri Anupam Kishore Gupta to help Shri P.R. Karnik in putting together the financial projections for the applications, who accordingly prepared the Business Plan Statements.
51.
It is alleged that in furtherance of the criminal conspiracy with other
accused persons, accused Vikash Saraf, the then CEO of Essar Telecom Business Group, asked Shri Ajay Madan, CEO, M/s Essar Telecom Infrastructure Pvt. Ltd., to oversee the work of M/s Shippingstop Dot Com (India) Private Limited project, including network planning, roll out planning, recruitment of personnel etc., apart from his normal work. He was also appointed on the board of both the operating companies of Loop group including M/s Shippingstop Dot Com (India) Private Limited, M/s BPL Mobile Communications Ltd. by accused Vikash Saraf. Policy decisions in respect of M/s Shippingstop Dot Com (India) Private Limited, including
financial
matters,
applications
and
further
operations
were
communicated by accused Vikash Saraf to board members, and as per these decisions resolutions of M/s Shippingstop Dot Com (India) Private Limited and its holding companies viz. M/s BPL Mobile Communications Ltd. and M/s BPL Communications Ltd. were passed by the respective Boards. That at times, accused Vikash Saraf used to remain present during such Board meetings informally. The operating office of M/s Essar Telecom Infrastructure of Pvt. Ltd. was located at Essar Techno Park, LBS Marg, Kurla, Mumbai and Shri Ajay Madan was functioning from this office as Director of M/s Shippingstop Dot Com (India) Private Limited, too. It is alleged that most of the aforesaid important functionaries, including directors of said companies, did not even know either of accused I P Khaitan or Ms. K iran Khaitan, or even heard about them being promoters of these companies.
52.
It is alleged that Shri P.R. Karnik was made an authorized signatory of
M/s Shippingstop Dot Com (India) Pvt. Ltd. in August, 2007, admittedly an Essar Group Company. He submitted 21 applications for UAS Licenses to DoT, New
Delhi on 3.9.2007 under the supervision of Shri A jay Madan, CEO of M/s Essar Telecom Infrastructure Pvt. Ltd., who in turn was functioning under instruction of accused Vikash Saraf. These UAS License applications were for Andhra Pradesh, Assam, Bihar, Tamil Nadu, Delhi, Gujarat, Haryana, Himachal Pradesh, Jammu & Kashmir, Karnataka, Kerala, Kolkata, Madhya Pradesh, Maharashtra, Uttar Pradesh(West), North-East, Orissa, Punjab, Rajasthan, Uttar Pradesh(East) and West Bengal service areas. Other employees of Essar Group as mentioned above helped Shri P.R. Karnik in preparation of such applications and its enclosures. It is alleged that accused Vikash Saraf, in conspiracy with accused Ravi N Ruia, Anshuman Ruia, IP Khaitan and Kiran Khaitan, fraudulently created a corporate veil in the name of M/s BPL Mobile Communications Limited, M/s BPL Communications Limited and their complex holding company structure, to conceal the actual complete control over it by the Essar Group through M/s Essar Teleholdings Limited, and various employees of Essar Telecom Business Group, and dishonestly & fraudulently misled the aforesaid employees of Essar Group into believing that Essar Group was not holding substantial equity in the said applicant company and was in compliance of UASL Guidelines.
53.
It is alleged that under such false belief Shri P.R. Karnik was to made
to sign an undertaking to the effect that no single promoter company/ legal person, either directly or through its associates, has substantial equity holding in more than one licensee company in the same service area for the Access Services namely; Basic, Cellular and Unified Access Service where the substantial equity means an equity of 10 per cent or more'. This undertaking was part of the applications dated 3.9.2007 submitted to DOT on 06.09.2007 by Shri P.R. Karnik, with the help of regulatory office employees of Essar Group at New Delhi, on behalf of M/s
Shippingstop Dot Com (India) Pvt. Ltd. However, as per requirements, a separate certificate under the signatures of the Company Secretary, regarding compliance of Clause 8 of the UASL Guidelines dated 14.12.2005 was not enclosed.
54.
It is alleged that when this application was scrutinized by the DoT
officials, absence of this certificate was listed as one of the discrepancies. The DoT officials also indicated that the company had not specifically indicated its promoters. Various shortcomings /discrepancies indicated in the application of the company were communicated to it vide letter dated 10/12/2007 of the A DG (AS-I), DoT.
55.
In the mean time on 21.09.2007 the name of the applicant company
was changed from M/s Shippingstop Dot Com (India) Pvt. Ltd. to M/s Loop Telecom Pvt. Ltd. In response to the letter dated 10.12.2007, a certificate dated 12.12.2007 signed by Shri Priyadarshi Siddhartha, Company Secretary, under instructions of accused Vikash Saraf, in conspiracy with accused Ravi N. Ruia, Anshuman Ruia, I.P. Khaitan and Ms. K iran Khaitan, was submitted in DOT office. This certificate, however, was not exactly as per the language required as per the guidelines of DoT. This was highlighted by the DoT officials. Accordingly another certificate dated 7.1.2008 was submitted by the applicant company under the signature of said Company Secretary. This was forwarded by Shri D.B. Sehgal, Authorised Signatory of the applicant company who was otherwise an employee of Essar Group and had been receiving the salary from M/s Essar Steel Ltd. during the period 2006 to 2010.
56.
Even this certificate was not as per the requirement of DoT and
accordingly another certificate dated 9.1.2008 was submitted by the company in the language required by the DoT as per the guidelines. Such acts of the applicant company to circumvent the commitment desired under the clause 8 of the U ASL Guidelines dated 14.12.2005, indicate fraudulent / dishonest intention of the accused persons to cheat the DOT.
57.
Shri Priyadarshi Siddhartha joined M/s BPL Mobile Communications
Ltd. on 10.12.2007 only and was asked to sign this certificate the very next day, on 11.12.2007, by the concerned persons under the instructions of accused Vikash Saraf, in conspiracy with accused Ravi N. Ruia, Anshuman Ruia, I.P. Khaitan and Ms. K iran Khaitan. Moreover the statutory books of the company created under the corporate veil did not reflect the true picture and the company secretary submitted such a certificate under bonafide belief so created by accused persons.
58.
On 10.1.2008 the DoT, believing that the company met the eligibility
conditions including the clause 8 of the U ASL Guidelines, allocated Letters of Intent to the applicant company. As per the Letters of Intent for the 21 service areas, M/s Loop Telecom Ltd. was required to pay an entry fee of Rs. 1454/- crore. This fee was paid to the DoT on 11.1.2008. That the aforesaid funds were entirely sourced by applicant company M/s Loop Telecom Ltd. from various companies belonging to Essar Group only. The details of such sources, as revealed during investigation are mentioned below:-
a. Advance from M/s Essar Telecom Infrastructure Pvt. Ltd. (ETIPL) M/s Essar Telecom infrastructures Ltd. paid an amount of Rs. 700/- crore to M/s Loop Telecom Pvt. Ltd. in the form of an advance towards an agreement entered into by it that, in the event of getting licenses and desired spectrum for providing cellular mobile services, M/s Loop Telecom Pvt. Ltd. will procure services relating to sharing of passive infrastructure and related operations/ maintenance from M/s Essar Infrastructure Ltd. only. It is alleged that ETIPL paid the aforesaid Rs. 700/- crore in the garb of a claim to lock in this customer and secure exclusive rights for providing passive infrastructure it had. b. Loan of Rs.725 crore from State Bank of India. M/s Loop Telecom Pvt. Ltd. approached State Bank of India for sanction of a term loan of Rs. 725 crore and non- fund based Bank guarantee on Rs. 812 crore. This case was processed by State Bank of India on the premises that M/s Loop telecom Pvt. Ltd. was Essar Group Company and accordingly this loan was sanctioned by State Bank of India to M/s Loop Telecom Pvt. Ltd. while treating it as a part of Group-Essar. It is alleged that such processing was based on various factors which included the corporate guarantee given by Ms/ Essar Shipping Limited, M/s Essar Steel Limited and M/s Essar Power Limited. Further, the matter on behalf of M/s Loop Telecom Pvt. Ltd. was pursued and negotiated by Essar Group functionaries. The Annual Report of the company for the year 2006-07 submitted by it for the loan purpose also indicated its association with various companies and promoters of Essar Group. It is alleged that the bank officials while processing the loan observed that M/s Loop Telecom Pvt. Ltd., a company promoted by M/s BPL Mobile Communications Ltd. of the Essar group is a special purpose vehicle of the group to implement
telecom business. c. Advance of Rs.175 crore towards equity shares from ETHL Global Capital Ltd. M/s ETHL Global Capital Ltd., an Essar group company, gave an advance of Rs.175 crore to M/s Loop Telecom Pvt. Ltd. as share application money for subscription of its equity shares subject to agreement on pricing of the shares and other terms of investment among the entire investors consortium and that investment being kept at 9.99% direct equity interest as per the terms and conditions of UASL guidelines. At the time when the LOIs were issued to M/s Loop Telecom Pvt. Ltd. Rs. 175 crore of the aforesaid Essar group company was lying with it as share application money. This amount of Rs. 175 crore as compared to the entire paid up capital of M/s Loop Telecom Pvt. Ltd. at Rs. 130.65 crore was a substantial amount. The aforesaid facts clearly indicate that the share price was not known when the share application money was paid by said Essar group company and the agreement was arrived at in furtherance of the conspiracy to allot shares at a price so that its shareholding doesn't go beyond 9.99%. Even this agreement was in violation of the clause 8 of UASL Guidelines dated 14.12.2005 in view of the 9.99% equity already held by M/s Essar Teleholdings Ltd. in M/s BPL Mobile Communications Ltd., the holding company of M/s Loop Telecom Pvt. Ltd. That this amount was later re-funded by M/s Loop Telecom Pvt. Ltd. and no equity was allotted. 59.
Letters of Intent for 21 UAS Licenses to M/s Loop Telecom Pvt. Ltd.
were complied with on 11.01.2008. Subsequently during 03.03.2008 to 05.03.2008 UAS License agreements for all the 21 service areas were signed by the DoT. Later scarce and valuable spectrum was allocated to M/s Loop Telecom Pvt. Ltd. on various dates as per dates mentioned below:-
Allocation of spectrum to Loop S. No.
60.
Name of Circle
Date of Allocation
1
Tami Nadu (inclusive of Chennai)
22.04.2008
2
Orissa
24.04.2008
3
Kerala
15.05.2008
4
Andhra Pradesh
27.05.2008
5
Karnataka
30.05.2008
6
Madhya Pradesh
28.08.2008
7
Bihar
03.10.2008
8
Maharashtra
14.11.2008
9
Himachal Pradesh
04.12.2008
10
Haryana
04.12.2008
11
Kolkata
05.12.2008
12
Assam
22.12.2008
13
North East
23.12.2008
14
Rajasthan
23.12.2008
15
Jammu & Kashmir
24.12.2008
16
Uttar Pradesh (West)
26.12.2008
17
West Bengal
09.01.2009
18
Uttar Pradesh (East)
21.01.2009
19
Gujarat
09.03.2009
20
Punjab
09.03.2009
21
Delhi
Not allocated
Subsequently M/s Loop Telecom Pvt. Ltd. planned to meet roll out
obligations for which it needed certain financial assistance from various banks.
That Central Bank of India sanctioned a loan of Rs. 500 crore to it on 29.9.2009 on the basis of bank guarantee given by M/s Essar Global Limited, an Essar Group company. In the Board Resolution submitted by it along with bank guarantee so given by M/s Essar Global Limited to the Central Bank of India it was clearly mentioned that Loop is an associate of Essar Global Limited'. 61.
M/s Loop Telecom Pvt. Ltd. also approached Federal Bank Limited
which sanctioned a loan of Rs. 100 crore to it on 18.12.2009. It has come in evidence that this loan was also sanctioned on the basis of bank guarantee given by M/s Essar Global Limited to the bank. In the Board Resolution of M/s Essar Global Limited submitted by it to Federal Bank it was again mentioned that Loop is an associate of Essar Global Limited'. 62.
M/s Loop Telecom Pvt. Ltd. had also approached SBI Capital Market
Limited and L IC of India for loans of Rs. 400 crore and Rs. 600 crore respectively which was sanctioned on 31.12.2009 and 28.1.2010. Both these loans the loans were sanctioned by the banks on the basis of bank guarantees given by M/s Essar Global Limited only. 63.
It is alleged that many persons who were actually belonging to Essar
group joined the board of M/s Loop Telecom Pvt. Ltd. even after it had been shown as transferred from Essar group to M/s BPL Mobile Communications Ltd. and M/s BPL Communications Ltd. on 01.09.2007. Among these persons one Sh. V Ganeshan, who has been an Essar group employee since 1995 till date, and was posted as Manager in M/s Essar Investments Ltd. in 2007. He was a director in M/s Loop Telecom Pvt. Ltd. since September, 2006 till 19.09.2008. Ms. Sangeeta Lakhi, another such director appointed since 16.08.2007, who was also a director in M/s Santa Trading Pvt. Ltd., M/s BPL Mobile Communications Ltd. & M/s
BPL Communications Ltd., was in fact an advocate with M/s Prem Rajani & Associates and had long professional association with Essar Group through accused Vikash Saraf and no such association with Khaitans. Shri A jay Madan, another Director of M/s Loop Telecom Pvt. Ltd. since 16.8.2007 till 4.3.2009 was also a Director in M/s BPL Mobile Communications Ltd. during 28.9.2006 to 16.12.2008. That Shri A jay Madan was in fact a part of Essar Telecom Business Group since 1.12.2004 and later became CEO of M/s Essar Telecom Infrastructure Pvt. Ltd. from 2006 onwards and remained so till 31.1.2009, and that during this entire period he drew salary from Essar Group only. 64.
Another Director appointed on 16.8.2007 in M/s Loop Telecom Pvt.
Ltd. was Shri S. Subramanian, CEO, M/s BPL Mobile Communications Ltd. who remained so till 2.6.2008. That he was appointed as CEO of the company on 1.8.2006 by Vikash Saraf, who himself was the CEO of Essar Telecom Business Group and a Director of M/s BPL Mobile Communications Ltd., and was supervising and appraising the functioning of Shri S. Subramaniam. Subsequently, in 2008 when accused Vikash Saraf got elevated as Group President -Strategy and Mergers & Acquisition, of Essar Group, he appointed Shri S. Subramaniam as CEO of M/s Essar Telecom Business Group and appointed Shri Sanjeev Chachondia, the then CEO of M/s Essar Telecom Infrastructure Pvt. Ltd. as CEO of M/s BPL Mobile Communications Ltd. 65.
It is alleged that during the period 16.8.2007 to 2.6.2008, when all
applications were made by M/s Loop Telecom Pvt. Ltd. (erstwhile M/s Shippingstop Dot Com (India) Pvt. Ltd.), and U AS licenses obtained by it, the company had four Directors namely Shri V. Ganeshan, Smt. Sangeeta Lakhi, Shri Ajay Madan and Shri S. Subramaniam and two of them were full time employees of M/s Essar Group and the two were functioning under the instructions of accused
Vikash Saraf and accused promoters of Essar Group. Most of the meetings during September, 2006 to September, 2008 were chaired by Sh V. Ganeshan, an Essar group employee. The composition of the Board of directors of the licensee company was, therefore, being controlled by accused Essar group promoters through M/s Essar Teleholdings Ltd. and accused Vikash Saraf. It is alleged that substantial funds amounting to much more than the entire equity of M/s Loop Telecom Pvt. Ltd. were provided by accused persons belonging to Essar group through M/s Essar Teleholdings Ltd. and M/s Essar Investment Ltd., which were used by the applicant company towards share capital in name of holding front companies, share application money for M/s ETHL Global Capital Ltd. and entire entry fee paid by the applicant company to DoT. Essar group was, therefore, through M/s Essar Teleholdings Ltd. / M/s Essar Investment Ltd., holding more than half in nominal value of the share capital of M/s Loop Telecom Ltd., under a complex corporate veil, fraudulently created for the purpose. M/s Loop Telecom Ltd., therefore, was functioning as a subsidiary, and thereby an associate, of M/s Essar Teleholdings Ltd. under a complex corporate veil, fraudulently created for the purpose, by accused persons and companies. It is alleged that M/s Loop Telecom Pvt. Ltd. was in fact an alter ego /front of M/s Essar Teleholdings Ltd. / Essar group. 66.
During the aforesaid period many persons who were actually
belonging to Essar group were functioning on the board of M/s BPL Mobile Communications Ltd. too. Accused Vikash Saraf, who was actually CEO of Essar Telecom Business Group and later became CEO (Strategy and Merger & Acquisitions) of Essar Group, himself was a director in M/s BPL Mobile Communications Ltd. from February, 2005 to 2008-09. He was also a director in M/s Essar Teleholdings Ltd during the relevant period from 04.06.2004 to
13.08.2010. Sh Prem Rajani, another such director appointed in February, 2005 was in fact an advocate with M/s Prem Rajani & Associates and had long professional association with Essar Group through accused Vikash Saraf and no such association with Khaitans. Ms. Sangeeta Lakhi, another such director appointed since 02.04.2007, who was also a director in M/s Santa Trading Pvt. Ltd., M/s BPL Communications Ltd. and M/s Loop Telecom Pvt. Ltd., was in fact an advocate with M/s Prem Rajani & Associates and had long professional association with Essar Group through accused Vikash Saraf and no such association with Khaitans. Shri A jay Madan, another Director of M/s BPL Mobile Communications Ltd. since 28.09.2006 till 16.12.2008, was in fact a part of Essar Telecom Business Group since 1.12.2004 and later became CEO of M/s Essar Telecom Infrastructure Pvt. Ltd. in 2006 and remained so till 31.1.2009, and that during this entire period he drew salary from Essar Group only. 67.
Accused Vikash Saraf (CEO of Essar Telecom Business Group), Shri
Ajay Madan (CEO of Essar Telecom Infrastructure Pvt. Ltd.), Shri Amit Gupta (Vice President, Essar Investments Ltd. and Member of Essar Telecom Business Group), Shri N.B. Vyas (Company Secretary, M/s Essar Steel Ltd.) and Shri V. Ganeshan (an employee in M/s Essar Investment Ltd. /Essar Steel Ltd.) were the authorized signatories in various bank accounts of M/s Loop Telecom Pvt. Ltd. apart from Shri S. Subramaniam of M/s BPL Mobile Communications Ltd. and a Director of M/s Loop Telecom Pvt. Ltd. who was himself appointed by and reporting to accused Vikash Saraf. 68.
It is alleged that many board meetings of M/s Loop Telecom Pvt. Ltd.
and M/s BPL Mobile Communications Ltd. during the period 2006 to 2009 were held at Essar House, Mahalaxmi, Mumbai, instead of the changed registered office of M/s Loop Telecom Ltd. and the address of M/s BPL Mobile Communications
Ltd. both situated at Mahim, Mumbai. 69.
It is alleged that searches were conducted at the office premises of
M/s Loop Telecom Pvt. Ltd. wherein office copies of certain emails exchanged between the Essar Telecom Business Group (ETBG) officials and officials of Loop Telecom Pvt. Ltd. have been recovered. These facts establish the active involvement and influence of M/s Essar Telecom Business Group into the functioning of M/s Loop Telecom Pvt. Ltd. During search, a draft due diligence report of M/s J. Sagar Associates was also recovered from the premises of M/s Loop Telecom Pvt. Ltd. in Mumbai. In this report, various instances have been highlighted which indicate that M/s Loop Telecom Pvt. Ltd. is an associate of Essar Group in terms of Clause 8 of the U ASL Guidelines and in terms of Accounting Standards 23 notified by M inistry of Corporate Affairs and Institute of Chartered Accountants of India (ICAI). 70.
M/s Loop Telecom Pvt. Ltd. has since been renamed as M/s Loop
Telecom Ltd. w.e.f 21.10.2009. M/s BPL Mobile Communications Ltd. has been renamed as M/s Loop Mobile India Ltd. w.e.f. 09.03.2009 and M/s BPL Communications Ltd. has since been renamed as M/s Loop Mobile Holdings India Ltd. w.e.f. 21.04.2009. 71.
A fter the accused persons had cheated the DoT and fraudulently
obtained the Letters of Intent /UAS Licenses /valuable spectrum in furtherance of a conspiracy among themselves, several complaints were received by the DoT during 2008-2010 alleging that M/s Loop Telecom Ltd. was an Essar group company under a corporate veil and was thereby violating the clause 8 of UASL Guidelines dated 14.12.2005. In one such matter DoT referred the matter to M inistry of Corporate Affairs seeking to examine the matter and opine whether the
given facts and circumstances made out a violation of the clause 8 of U ASL Guidelines. The Deputy Director (Inspection), M inistry of Corporate Affairs, who examined the matter in detail concluded that the clause 8 of the UASL Guidelines had been violated. However, the M inistry of Corporate Affairs, instead of conveying such a definite opinion to DoT, chose to send a non-committal vague report elaborating the significant control of Essar group over M/s Loop Telecom Pvt. Ltd. In the light of such a general report on facts, the DoT took a broad view of the matter and decided to wait for any fresh inputs for deciding the matter, even though many a concerned officers of DoT had recommended to issue Show Cause Notices to M/s Loop Telecom Ltd. for termination of UAS Licenses. In this manner the public servants belonging to M inistry of Corporate Affairs and DoT chose to take a broad view of this serious matter, despite there being strong suggestions of violation of the Clause 8 of U ASL Guidelines dated 14.12.2005. The public servants belonging to M inistry of Corporate Affairs and DoT even chose not to investigate the matter under provisions of the Companies Act and allowed the matter to rest.
72.
It is further alleged that M/s Loop Telecom Ltd. made fraudulent
UASL applications for 21 circles on 3.9.2007 by misrepresenting the fact that they met all the eligibility criteria including clause 8 of U ASL guidelines. These fraudulent applications were accompanied by false certificates to the effect that the company met the conditions prescribed under clause 8 of UASL guidelines, thereby falsely claiming that the applicant company was not under any control / influence of any existing licensee and that competition would not be compromised if 21 licenses applied for are issued to it. The employees of Essar Group/ M/s Loop Telecom Ltd., under bona-fide belief, signed these certificates on false assurance
about correctness of the facts, given by accused Vikash Saraf, in conspiracy with promoters of Essar group viz. accused Ravi N. Ruia and accused Anshuman Ruia, and with complicity of accused I P Khaitan and Ms. K iran Khaitan. Accused Ravi N. Ruia was a director of the M/s Essar Investment Ltd. from 10.12.1976 to 10.11.2008, during which period all the Essar group transactions with M/s Loop Telecom Ltd. and its holding companies, thereby fraudulently creating complex corporate veil, took place. Among the Essar Promoters the knowledge of the entire structuring of the corporate veil to hide the true identity of the company's stakeholders has come in respect of accused Ravi N. Ruia and accused Anshuman Ruia. It is alleged that these two promoters and accused Vikash Saraf, all belonging to Essar group, remained as directors on the board of M/s Hutchison Essar Ltd. during the entire relevant period i.e. 2004 to 2010 (during 2007-2010 it was renamed as M/s Vodafone Essar Ltd.) and were looking after the telecom interests of the Essar group in the joint venture and elsewhere. The said accused persons were also directors, one or more of them, in other subsidiary licensee companies of the said joint venture M/s Hutchison Essar Ltd. /M/s Vodafone Essar Ltd. during said period. It is alleged that these two Essar promoters, while giving shape to the criminal conspiracy to cheat the DoT, Govt. of India, withdrew themselves from the role on record they had been playing in M/s Essar Investments Ltd. (accused Ravi Ruia, a director of M/s Essar Investment Ltd. resigned on 10.11.2008) and M/s Loop Mobile India Ltd. (accused Anshuma Ruia a director of M/s BPL Mobile Communications Ltd. /L M IL resigned in December, 2006). It is alleged that this fraudulent act was actually a result of the entire conspiracy to cheat the DoT through a fraudulent corporate veil, to hide the actual holding structure of M/s Loop Telecom Pvt. Ltd. and M/s Loop Mobile India Ltd. (erstwhile M/s BPL Mobile Communications Ltd.) which was committed through M/s Essar Teleholdings Ltd. It is alleged that said M/s Essar Teleholdings Ltd. which was
holding substantial equity directly/ through associates in M/s Vodafone Essar Ltd., a company having various subsidiaries operating U AS Licenses in all 22 telecom service areas, was also holding substantial equity in M/s Loop Telecom Ltd. and M/s Loop Mobile India Ltd. (erstwhile M/s BPL Mobile Communications Ltd.) under a corporate veil fraudulently created by the accused persons for this purpose. Evidence has also come to the effect that these two promoters of Essar group, viz. accused Ravi N. Ruia and accused Anshuman Ruia, were actively looking after the functioning of accused Vikash Saraf, who gave shape to the entire edifice of offence with complicity of accused I P Khaitan and Ms. K iran Khaitan. Accused I P Khaitan and accused Ms. K iran Khaitan wilfully participated in the entire conspiracy by becoming benami holders of M/s Loop Telecom Ltd. on behalf of the accused promoters of Essar group. M/s Loop Telecom Ltd. has been the beneficiary of the entire design to cheat DoT and M/s Loop Mobile India Ltd. (erstwhile M/s BPL Mobile Communications Ltd.), another telecom operator and also a substantial stake holder in M/s Loop Telecom Pvt. Limited, has also been a beneficiary of the same design (being stakeholder of the former). It is alleged that entry fee ought to have been indexed / revised by DoT by 3.5 times as Adjusted Gross Revenue per Mega Hertz of spectrum (AGR/MHz) had increased by 3.5 times during 2003-08. It is alleged that by paying an entry fee of Rs. 1455 crore, accused M/s Loop Telecom Ltd., in conspiracy with other accused persons, obtained 21 UAS Licenses worth Rs.5092 crore.
73.
It is alleged that the aforesaid facts and circumstances constitute commission
of offences, during 2007-08, punishable u/s 120-B IPC r/w 420 of IPC, and substantive offence u/s 420 of IPC, against accused persons, viz. Ravi N. Ruia, Anshuman Ruia, Vikash Saraf, I P Khaitan, Ms. Kiran Khaitan, M/s Loop Telecom
Ltd. (erstwhile M/s Shippingstop Dot Com India Pvt. Ltd.), M/s Loop Mobile India Ltd. (erstwhile M/s BPL Mobile Communications Limited) and M/s Essar Teleholdings Ltd. 74.
Hence, this case.
75.
I have heard the arguments on charge extensively at the bar from
03.05.2012 to 11.05.2012 on day-to-day basis and have carefully gone through the record. I may respectfully add that the prosecution has placed on record five boxful of documents containing close to one lac pages.
76.
Sh. U. U. Lalit, learned Sr. Advocate/ Spl. PP, has read out the entire
charge sheet at the bar to show that accused Ravi Kant Ruia, Anshuman Ruia and Vikash Saraf, acting in league with accused I. P. Khaitan and K iran Khaitan, created a complex web of companies to conceal actual stakeholders of BPL Communications Limited, now Loop Mobile Holdings India Limited, and its subsidiaries after its purchase from erstwhile promoters/ stakeholders. It is submitted that entire funding for more than 83% equity and debt instruments for the purchase of BPL Communications Limited, now Loop Mobile Holdings India Limited, and its two operating companies, BPL Mobile Communications Limited, now Loop Mobile (India) Limited, and BPL Mobile Cellular Limited, came from Essar group companies. It is submitted that applications for 21 new UAS Licences were submitted to DoT on 03.09.2007 in the name of Shippingstop Dot Com (India) (P) Limited, which was an Essar group company. It is further submitted that this company was transferred to M/s BPL Communications Limited, now Loop Mobile Holdings India Limited, and BPL Mobile Communications Limited,
now Loop Mobile (India) Limited, just two days before the applications for 21 UAS Licences were submitted to DoT. It is further submitted by him that on 31.08.2007, 49 lac equity shares of Rs. 10 each of Shippingstop Dot Com (India) (P) Limited were issued to BPL Communications Limited, now Loop Mobile Holdings India Limited, at a premium of Rs. 275 each, but the amount of Rs. 140 crore was received by BPL Communications Limited, now Loop Mobile Holdings India Limited, from Essar Teleholdings Limited. It is further submitted that on 01.09.2007 M/s Karthick Financial Limited, a company of Essar group, sold 51,50,000 shares of Shippingstop Dot Com (India) (P)Limited to M/s BPL Mobile Communications Limited, now Loop Mobile (India) Limited, at par and 130 shares held by it jointly with Sh. Girish Sathe to Sh. S. Subramaniam jointly with BPL Mobile Communications Limited, now Loop Mobile (India) Limited. It is submitted that the difference in the sale price of the shares show that Essar group and the BPL group were same, though in papers it was shown that BPL Communications Limited, now Loop Mobile Holdings India Limited, and BPL Mobile Communications Limited, now Loop Mobile (India) Limited, were held by I. P. Khaitan and K iran Khaitan through Santa Trading (P) Limited (STPL). It is further submitted by him that on the date of application the funding of M/s Shippingstop Dot Com (India) (P)Limited for complying with paid-up capital and authorized capital requirement was, in fact, received from BPL Mobile Communications Limited, now Loop Mobile (India) Limited, and BPL Communications Limited, now Loop Mobile Holdings India Limited, which in turn received the funds from Essar Teleholdings Limited. It is further submitted by him that on the date of application Essar Teleholdings Limited was having 33% stake in Vodafone Essar Limited, a pan India licencee company. It is further submitted that BPL Mobile Communications
Limited, now Loop Mobile India Limited, was also still having licence for Mumbai circle as that could not be sold to Hutchison Essar Limited. It is further submitted that BPL Communications Limited, now Loop Mobile Holdings India Limited, was even otherwise controlled by Essar group on the date of application as a partnership firm by the name of BPL Communications was constituted in which Essar Investment and Karthick Financial Services Limited, both of Essar group, were partners of 3% and 2%, whereas BPL Communications Limited, now Loop Mobile Holdings India Limited, was partner of 95%, but it being a partnership firm, decisions were to be taken by the majority of the partners and not as per the extent of shareholding. It is repeatedly submitted by him that Essar group exercises full control over Shippingstop Dot Com (India)(P)Limited, the name of which was changed to M/s Loop Telecom (P) Limited on 21.09.2007 and in the year 2009, it was converted into a closely held public limited company with name M/s Loop Telecom Limited. It is submitted by him that the applications were prepared and made by officials/ employees of Essar group companies. It is repeatedly submitted by him that funding was also arranged by Essar group companies. It is further submitted by him that when DoT officials raised queries about eligibility of Loop Telecom Limited, accused Vikash Saraf, in conspiracy with Ravi Ruia, Anshuman Ruia, Ishwari Prasad Khaitan and Kiran Khiatan, knowing fully well that BPL Mobile Communications Limited, now Loop Mobile India Limited, was fully owned and controlled by Essar group under a complex corporate veil, deliberately made false representations through other innocent employees that Shippingstop Dot Com (India) (P) Limited, now Loop Telecom Limited, was in compliance of substantial equity clause, though on that date Essar group was already having 33% stake in Hutchison Essar Limited, later Vodafone Essar Limited, a pan India licencee. It is submitted that almost entire funding came
from the Essar group. Directors and personnel involved in the preparation, filing and processing of the applications were also of Essar group. It is submitted that accused cheated the DoT into issuing LOIs on 10.01.2008 and subsequently signing of UAS Licences and allocation of spectrum. It is further submitted that on issuance of LOI, Loop Telecom Limited was required to pay entry fee of 1454 crore and this fee was paid on 11.01.2008 and the entire funds were sourced by the applicant company from various companies belonging to Essar group. It is further submitted by him that Essar Telecom Infrastructure Limited, an Essar group company, paid an amount of Rs. 700 crore to Loop Telecom Limited in the form of an advance for using its passive infrastructure. It is further submitted that SBI sanctioned a term loan of Rs. 725 crore and non-fund based bank guarantee of Rs. 812 crore to Loop Telecom Limited taking it to be an Essar group company and companies of Essar group gave the corporate guarantee. Another Essar group company, that is, ETHL Global Capital Limited gave an advance of Rs. 175 crore to Loop Telecom Limited as share application money for subscription of its shares. It is repeatedly submitted that subsequent loan facilities from various banks were obtained by it on the premise that it was an Essar group company. It is submitted by him that this complex corporate veil was created by the accused persons to conceal the fact that Essar group was controlling Loop Telecom Limited in the name of Kiran Khaitan and I. P. Khaitan. It is submitted that it is a fit case where corporate veil is required to be pierced. My attention has been invited by him to various documents and statements of witnesses. It is repeatedly submitted by him that accused persons deliberately cheated the DoT into issuing LOIs by making it believe that applicant company was in compliance of substantial equity clause, though it was not. It is submitted by him that this was done by all five accused and three companies in conspiracy
with each other and the DoT was cheated. It is submitted that there is enough material on record to frame the charges against the accused. My attention has also been invited to the following authorities:(1)S. N. Palanitkar v. State of Bihar, A IR 2001 SC 2960; (2)Hridaya Ranjan Pd. Verma v. State of Bihar, A IR 2000 SC 2341; (3) Chitresh Kumar Chopra Vs. State (Government of NCT of Delhi), (2009) 16 SCC 605; and (4) Niranjan Singh Karam Singh Punjabi Vs. Jitender Bhimraj Bijjaya and others, (1990) 4 SCC 76.
On the other hand, it is submitted by Sh. Mukul Rohatgi, learned Sr.
77.
Advocate, for accused Ravikant Ruia and Anshuman Ruia that U ASL Guidelines dated 14.12.2005, containing substantial equity clause, which is alleged to have been violated, does not have the force of law. They are mere guidelines and not law. It is submitted that their violation does not attract penal action. It is further submitted by him that there is no cheating involved in this case as the entire facts were brought to the notice of the DoT by way of a complaint filed by Janhit Morcha, an NGO, before the DoT. It is submitted that all the allegations made in the charge sheet were also leveled in the complaint of Janhit Morcha. It is submitted that when the entire facts were in the knowledge of the DoT, there is no question of DoT being misled by the accused persons. It is submitted that there is no question of deception being practised by the accused persons.
It is further submitted that clause 8 of U ASL Guidelines, that is, substantial equity clause, is vague and it has no definite and certain meaning and any violation of such a vague clause cannot be held to be incriminating or criminal. It is further submitted that the word "associate" used therein has no definite meaning and even DoT does not know its meaning. It is submitted that violation only by way of equity holding can be considered and no other consideration can be taken into account. It is repeatedly submitted by him that it is equity and equity alone which is material in the case and the equity holding of the relevant companies was within the permissible limits. It is submitted by him that debentures, loans or funding cannot be taken into account while considering the violation of clause. It is further submitted that an amorphous term "Essar group" has been used in the charge sheet and this term also has no legal meaning and has been used to illegally charge sheet the accused persons. It is repeatedly submitted that funding a company or helping a relative or acquiring shares in a company is no crime. It is further submitted that even the word "promoter" has no definite meaning. It is further submitted that entire transactions have been duly reflected in the books of accounts and nothing has been concealed and there is no question of any cheating or any benami transaction. It is further submitted that in the instant case even ingredients of Section 420 are not made out as there is no delivery of property. It is further submitted that there is no complainant as there is no victim in the case. It is submitted that spectrum is existing in nature and its possession cannot be obtained or delivered. Only a licencee has a right to use it and, as such, it does not come within the four corners of Section 420 IPC. It is submitted that the property contemplated by Section 420 IPC is physical property. It is submitted that no one suffered any loss in the case and, as such, there is no violation of Section 420 IPC. It is further
submitted that there is no vicarious liability under the criminal law. It is further submitted by him that there is no role of accused Anshuman Ruia and Ravi Ruia in this case. They were not directors in the company and Anshuman Ruia had resigned from the board of Loop Mobile (India) Limited on 15.12.2006. It is further submitted by him that there is no material on record to show that the accused persons were in conspiracy with each other. Relevant pages of the charge sheet have been read at the bar to emphasize that there is no incriminating material on record and that both accused are innocent. My attention has been invited to various documents and statements of witnesses. It is submitted that since there is no incriminating material on record, both accused may be discharged. My attention has also been invited to the following authorities: (1)State of W. B. Vs. Pranab Ranjan Roy, (1998) 3 SCC 209; (2)Associated Hotels of India Limited Vs. R. N. Kapoor, A IR 1959 SC 1262; (3) Yogesh alias Sachin Jagdish Joshi Vs. State of Maharashtra, (2008) 10 SCC 394; (4)State of Bihar v. Bhagirath Sharma, (1973) 2 SCC 257; (5)R. D. Goyal v. Reliance Industries Limited, (2003)1 SCC 81; (6)Union of India Vs. Prafulla Kumar Samal, (1979) 3 SCC 4; (7)State of Kerala and others Vs. Unni and another, (2007) 2 SCC 365; (8)Sanjay Chandra Vs. Central Bureau of Investigation, (2012) 1 SCC 40; (9) Gurcharan Singh and others Vs. State (Delhi Administration), (1978) 1 SCC 118;
(10)Maksud Saiyed Vs. State of Gujarat and others, (2008)5 SCC 668; (11) R. Sai Bharathi Vs. J. Jayalalitha, (2004) 2 SCC 9; and (12) Commissioner of Income Tax Vs. National Travel Services, 2012 A D (Delhi) 98.
78.
It is submitted by Sh. Parag Tripathi, learned Sr. Advocate, for
accused I. P. Khaitan, Ms. Kiran Khaitan, M/s Loop Telecom Limited and M/s Loop Mobile India Limited that Essar group is different from Loop group. It is submitted that there is no element of criminality involved in Loop Telecom Limited acquiring UAS Licences for 21 circles. It is submitted that if Loop Telecom Limited was ineligible on the date of application, then it is a matter of administrative or civil law and there is nothing on record to make it criminal. It is submitted that the charge sheet does not disclose any mens rea or criminality. It is submitted that the entire charge sheet is based upon violation of clause 8 of U ASL Guidelines and that clause itself is ambiguous. It is submitted that even DoT does not know its meaning. It is submitted that there is no benami transaction involved in the case. It is repeatedly submitted that entire transactions were duly reflected in the books of accounts and if a transaction is reflected in the books of accounts, that does not become benami. It is submitted by him that both Essar group and Khaitan group had reflected the entire transactions in their books of accounts. It is submitted that Loop Telecom Limited raised its own resources and if Essar group provided some funding, that does not make the action criminal as the transactions were duly recorded in the books of accounts. It is submitted that Essar group never went to DoT for U AS Licence in the name of Loop Telecom Limited. It is submitted that even otherwise clause 8 is an ambiguous clause without any definite
meaning and its violation cannot make anyone suffer penal action. It is submitted that for attributing criminality, a legal provision must be certain and definite. It is repeatedly submitted that the word "associate" has no definite meaning. It is repeatedly submitted that only equity and equity alone can be considered while determining the violation of clause 8 and sources of fund cannot be gone into. It is repeatedly submitted by him that since there is no mens rea, there is no question of any deception. More over, there is no benami transaction in the instant case. It is repeatedly submitted by him that there in no incriminating material on record against any of the four accused. Relevant paragraphs of the charge sheet have been read out at the bar. My attention has been invited to various documents and statements of witnesses to emphasize that there is no incriminating material on record. It is prayed that the accused persons may be discharged. My attention has also been invited to an authority reported as Pawan Kumar Gupta Vs. Rochiram Nagdeo, (1994) 4 SCC 243.
79.
It is submitted by Sh. Sidharath Luthra, learned Sr. Advocate, for
accused Vikash Saraf that accused is innocent and there is no incriminating material on record against him. It is submitted that accused was merely an employee and he gave directions or rendered help at various stages in normal course of his duties and there was no criminality involved in that. It is submitted that suspicion cannot take the place of proof. It is submitted by him that acquisition or transfer of a company is a normal business activity and there is no criminality involved in that. It is submitted by him that applications for 21 UAS Licences were submitted on 03.09.2007 and these applications were neither signed nor submitted by accused Vikash Saraf. It is further submitted by him that even
clarifications sought by DoT were not given by him. It is further submitted that the word "associate" as used in clause 8 of U ASL Guidelines has no definite meaning and is ambiguous and benefit of ambiguity is required to be given to the accused. It is submitted that there is no doubt about the source of money as the transactions were duly recorded in the books of accounts of Essar group as well as Khaitan group and when the transactions were duly recorded, an employee cannot be held responsible for that as he did not make any false entry or false representation. It is further submitted that while acting for Loop Telecom Limited, he was acting on the directions of directors. It is repeatedly submitted by him that there is no incriminating evidence against the accused. Relevant portions of charge sheet, statements of many witnesses and relevant parts of numerous documents have been read at the bar in great detail. It is prayed that accused may be discharged. My attention has also been invited to the following authorities: (1) Niranjan Singh Karam Singh Punjabi Vs. Jitender Bhimraj Bijjaya and others, (1990) 4 SCC 76; (2)State through CBI Vs. Rakesh Bist and another, Crl. Rev. Pet. No. 113 of 2003 decided by Hon'ble High Court of Delhi on 30.07.2007; (3)Dilawar Balu Kurane Vs. State of Maharashtra, (2002) 2 SCC 135; (4)Union of India Vs. Prafulla Kumar Samal, (1979) 3 SCC 4; (5)State of Bihar Vs. Bhagirath Sharma and another, (1973) 2 SCC 257; (6) State of West Bengal and others Vs. Committee for Protection of Democratic Rights, West Bengal and others, (2010) 3 SCC 571; and (7)Shankutala Vs. State of Delhi, 139 (2007) Delhi Law Times 178.
80.
It is submitted by Sh. Harish N. Salve, learned Sr. Advocate, for
accused M/s Essar Teleholdings (A-8) Limited that no crime has been committed in this case as every company manages its own affairs. It is submitted that applications for 21 UAS Licences were made by Shippingstop Dot Com (India) (P) Limited on 03.09.2007 and this was done by the company as per its own commercial considerations and doing this is no crime as long as this is within the parameters of law. It is submitted that in the instant case, companies governed by the Companies Act are involved and their relationship is governed by law. It is submitted that in this case companies were bought and sold to make money. It is submitted that all parties involved in the case knew that BPL Communications Limited, now Loop Mobile Holdings India Limited, and its subsidiaries were being sold and purchased for being sold further to make money. It is further submitted by the learned Sr. Advocate that in this case the funds, which were transferred from Essar group to Khaitan group came from Hutchison as the transaction of purchase of BPL Communications Limited, now Loop Mobile Holdings India Limited, and its two operating companies, BPL Mobile Communications Limited, now Loop Mobile India Limited, and BPL Cellular Mobile Limited, having telecom licences in Mumbai, Tamil Nadu, Kerala and Maharashtra circles respectively was being done for someone else. It is submitted by him that there is no benami transaction involved in the case. It is submitted by him that if there are two possibilities, then no criminal charge can be framed. It is further submitted by him that it was a case of merger and both the operating companies were purchased to be sold and BPL Cellular Mobile Limited was sold to Hutchison Essar Limited for Rs. 1120 crore. However, permission was not received from DoT regarding sale of BPL Mobile Communications Limited, now Loop Mobile India Limited, operating company for Mumbai circle, to Hutchison Essar Limited as both were having telecom licences
in Mumbai circle and, as such, this transaction of sale could not be completed, though the price was fixed to be Rs. 1412 crore, later on enhanced to Rs. 1663 crore, out of which Rs. 1617 crore was already paid by Hutchison Essar Limited as advance. This agreement of sale shows that there was no criminal intention involved in these transactions at any stage. The learned Sr. Advocate has read out the relevant portions of charge sheet to show as to how BPL Communications Limited, now Loop Mobile Holdings India Limited, and its two subsidiary companies, BPL Mobile Communications Limited, now Loop Mobile India Limited, and BPL Cellular Mobile Limited, were purchased by Essar group for being assigned to Khaitan group. It is further submitted that the partnership firm by the name of BPL Communications with Essar Investment, Karthick Financial Services Limited and BPL Communications Limited, now Loop Mobile Holdings India Limited, was created as an investment vehicle and not for the purpose of controlling BPL Communications Limited, now Loop Mobile Holdings India Limited, and BPL Mobile Communications Limited, now Loop Mobile India Limited, both shareholders of Shippingstop Dot Com (India) (P)Limited, later on Loop Telecom Limited. It is further submitted that this was also a tax saving instrumentality. It is repeatedly submitted that it had no criminal intention to acquire another U AS Licence. It is repeatedly submitted by him that when one company of the group was already having a UAS Licence where was the need for having another one. It is further submitted that even in a partnership firm, voting is controlled by its members. It is further submitted that even if the Essar group wanted another UAS Licence by concealing the real facts, Hutchison Essar Limited/ Vodafone Essar Limited would have come to know about it and in such a situation why would Essar group risk its existing licence. It is further submitted that due diligence report
was also sought. It is further submitted that neither there is a victim nor a complainant in this case. It is further submitted that there is no material on the file to show any conspiracy between the parties. It is further submitted that the source of funding is clear and has been duly recorded in the books. It is repeatedly submitted that there is no incriminating material on record. A lmost entire charge sheet has been read at the bar to emphasize that there is no incriminating material on record. Relevant documents as well as statements of witnesses have also been read at the bar to emphasize that there is no incriminating material against the accused. It is prayed that the accused may be discharged. My attention has been invited to an authority reported as Vodafone International Holdings B.V. Vs. Union of India and Another, [2012] 341 ITR 1 (SC).
81.
The learned Sr. PP has rebutted the submissions of all the accused
persons and has submitted that a prima facie case of 120-B read with 420 IPC is made out against all the accused and a substantive case under Section 420 IPC is also made out against accused Vikash Saraf.
82.
I have carefully considered the rival submissions made at the bar in
the light of material on record.
83.
The basic principles to be followed at the time of consideration of
charge in a criminal case were laid down by the Hon'ble Supreme Court in Union of India Vs. Prafulla Kumar Samal and Another (supra) in para 10 as under::
"Thus, on a consideration of the authorities mentioned above, the following principles emerge: 10. That the Judge while considering the question of framing the charges under Section 227 of the Code has the undoubted power to sift and weigh the evidence for the limited purpose of finding out whether or not a prima facie case against the accused has been made out: 11. Where the materials placed before the Court disclose grave suspicion against the accused which has not been properly explained the Court will be fully justified in framing a charge and proceeding with the trial. 12. The test to determine a prima facie case would naturally depend upon the facts of each case and it is difficult to lay down a rule of universal application. By and large however if two views are equally possible and the Judge is satisfied that the evidence produced before him while giving rise to some suspicion but not grave suspicion against the accused, he will be fully within his right to discharge the accused. 13. That in exercising his jurisdiction under Section 227 of the Code the Judge which under the present Code is a senior and experienced Judge cannot act merely as a Post Office or a mouth-piece of the prosecution, but has to consider the broad possibilities of the case, the total effect of the evidence and the documents produced before the Court, and the basic infirmities appearing in the case and so on.
This however does not mean that the Judge should make a roving enquiry into the pros and cons of the matter and weigh the evidence as if he was conducting a trial".
84.
At the outset, I may make it clear that at the stage of charge a criminal
Court is not required to write a detailed order considering the merit of each submission made at the bar as the law does not require discussion on the merit of the case at this stage and any detailed discussion at this stage may also prejudice the parties. In this regard, it is instructive to quote an authority reported as Kanti Bhadra Shah Vs State of West Bengal (2001) 1 SCC 722, wherein Hon'ble Supreme Court observed, as under, on this point: "If there is no legal requirement that the trial Court should write an order showing the reasons for framing a charge, why should the already burdened trial Courts be further burdened with such an extra work. The time has reached to adopt all possible measures to chalk out measure to avert all road-blocks causing avoidable delays. If a Magistrate is to write detailed order at different stages merely because the counsel would address arguments at all stages, the snail paced progress of proceedings in trial Courts would further be slowed down. We are coming across interlocutory orders of Magistrates and Sessions Judges running into several pages. We can appreciate if such detailed order had been passed for culminating the proceedings before them. But it is quite unnecessary to write detailed orders at other
stages, such as issuing of process, remanding the accused to custody, framing of charges, passing over to next stage of trial."
85. (i)
Let me make a brief survey of the evidence on record:PW 1 Sh. Adil Malia, Group President (HR), Essar Group, has stated that
Vikash Saraf was employed with Essar since 01.04.2007 as Group President. (ii)
As per PW 2 Lt. Col. Ajay Madan, who was Group President (Business
Development), has stated that accused Anshuman Ruia was on the board of Loop Mobile (India) Limited and he resigned on 15.12.2006. He has also stated that Vikash Saraf was also on the board of Loop Mobile (India) Limited. He further states that as per resolution dated 23.07.2007 passed by the board of Shippingstop Dot Com (India) (P) Limited, it was informed that BPL Mobile Communications Limited and BPL Communications Limited agreed to acquire entire stake held by Karthick Financial Services Limited in Shippingstop Dot Com (India) (P) Limited, now Loop Telecom Limited. He further states that it was also resolved that the company as a part of extension of its activities would be making an application for unified access service licences in 21 service areas. He further states that it was also resolved that company would require stand alone net worth of 135 crore and combined net worth of Rs. 1280 crore with promoters and substantial shareholders and for that BPL Communications Limited agreed to infuse Rs. 140 crore for meeting the criteria of net worth for which it was suggested to issue 49 lac equity shares of Rs. 10 each to BPL Communications Limited at a premium of Rs. 275 per share.
He also states as to how the name of the company was changed from Shippingstop Dot Com (India) (P) Limited to Loop Telecom (P) Limited. He also states as to how shares of Karthick Financial Services Limited in Shippingstop Dot Com (India) (P) Limited were to be transferred to BPL Mobile Communications Limited. He has also spoken in detail about the role of accused Vikash Saraf and has stated that it was a fact that he used to interact with all promoter directors of Essar Group, namely, Shashi Ruia, Ravi Ruia, Prashant Ruia and Anshuman Ruia. He also states that all policy decisions used to communicated by Vikash Saraf and accordingly resolution used to be passed by the board and at sometime he informally used to present at the board meeting. As per D-5, which are minutes of the proceeding of the meeting of board of directors of Shippingstop Dot Com (India) (P) Limited held on 23.07.2007, wherein it was resolved that the company would apply for U AS Licence to DoT. (iii)
PW 3 Sh. Amit Kumar Gupta, who was Vice President with Essar Group
Limited and was reporting to accused Vikash Saraf has stated as to how BPL Communications Limited, holding company of two licencee company, BPL Mobile Cellular Limited, operating in Tamil Nadu, Kerala and Maharashtra, and BPL Mobile Communications Limited, operating in Mumbai service area, were acquired and were assigned to STPL. He gives detail of the payment made by the Essar group. He also states that Shippingstop Dot Com (India) (P)Limited was an Essar company and he was informed by Vikash Saraf in August 2007 that this company was being acquired by BPL Mobile and that it was making applications to DoT for 21 UAS Licences (all India excluding Mumbai circle). He further states that Vikash Saraf asked him to assist Ajay Madan in preparation of financial
projections for the applications and P. R. Karnik was asked to put together the applications. (iv)
PW 8 Sh. V. Ganeshan, who was also a director in Shippingstop Dot Com
(India) (P) Limited has also stated about these facts. He also states that Shippingstop Dot Com (India) (P) Limited was an Essar group company. He also states as to how a partnership firm by the name of BPL Communications was constituted, which included BPL Communications Limited 95%, Karthick Financial Services 2% and EIL 3%. (v)
PW 10 Sh. Pushkar Raj B. Joshi, company secretary of Vodafone Essar
Limited, has stated as to how Hutchison Essar became Vodafone Essar during 2006-07. He further states that accused Ravi Ruia, Anshuman Ruia and Vikash Saraf were on the board of Hutchison Essar Limited, later on Vodafone Essar Limited, from 2004 to 2010. D-128, which contains Form 20B pertaining to intimation regarding appointment of directors, filed as part of annual return with the ROC, also contains the names of these three directors. (vi)
PW 48 Sh. Prasad Ramakant Karnik has stated that A jay Madan, who was
also working as director either in BPL Mobile Cellular Limited or BPL Mobile Communications Limited, informed him that BPL Mobile Communications Limited is having CMTS licence for Mumbai circle only and further told him that UAS Licences for other 21 circles are also to be applied and further directed him to apply for 21 UAS Licences in the name of Shippingstop Dot Com (India) (P) Limited. He further states that 21 applications for U AS Licences in the name of Shippingstop Dot Com (India) (P) Limited, now M/s Loop Telecom (P) Limited, dated 03.09.2007 were signed by him at Mumbai. He gives in detail as to how
these applications were prepared, signed and filed. (vii) PW 51 Sh. Priyadarshi Sidharath, who is a qualified company secretary and who joined Loop Mobile India Limited on 10.12.2007 has stated as to how the certificate regarding compliance with substantial equity clause was made. (viii) PW 59 Sh. Girish Sathe, who joined Essar Group as company secretary and later on on the board of Shippingstop Dot Com (India) (P) Limited, later on Loop Telecom (P)Limited, has stated that this company was owned by Essar group and in August 2007, this company was sold to Loop Mobile India Limited, owned by Khaitan group. He further states that Essar group consists of various business verticals like steel, shipping, power, telephone etc., and each vertical is managed by respective business head. He further states that board of respective companies under particular business vertical carries out instructions of business team. (ix)
PW 21 Sh. Harish Kapoor, Chief Regulatory Officer of Loop Telecom
Limited, has explained its shareholding pattern as on 03.09.2007 and BPL Mobile Communications Limited and BPL Communications Limited have been shown to be shareholders, and BPL Mobile Communications Limited is majority shareholder with 51% equity. He further states that on 03.09.2007 BPL Communications Limited was held by Santa Trading (P) Limited with some foreign based companies, but Santa Trading (P)Limited being majority shareholder with 85.75% equity. He further states that on 03.09.2007 the shareholders of Santa Trading (P) Limited were K iran Khaitan and I. P. Khaitan. He has also explained the constitution of partnership firm BPL Communications as on 03.09.2007. To the same effect is the statement of PW 22 Sh. T. Sathisan, Chief Financial Officer of Loop Mobile India Limited. He has explained the entire shareholding and the manner in which applications were filed by Loop Telecom Limited and
acquisition of equity by it. (x)
PW 24 Smt. Kamla Prasad and PW 25 Sh. Venkat Raghavan, both officers of
State Bank of India, Mumbai, have stated as to how loan of Rs. 725 crore and bank guarantee of Rs. 812 crore was given by the bank to Loop Telecom Limited on the corporate guarantee of Essar Global and on the request of Vikash Saraf. (xi)
PW 25 Sh. S. V. Venkatesan, Chief Finance Officer of Essar group, has
stated as to how events took place on the board of Essar Teleholdings Limited during the relevant period and further states that all the important decisions were used to be taken by Vikash Saraf. (xii) DoT officials PW 33 Sh. Santok Singh, PW 34 Sh. A. K. Srivastava, PW 35 Sh. Manish Sinha, PW 36 Sh. Shailesh Kumar Singh, PW 37 Sh. R. Ashok, PW 39 Sh. Ramesh Kumar Meena and other officials have explained as to how the applications were processed in the DoT and as to how the things could not be detected. (xiii) PW 83 Sh. Subhash P. Chuga, Deputy Registrar of Companies, ROC, Mumbai, has explained the constitution of Essar Investment Limited, Santa Trading (P)Limited, Loop Mobile India Limited and Loop Mobile Holdings India Limited and their directors at the relevant period. (xiv) PW 93 Sh. Sukhbir Singh, Director (AS-III), DoT, has narrated the deficiencies found in the 21 applications for U AS Licences by Shippingstop Dot Com (P)Limited. There are numerous other witnesses from Loop Telecom Limited, Banks and DoT and from other offices who have stated as to how the events took place during the transfer of BPL Communications Limited and BPL Mobile Communications
Limited to STPL and also during the filing of applications for 21 UAS Licences and their processing in the DoT.
86.
Section 120-A IPC defines criminal conspiracy as under: "Definition of Criminal Conspiracy.-When two or more persons agree to do, or cause to be done,14. an illegal act, or 15. an act which is not illegal by illegal means, such an agreement is designated a criminal conspiracy: Provided that no agreement except an agreement to commit an offence shall amount to a criminal conspiracy unless some act besides the agreement is done by one or more parties to such agreement in pursuance thereof. Explanation.- It is immaterial whether the illegal act is the ultimate object of such agreement, or is merely incidental to that object."
87.
Section 415 IPC defines cheating as under: "Cheating.
Whoever,
by
fraudulently or dishonestly
deceiving
any
person,
induces the person so
deceived to deliver any property to any person, or to consent that any person shall retain any property, or intentionally induces the person so deceived to do or omit
to do anything which he would not do or omit if he were not so deceived, and which act or omission causes or is likely to cause damage or harm to that person in body, mind, reputation or property, is said to "cheat". Explanation.- A dishonest concealment of facts is a deception within the meaning of this section."
88.
It is clear from the facts quoted above and the statements of witnesses
that BPL Communications Limited, now Loop Mobile Holdings India Limited, was having two operating companies, that is, BPL Mobile Communications Limited, now Loop Mobile India Limited, for Mumbai service area, and BPL Cellular Mobile Limited for Tamil Nadu, Kerala and Maharashtra service areas. However, the promoters/ stakeholders of these companies were having litigation and, as such, wanted to sell these companies. In 2004, accused Ravi Ruia of Essar group approached Rajeev Chandrasekhar, who was having 63.07% stake in BPL Communications Limited, for buying out the three companies. At that time, Essar group was already having shareholding of 33% in a licencee company M/s Hutchison Essar Limited or its subsidiaries through M/s Essar Teleholdings Limited and its associates in all 22 circles except Tamil Nadu, Kerala and Maharashtra. Accordingly, Essar group through Essar Teleholdings Limited agreed to buy BPL Communications Limited and its two operating companies and at that the same time projected that the companies were being purchased for a third party, that is, for I. P. Khaitan and Kiran Khaitan. PW 18 Sh. Saket Aggarwal, relative of I. P. Khaitan and K iran Khaitan, was
having a shell company by the name of Santa Trading (P) Limited. In 2004 at the request of I. P. Khaitan, he agreed to transfer this company to I. P. Khaitan as he wanted to start some business and a shell company was required immediately and on 30.04.2005, Sh. Saket Aggarwal and his brother Sh. Rishi Aggarwal gifted the company to accused K iran Khaitan by effecting transfer of all 10,000 shares to her. 74% equity of BPL Mobile Communications Limited, now Loop Mobile India Limited, was held by BPL Communications Limited, now Loop Mobile Holdings India Limited, and 26% equity was held by France Telecom via Dominance Holdings Limited, Mauritius. BPL Mobile Cellular Limited was 100% held by BPL Communications Limited, now Loop Mobile Holdings India Limited. In October 2004, Essar Teleholings Limited resolved to buy 9.99% equity of M/s BPL Mobile Communications Limited for Rs. 120 crore (USD 26 million), from M/s Asia Pacific System Limited, a company of I. P. Khaitan, out of 26% proposed to be purchased by it from France Telecom and accordingly, it paid USD 26 million to M/s Asia Pacific System Limited. However, Asia Pacific System Limited bought 26% shares of BPL Mobile Communications Limited, now Loop Mobile India Limited, for USD 20 million. It is indicative that this entire acquisition was funded by Essar Teleholdings Limited. 63.7% stake of Sh. Rajeev Chandrasekhar was purchased by Essar group in the name of Santa Trading (P) Limited for Rs. 304 crore. 7.20% equity and preference shares held by Sh. T. P. G. Nambiar in BPL Mobile Communications Limited were also bought by Essar Teleholdings Limited for Rs. 125 crore and were assigned to STPL. ICICI Bank was holding non-convertible debentures of Rs. 410 crore of BPL Mobile Communications Limited and this was also purchased by Essar Teleholdings Limited for Santa Trading (P) Limited. ICICI Bank was also
holding shares worth Rs. 80 crore as security for loan advanced to BPL Communications Limited, which were also purchased for STPL, but the payment was made by Essar Steel Limited and M illennium Growth and Development Fund, created by Essar group. 20.43% equity of BPL Mobile Communications Limited and preference shares were held by Mauritius based companies. 3.76% equity and preference shares of BPL Communications Limited were held by CDC Financial Service (Mauritius) and South Asia Regional Fund, which were purchased by Black Lion Mauritius, a company of I. P. Khaitan for USD 18.52 million, which consisted of USD 1.857 million for preference shares held by M/s CDC Financial Service Limited. These preference shares alone were purchased by Essar Teleholdings Limited for USD 30.758 million. Thus, leaving 3.76% equity for free with I. P. Khaitan held company. The remaining 16.6% equity of BPL Communications Limited, held by M/s Deccan Asian Infrastructure (Mauritius) Inc. Limited, M/s A irtel Holdings (Mauritius) and M/s Inditel Holdings (Mauritius) was bought by M/s Capital Global Limited, purportedly owned by I. P. Khaitan. Thus, for acquisition of 83.4% equity, the funding had come from Essar group companies, which amounted to Rs. 919 crore excluding Rs. 133.83 crore paid to Black Lion, that is, Rs. 120 crore paid Asia Pacific System Limited, Rs. 304 crore paid to Rajeev Chandrasekhar, Rs. 125 crore paid to T. P. G. Nambiar and Rs. 490 crore paid to ICICI Bank, though the shares were transferred to STPL of I. P. Khaitan and K iran Khaitan, acquired by them from their relative Sh. Saket Aggarwal. This acquisition was complete by November 2005. BPL Mobile Cellular Limited was sold in 2006 for Rs. 1120 crore to Hutchison Essar Limited. However, BPL Mobile Communications Limited, now Loop Mobile India Limited, could not be sold to Hutchison Essar Limited as it was already having a telecom licence for Mumbai service area and permission of DoT
was required, which did not come forth and, as such, the companies, that is, BPL Communications Limited, now Loop Mobile Holdings India Limited, and BPL Mobile Communications Limited, now Loop Mobile India Limited, continued to be with STPL.
89.
The case of the prosecution is that these companies were acquired by
Essar group in the name of Khaitan group, that is, I. P. Khaitan and K iran Khaitan, in order to circumvent clause 1.3 of CMTS licence. The case of the prosecution is that BPL Communications Limited and BPL Mobile Communications Limited continued to be controlled/ owned by Essar group, though they were purportedly acquired in the name of Khaitan group, that is, I. P. Khaitan and K iran Khaitan, through STPL.
90.
The first submission of the accused is that U ASL Guidelines dated
14.12.2005 do not have the force of law and their violation do not attract penal charges. There is no dispute about that violation of UASL Guidelines do not constitute a criminal act. However, when the officials of DoT were misled into believing that Shippingstop Dot Com (India) (P) Limited, now Loop Telecom (P) Limited, the applicant company was compliant with the substantial equity clause, though it was not, the misrepresentation acquired criminal character as Shippingstop Dot Com (India) (P) Limited was transferred to I. P. Khaitan and Kiran Khaitan on 01.09.2007 and BPL Communications Limited, now Loop Mobile Holdings India Limited, and BPL Mobile Communications Limited, now Loop Mobile India Limited, acquired shares therein. As already stated above, the funding for acquisition of BPL Communications Limited as well as BPL Mobile
Communications Limited had come from Essar group. The funding for acquisition of shares by BPL Mobile Communications Limited in Shippingstop Dot Com (India) (P) Limited to the tune of Rs. 140 crore had also come from Essar Teleholdings Limited. Shippingstop Dot Com (India) (P) Limited was an Essar group company and was transferred to Khaitan on a day or two before filing of applications for UAS Licence on 03.09.2007 and Essar group was already having 33% stake in Vodafone Essar Limited, a pan India licencee company. As such, it is not a plain and simple violation of clause 8 alone.
91.
It is next submitted that there was no cheating as the entire facts were
brought to the notice of DoT by Janhit Morcha, an NGO, and when the entire facts as alleged in the charge sheet were already in the notice of DoT, there can be no cheating. However, these facts were brought to the notice of DoT by way of a complaint dated 05.02.2008 subsequent to the issuance of LOIs. LOIs were distributed on 10.01.2008 and the complaint was received on 05.02.2008 and signing of licence agreement and allocation of spectrum were follow up actions. PW 34 Sh. A. K. Srivastava has given a detailed account of events in this regard. Moreover, despite the receipt of complaint, entire facts were not before the officials of DoT and believing the assurances of the applicant company, UAS Licences were issued and spectrum was allocated and these assurances subsequently turned out to be false.
92.
It is further submitted that the word "associate" used in clause 8 of
UASL Guidelines is uncertain and vague and conveys no definite meaning and, as such, its violation cannot be saddled with criminal consequences. However, the
aim of this clause is to ensure that competition is not compromised and only one entity is not in a position to influence or monopolize licences in a particular circle. It is a settled rule of law that what cannot be done directly cannot be done indirectly. It is on record as well as in the statements of PW 39 Sh. Ramesh Kumar Meena, PW 34 Sh. A. K. Srivastava and numerous other witnesses as to how entire funding was provided by Essar group companies. It has been argued that while determining the violation of clause 8, only equity holding can be considered. There is no doubt about that, but in the instant case funding was provided by Essar group, a stakeholder in existing all India licencee company, that is, Vodafone Essar Limited, for buying and creating a company and then using the same company as a front for making applications for 21 UAS Licences. Moreover, the composition of board of directors was also controlled by Essar group as the funding was coming from them. Loop Telecom (P) Limited was just a front of Essar group companies. Looking at the funding provided by Essar group, it is prima facie clear that Loop Telecom (P) Limited was just an alter ego of Essar group through Essar Teleholdings Limited and other companies. Loop Telecom (P) Limited was just a device created by Essar Group to defeat clause 8, which aims at ensuring and promoting fair competition. However, the matter cannot be left to rest at the definition of word "associate" alone in such a case as the question is not of one company being an associate of another but the question is of one company being an alter ego/ front of another.
93.
It was next submitted that there was no cheating as no property was
delivered. However, it requires no great elaboration to say that an LOI, a UAS Licence and WPC Licence for using spectrum constitutes property.
94.
It was next submitted that there is no role of accused Anshuman Ruia,
Ravi Ruia, Vikash Saraf, I. P. Khaitan and K iran Khaitan. However, accused Vikash Saraf and Anshuman Ruia were on the board of Loop Mobile India Limited and Anshuman Ruia resigned on 15.12.2006 only. As such, they knew as to for whom BPL Communications Limited and BPL. Mobile Communications Limited were acquired by Khaitan and by whom the acquisition was funded. They knew that the Essar group was in complete control of the companies through funding. It is also on record and in evidence that Anshuman Ruia and Ravi Ruia were directors in Hutchison Essar Limited and subsequently Vodafone Essar Limited from 2004 onwards. As such, they are supposed to know that any other entity funded/ created by them cannot acquire another licence or substantial stake in any other licencee company. In the instant case, the acts of the accused went much beyond the requirement of clause 8 as they acquired a company through circuitous route and made it to apply for 21 UAS Licences by artificially creating its equity through a complex web of companies. PW 18 Sh. Saket Aggarwal has stated that he had gifted the company, that is, STPL, to I. P. Khaitan and Kiran Khaitan. He also states as to how I. P. Khaitan and Kiran Khaitan were appointed directors on 30.06.2005. He has also stated as to how a payment of Rs. 50 crore was routed through his company Oblique Trading (P)Limited. PW 19 Sh. Sandeep Basu, who was CEO of BPL Mobile Communications Limited till August 2005, later Loop Mobile India Limited and Loop Telecom Limited in August 2009 as CEO, has stated as to how BPL Communications Limited and its operating companies, BPL Mobile Communications Limited and BPL Cellular Mobile Limited, were acquired by Khaitan. He has given a detailed narration of the entire events. He has stated that on 31.08.2007 a sum of Rs. 140 crore was paid by Essar Teleholdings Limited to Loop Mobile Holdings India Limited and on the same day, a sum of Rs. 139.65 crore was paid by Loop Mobile Holdings India Limited to Loop Telecom Limited,
earlier known as Shippingstop Dot Com (India) (P) Limited towards subscription of 49 lacs equity shares of Loop Telecom Limited at the rate of Rs. 285 per share. He also states that on 01.09.2007 Loop Mobile India Limited passed a resolution to acquire 100% equity stake in Loop Telecom Limited from Karthick Financial Services Limited. As such, on 31.08.2007 and 01.09.2007, Loop Mobile Holdings India Limited, earlier known as BPL Communications Limited, and Loop Mobile India Limited, earlier known as BPL Mobile Communications Limited, had acquired stake in Shippingstop Dot Com (India) (P) Limited, now Loop Telecom (P) Limited, the applicant company for 21 circles. The applications were filed on 03.09.2007 and on that day BPL Communications Limited and BPL Mobile Communications Limited were owned by I. P. Khaitan and Kiran Khaitan through STPL. As such, the role of these five accused and the companies is, prima facie, clear on the record. Furthermore, PW 2 Sh. Ajay Madan, PW 49 Sh. S. Subramaniam and other witnesses have stated that they used to take directions from Vikash Saraf. Furthermore, Vikash Saraf used innocent employees/ subordinates to represent to DoT that applicant company was compliant of clause 8 of U ASL Guidelines.
95.
It was next argued that there is no evidence on record to indicate
existence of any criminal conspiracy. However, there are more than one person involved and charge sheeted in the case and the acts alleged cannot be done by a single person. These alleged acts were done over a period of time by numerous persons, known to each other from before. The facts have been narrated in great detail as to how companies were acquired and real stakeholders were concealed and thereafter, another company, that is, Shippingstop Dot Com (India) (P) Limited, now Loop Telecom (P) Limited, was used to make applications for 21
UAS Licences. How the companies were funded through a complex web of companies has already been explained. It has come in evidence as to how the DoT officials were deceived to believe that the applicant company was in compliance of clause 8 of U ASL Guidelines. The facts and the evidence on record, prima facie, indicate existence of a criminal conspiracy to acquire Letters of Intent and consequent U AS Licences and spectrum. In order to understand the law of conspiracy, it is instructive to quote an authority reported as Firozuddin Basheeruddin and others Vs. State of Kerela, A I R 2001 SC 3488, wherein while dealing with the question of conspiracy, Hon'ble Supreme Court observed in paragraphs 20 to 27 as under: ''20. ...................................................................................... .................................... The High Court concluded its judgment with the following observations/ findings: 'Criminal conspiracy is not easy to prove. The conspirators invariably deliberate, plan and act in secret over a period of time. It is not necessary that each one of them must have actively participated in the commission of the offence or was involved in it from start to finish. What is important is that they were involved in the conspiracy or in other words, there is ''combination by agreement, which may be express or implied and in part implied. The conspiracy arises and the offence is committed as soon as the agreement is made and the offence continues to be committed so long as the combination persists, that is, until the conspiratorial agreement is terminated by completion of its performance
or by abandonment or frustration''. The Court has to be satisfied that there is a reasonable ground to believe the existence of the conspiracy and that is a matter for judicial inference from proved facts and circumstances. Once the existence of conspiracy is proved or held to exist, no doubt on relevant evidence, every act, declaration and writing of any one of the conspirators referable to the common intention will be relevant. Hearsay is not excluded if it could be brought within the parameters of
Section
10
of
the Evidence Act
...........................................' 21. Section 120A of the Indian Penal Code defines 'Criminal Conspiracy' as follows: ''When two or more persons agree to do, or cause to be done, (1)an illegal act, (2) an act which is not illegal by illegal means, such an agreement is designated a criminal conspiracy: Provided that no agreement except agreement to commit an offence shall amount to a criminal conspiracy unless some act besides the agreement is done by one or more parties to such agreement in pursuance thereof. Explanation- It is immaterial whether the illegal act is the ultimate object of such agreement, or is merely incidental
to that object.'' 22. Section 120B, which prescribes in sub-section (1) the punishment for criminal conspiracy provides: ''Whoever is a party to a criminal conspiracy to commit an offence punishable with death, (imprisonment for life) or rigorous imprisonment for a term of two years or upwards, shall, where no express provision is made in the Code for the punishment of such a conspiracy, be punished in the same manner as if he had abetted such offence.'' 23. Like most crimes, conspiracy requires an act (actus reus) and an accompanying mental state (mens rea). The agreement constitutes that act, and the intention to achieve the unlawful objective of that agreement constitutes the required mental state. In the face of modern organized crime, complex business arrangements in restraint of trade, and subversive political activity, conspiracy law has witnessed expansion in many forms. Conspiracy criminalizes an agreement to commit a crime. A ll conspirators are liable for crimes committed in furtherance of the conspiracy by any member of the group, regardless of
whether
liability
would
be
established by the law of complicity. To put it differently, the law punishes conduct that threatens to produce the harm, as well as conduct that has actually produced it.
Contrary to the usual rule that an attempt to commit a crime merges with the complete offence, conspirators may be tried and punished for both the conspiracy and the completed crime. The rationale of conspiracy is that the required objective manifestation of
disposition to
criminality is provided by the act of agreement. Conspiracy is a clandestine activity. Persons generally do not form illegal covenants openly. In the interests of security, a person may carry out his part of a conspiracy without even being informed of the identity of his coconspirators. Since an agreement of this kind can rarely be shown by direct proof, it must be inferred from circumstantial evidence of co-operation between the accused. What people do is, of course, evidence of what lies in their minds. To convict a person of conspiracy, the prosecution must show that he agreed with others that together they would accomplish the unlawful object of conspiracy. 24. Another major problem which arises in connection with the requirement of an agreement is that of determining the scope of a conspiracy- who are the parties and what are their objectives. The determination is critical, since it defines the potential liability of each accused. The law has developed several different models with which to approach the question of scope. One such model is that of a chain, where each party performs a role
that aids succeeding parties in accomplishing the criminal objectives of the conspiracy. No matter how diverse the goals of a large criminal organization, there is but one objective; to promote the furtherance of the enterprise. So far as the mental state is concerned, two elements required by the conspiracy are the intent to agree and the intent to promote the unlawful objective of the conspiracy. It is the intention to promote a crime that lends conspiracy its criminal cast. 25. Conspiracy is not only a substantive crime. It also serves as a basis for holding one person liable for the crimes of others in cases where application of the usual doctrines of complicity would render that person liable. Thus, one who enters into conspiratorial relationship is liable for every reasonably foreseeable crime committed by every other member of the conspiracy in furtherance of its objectives, whether or not he knew of the crimes or aided in their commission. The rationale is that criminal acts done in furtherance of a conspiracy may be sufficiently dependent upon the encouragement and support of the group as a whole to warrant treating each member as a causal agent to each act. Under this view, which of the conspirators committed the substantive offence would be less significant in determining the defendant's liability than the fact that the crime was performed as a part of a larger division of labour to which
the accused had also contributed his efforts. 26. Regarding admissibility of evidence, loosened standards prevail in a conspiracy trial. Contrary to the usual rule, in conspiracy prosecutions any declaration by one conspirator, made in furtherance of a conspiracy and during its pendency, is admissible against each coconspirator. Despite the unreliability of hearsay evidence, it is admissible in conspiracy prosecution. Explaining this rule, Judge Hand said: ''Such declarations are admitted upon no doctrine of the law of evidence, but of the substantive law of crime. When men enter into an agreement for an unlawful end, they become ad hoc agents for one another, and have made 'a partnership in crime'. What one does pursuant to their common purpose, all do, and as declarations may be such acts, they are competent against all. (Van Riper v. United States 13F, 2d 961, 967 (2d Cir, 1926).'' 27. Thus conspirators are liable on an agency theory for statements of co-conspirators, just as they are for the overt
acts
and
crimes
committed
by
their
conferrers ............................................."
96.
Similarly, in State of Madhya Pradesh Vs. Sheetla Sahai & others,
(2009) 8 SCC 617, while dealing with the law of conspiracy, particularly the help which each accused renders to the other in the achievement of objectives of
conspiracy, Hon'ble Supreme Court observed in paragraph 52 as under: ''.........Law making conspiracy a crime is designed to curb immoderate power to do mischief which is gained by a combination of the means. The encouragement and support which co-conspirators give to one another rendering enterprises possible which, if left to individual effort, would have been impossible, furnish the ground for visiting conspirators and abettors with condign punishment.......'' In view of the law and facts quoted above, it is prima facie clear that a criminal conspiracy was there amongst the accused persons for acquiring the U AS Licences and spectrum, as alleged by the prosecution. Furthermore, the first physical manifestation of the conspiracy appeared on 23.07.2007 when resolution was passed by Shippinstop Dot Com (India) (P) Limited to apply to DoT for U AS Licences. The conspiracy continued till 09.03.2009 when spectrum was allocated for Punjab service area as the officials of DoT could not understand the complexity of the situation despite complaints received by them through various sources including Janhit Morcha, Telecom Watchdog etc. Prima facie, it was not possible for officials to understand the complex web of companies, more so, when the entire facts were not before them.
97.
It was next argued that BPL Communications Limited and its two
operating companies, BPL Mobile Communications Limited and BPL Cellular Mobile Limited, were bought and sold for making money and there was no criminality involved in that. The charge sheet was read out at the bar by learned
defence advocates to show that there was no illegality in that. Various statements of witnesses and documents were also referred to. The case of the prosecution is that these companies were, in fact, acquired by Essar group, which already was having 33% stake in Hutchison Essar Limited, which was having UAS Licence for all circles except Tamil Nadu, Kerala and Maharashtra, though apparently they were purchased by K iran Khaitan and I. P. Khaitan through STPL. It is the case of the prosecution that the real buyer is Essar group and in the acquisition of the company, substantial equity clause was violated. However, in December 2005 or in early 2006, BPL Cellular Mobile Limited was purchased by Hutchison Essar Limited and, as such, Hutchison Essar Limited became pan India licencee as it was not having licences for Tamil Nadu, Kerala and Maharashtra circles. PW 49 Sh. S. Subramaniam has stated that BPL Cellular Limited was acquired by Hutchison Essar Limited on 01.01.2006. However, BPL Mobile Communications Limited, licencee for Mumbai circle, could not be acquired as Hutchison Essar Limited was already having for that circle and permission for merger was not received from DoT in time. It was argued that if in the acquisition of these companies any violation was committed, it was only civil or administrative in nature without any criminality involved in that.
98.
On the basis of material on record, I find myself in agreement with the
submission of the defence that if there was any violation in the acquisition of the companies, it was only administrative or civil in nature. However, the events started acquiring criminal character w.e.f 23.07.2007 when Loop Telecom (P) Limited, earlier Shippingstop Dot Com (India) (P)Limited, passed a resolution for applying to DoT for 21 U AS Licences, which company admittedly at that time was an Essar group company. At that time, Essar group company was having 33% stake
in pan India licencee Vodafone Essar Limited. Shippingstop Dot Com (India) (P) Limited, which was an Essar group company was transferred to I. P. Khaitan and Kiran Khaitan and thereafter, BPL Communications Limited and BPL Mobile Communications Limited acquired stake therein to meet net worth and paid-up capital criteria and thereafter, it applied to DoT for 21 U AS Licences on 03.09.2007 and after misrepresentations were made to officials of DoT that the applicant company was in compliance of substantial equity clause, LOIs were granted to it on 10.01.2008 and UAS Licences were signed subsequently and spectrum was also allocated later on. As such, the first physical manifestation of criminal conspiracy to cheat DoT into issuing LOIs, UAS Licences and allocation of spectrum was on 23.07.2007. As such, the parties might have acquired BPL Communications Limited and its two operating companies for making money, but BPL Communications Limited and BPL Mobile Communications Limited could not be transferred and were ultimately used in a circuitous manner to provide net worth and paid-up capital of applicant company, Shippingstop Dot Com (India) (P) Limited, now known as Loop Telecom (P) Limited. The submission that BPL Communications and its two operating companies were acquired basically to make money is of no avail due to their subsequent misuse in pursuance to a criminal conspiracy to acquire 21 U AS Licences and spectrum.
99.
Even otherwise where entire funding of another company is made by
one company or the board of directors is controlled by the funding company, the court can lift the corporate veil. The instant case is a case of grant of telecom licenses. In similar situation in a case reported as M/s New Horizons Limited And...Vs. Union of India And Others, AI R 1994 Delhi 126, Hon'ble Delhi High Court observed in paragraph 20 (8)as under:-
"The Courts have further shown themselves willing to "lift the veil" where the device of incorporation is used for some illegal or improper purpose.
So, where a
transport company sought to obtain licenses for its vehicles, which it was unlikely to obtain if it made application on its own behalf, by causing the application to be made by a subsidiary company to which the vehicles where to be transferred, the court refused to treat parent and subsidiary as independent bodies, and decided the application on the basis that they were one commercial unit................." (All underlinings by me for supplying emphasis).
100.
Furthermore, PW 73 Sh. Vinayak Vilas Joshi, Deputy General
Manager of Essar Global Services Limited, has stated that this company passed a resolution on 24.11.2009 wherein it was noted that Loop Telecom Limited is an associate of the company and is a major telecom service provider in Mumbai. Though this is subsequent to the period of conspiracy, but is indicative of the relations between the companies.
101.
During arguments it was argued that a vague concept of "group" has
been used to charge sheet the accused persons. It was argued that there is nothing like "group" and every company is independent. However, the accused themselves availed of this concept while taking loans for Loop Telecom Limited and in this regard statement of PW 75 Sh. C. H. Narsimha Rao, Chief General Manager, State
Bank of India, who was posted as General Manager in SBI branch, Mumbai, from December 2006 to August 2008 and from which branch Loop Telecom Limited obtained financial assistance, is important and he states, inter alia, as under: "........................................................................................... ....................................Today you have shown me a file pertaining to the financial assistance given to Loop Telecom Pvt. Ltd. (LTPL). The LTPL approached SBI on 17.10.2007 seeking Fund Based facilities of Rs. 725 crore and Non-Fund Based facility of Rs. 812 crore. It is on page no. 2. The proposal came along with the supporting documents and the financial statements. A fter going through the papers, I state that LTPL is formerly known as Shipping Stop Dot Com (I) Pvt. Ltd. The 10th Annual Report for the year 2006-07 of Shipping Stop Dot Com (I) Pvt. Ltd., is on pages 07-20. Schedule no. 7 of the Annual Report states as under:4 C page 16 states:- individuals indirectly owning interest in voting power of the company: i. Shri S. N. Ruia ii. Shri R. N. Ruia iii. Shri P. S. Ruia iv. Shri A. S. Ruia v. Shri R. R. Ruia
4 D page 17 states:- other related parties commonly controlled or influenced by (C) above, where there have been transactions:1.
Reclame Commercial and
Securities Pvt. Ltd. 2.
Essar Teleholdings Ltd.
3.
Imperial Consultants and
Securities Pvt. Ltd. The concept of "Group" is followed in the Bank as per the RBI guideline (RBI Master Circular on Exposure Norms: RBI/2007-08/45 dtd. 02.07.07) which says as under:a)
The concept of "Group" and the
task
of
identification of the
borrowers belonging to specific
industrial groups is
left to the
banks/ financial
institutions.
Bank/
institutions are generally aware of constitution of their
perception of the financial
the
basic
clientele for the purpose of
regulating their exposure to risk
assets. The group
to which a particular borrowing unit belongs, therefore, be decided by them on relevant
the
basis
information available with them,
may, of
the
the
guiding principle being commonality of management and effective control. In so far as undertakings are
public
sector
concerned, only single borrowers
exposure limit would be applicable.
b)
In the case of a split in the group, if
formalized, the splinter separate reference
groups will be regarded as
group. If banks and financial
has doubts about the
the split is institutions
bona fides of the split, a
may be made to RBI for its final
in the matter to preclude the
view
possibility of a split
being engineered in order to prevent
coverage
under Group Approach.
Keeping this spirit of the above RBI guidelines and on the basis of information referred to in Schedule 7 of the balance sheet of the applicant company, we considered that LTPL belongs to Essar Group. A lso to secure the proposed fund based and non-fund based facilities to LTPL, the major companies in Essar group have agreed to offer Corporate Guarantees. A fter going through Corporate Guarantee given by Essar Power Ltd. in favour of SBI dtd. 10.01.08 for the facilities of an aggregate of Rs. 1537/- crore, (Term Loan of Rs. 725 crore and Bank Guarantee for Rs. 812 crore) I state that as per para 3 in the event of any default on the part of the borrowers in payment/ re-payment of any of the moneys referred to above or in the event of any default on the part of the borrowers to comply with or perform any of the terms/ conditions and convenient contained in the
financial documents, the guarantors shall, upon demand forthwith pay to the bank without demur all the amounts payable by the borrowers under the financing documents. Initially, the SBI has stipulated that the Corporate Guarantees of Essar Shipping Ltd. and Essar Power Ltd. be obtained as a Security for the proposed facilities to be sanctioned to LTPL. LTPL vide its letter dtd. 10.01.08 signed by Shri V. Ganeshan, the then Director, LTPL has submitted that Essar Shipping was unable to give the Corporate Guarantee. In its place, they have offered the Corporate Guarantee of another Essar Group Companies i.e. Essar Steel which readily and willingly accepted to provide the Guarantee to SBI for the facilities granted to LTPL. The relevant correspondence between SBI and LTPL is available at page 192. This also strengthens the view held by the Bank that LTPL belongs to Essar Group. I further state that as per documents submitted by Loop Telecom Pvt. Ltd. along with their application dtd. 17.10.2007, even though the share holding pattern has undergone a change between 31.03.2007 (the balance sheet date) and 17.10.07 (the date of application), we continued our view that LTPL belongs to Essar Group as the discussions on this proposal and negotiations on the terms and conditions were being conducted primarily with Essar group functionaries like Sri V. G. Raghvan, CFO of Essar Group. It is also pertinent to note that the
Essar group companies of substantial worth were willing to and actually guaranteed the facilities granted to LTPL, which strengthened our view that LTPL is part of Essar group. …......................................................................................... ........................."
102.
In view of the facts, evidence and law quoted above, it is prima facie
clear that BPL Communications Limited, now known as Loop Mobile Holdings India Limited, and its two operating companies, BPL Mobile Communications Limited, now known as Loop Mobile India Limited, and BPL Cellular Mobile Limited, were acquired by Essar group, a stakeholder in Hutchison Essar Limited, an existing licencee company, through a circuitous and labyrinthine route, apparently in the name of STPL of I. P. Khaitan and Kiran Khaitan and BPL Cellular Mobile Limited was sold to Hutchison Essar Limited in 2006, but BPL Communications Limited and BPL Mobile Communications Limited remained with Essar group through K iran Khaitan and I. P. Khaitan and these two companies were apparently used, in pursuance to a conspiracy, by the accused persons to buy equity as shareholders of Shippingstop Dot Com (India) (P) Limited, an Essar group company, which was transferred to Kiran Khaitan and I. P. Khaitan on 01.09.2007, to provide for net worth and paid-up capital of Shippingstop Dot Com (India) (P) Limited and thereafter, to apply to DoT for 21 U AS Licences, despite knowing that it was not in compliance of clause 8 of U ASL Guidelines and ultimately to cheat the DoT by successfully getting LOIs for 21 circles and consequently UAS Licences and spectrum.
103.
Accordingly, I am, prima facie, satisfied that all eight accused, that is,
accused Ravi Ruia, Anshuman Ruia, I. P. Khaitan, Kiran Khaitan, Vikash Saraf, and the three companies, that is, Loop Telecom Limited, Loop Mobile India Limited and Essar Teleholdings Limited, entered into a criminal conspiracy at New Delhi, Mumbai and other unknown places, during the period 23.07.2007 to 09.03.2009, the date on which spectrum was lastly allocated for Punjab service area, to cheat the DoT into issuing LOIs for 21 UAS Licences for as many circles and consequently UAS Licences and allocation of spectrum and in consequence to the conspiracy cheated it in doing so. Accordingly, a prima facie case under Section 120-B read with 420 IPC is made out against all eight accused including the three companies, as they were also beneficiary of cheating.
104.
I am also satisfied that a prima facie case under Section 420 IPC is
made out against accused Vikash Saraf as it was he who misrepresented to the DoT, through his innocent employees/ subordinates, of applicant company being in compliance of clause 8 of U ASL Guidelines.
105.
Let the charge(s)be framed.
Announced in open Court, today on May 25, 2012.
(O. P. SAINI)
Spl. Judge/CBI(04)(2GSpectrum Cases)/ND
