Which important politician do you know? That was the key question CBI officers asked DB Realty MD Shahid Usman Balwa over eight days of interrogation at their Eastern Block-style headquarters. Balwa, ranked by Forbes India as the country's 66th richest man in 2010 with a net worth of $1.06 billion, said he knew none. He was initially cool, unruffled and less than communicative. He kept fit with a three-km morning and a three-km evening jog around the CBI building, a perk given by the CBI which was being friendly in return for expected cooperation. CBI officers nudged his memory: Balwa's partner Vinod Goenka had taken top officials of cola companies for a secret meeting with a Maharashtra-based politician, then heading a parliamentary committee set up to probe the pesticide scandal. An officer joked that if Balwa would not cooperate, the five star hotel food sent by his father, Usman Balwa, would be given to the interrogators.
The 37-year-old Balwa soon sensed the steel behind the smiles. He confessed that he and Goenka had the numbers of several Maharashtra politicians on their speed dials, and knew exactly which bureaucrat to approach for which project.
Balwa's role in the 2G spectrum scam led him to jail. In 2005, his newly-minted Swan Telecom bought a spectrum licence in 13 circles for a little over Rs 1,500 crore and subsequently sold it to the Dubai-based Etisalat for Rs 4,200 crore. He was soon telling interrogators about his financial dealings with Indian business houses, bank accounts in the Middle East, interests in retail and a cash trail that leads right to the door of the M. Karunanidhi family-led Kalaignar TV (he called it an investment on which he even paid a Rs 31-crore tax).
He was stumped when CBI told him a few things. They had documentary evidence of payments received from two Cyprus-based firms which invested Rs 525 crore in convertible debentures issued by DB Realty. These debentures were converted into shares of DB Realty at a high premium of Rs 5,590 per share in September 2009. The ownership and the source of funds of the Cyprusbased companies-one of them is Greetham Investment-are now under investigation.
Balwa, known for his expensive suits, a private jet and flashy lifestyle, also remained silent when asked whether or not Reliance ADAG stood bank guarantors for his company. A CBI insider, who witnessed the interrogation, said that the realty tycoon seemed, at times, totally uninterested in the entire process and often asked: "Why me?"
If the country's premier investigative agency has its way, some of India's biggest corporate names will soon be asking the same question. Anil Ambani, head of Reliance ADAG, has already been questioned and the CBI intends to call the heads of other alleged beneficiary companies at a secret location to protect the image of India Inc. Some of the big names in the list include Ratan Tata, Shashi and Ravi Ruia, Venugopal Dhoot, Kumar Mangalam Birla, Sunil Bharti Mittal and S Tel Chairman C. Sivasankaran. Some of the marquee names of Indian business have reasons to fear what Balwa will disclose about the pattern of enrichment through 2G. If this was not enough, former telecom minister Arun Shourie, who has a reputation for personal integrity, has entered the fray after being provoked by an injudicious comment by present Telecom Minister Kapil Sibal. Shourie has asked the CBI to keep a whole day free for his deposition on February 21.
The investigations are on in full swing. The CBI has questioned Tata Realty and Infrastructure MD Sanjay Ubale and CFO Kishore Saletore about the company's loans to Unitech. "There was no summons from the CBI. The agency sought some clarifications which were provided," read a statement issued by Tata Realty. Tata Teleservices, which got licences in 2008 to add GSM-based technology to the CDMA-based platform it was then offering, also came under the CBI scanner and provided certain clarifications sought by the probe agency, a senior executive said. Others questioned this week were Loop Telecom CEO Sandip Basu as well as S Tel CFO Arun Mandhana and chief regulatory officer R. Sikka.
Both Loop and S Tel are among the firms that received telecom licences under the controversial process in 2007-2008 under Raja. Senior officials in the Ministry of Corporate Affairs said they were probing the shareholding pattern of Loop Telecom on allegations that Loop had links with Santa Trading, owned by Kiran Khaitan, sister of the Ruia brothers, Shashi and Ravi, who run Essar. "Loop Telecom confirms that it is in compliance with the Unified Access Service (UAS) licence norms and is fully cooperating with the Government investigating agencies," the company said in a statement.
There are also chances that senior officials of Videocon Telecommunications could be called to check whether there was any violation of the licence norms because top officials of Mukesh Ambani's Reliance had an equity stake in Datacom Solutions that was, eventually, acquired by the Dhoots. "The matter of the CAG report is sub-judice and pending before the apex court, we don't want to comment upon the same," said Pradip Kumar Dhoot, executive vice-chairman, Datacom. Amidst all the drama, another case that also hogged the headlines was the one involving a Rs 675-crore investment in Sun Direct TV, by Astro, controlled by Malaysian billionaire T. Ananda Krishnan, owner of Maxis Communications, a telecom firm with a majority stake in Aircel, within four months of getting spectrum in Dishnet Wireless, now called Aircel.
The countdown has begun. On February 16, Reliance ADAG Chairman, Anil Ambani, spent three hours at the CBI headquarters, answering questions on his company's alleged links with Swan Telecom. "Anil Ambani was not summoned and he cooperated with the investigators," a spokesman of ADAG said in a brief conversation. Earlier in February, the CBI questioned one of ADAG company secretaries, Hari Nair, on at least three occasions, close on the heels of Balwa's arrest. Both the Balwa-led DB Realty Group and Anil Ambani-led Reliance Telecom were equity holders in Swan Telecom. CBI insiders say they are probing whether Reliance Telecom was actually controlling Swan and benefited substantially from the latter's spectrum allocation.
However, Reliance Communications kept within the law since it held less than 10 per cent in Swan Telecom. The Shahid Balwa Group was a majority stakeholder with 91.19 per cent shareholding (through a holding company called Tiger Traders) when Swan Telecom applied for the UAS licence in 2007. CBI officials said they were probing whether ADAG had a Rs 1,000 crore plus investment for a 9.81 per cent minority holding as against Tiger Traders' Rs 98 crore investment. The CAG, in its report tabled in Parliament last November, had named Swan Telecom as a front company of Anil Ambani.
Reliance sold its stake by the time Swan Telecom was granted the UAS licence (and with it the precious 2G spectrum) in January 2008. The company, Reliance sold it to, had been identified by the CBI as Mauritius-based Delphi Investments. The CBI is now probing whether the mysterious deal between Delphi and Reliance was part of the kickbacks allegedly given to the then minister of telecommunications and technology, A. Raja, for favouring Reliance Telecom under the dual technology policy and Swan Telecom under the new UAS licence. A letter rogatory has been sent to the Mauritius government for information on promoters of Delphi. "Neither Reliance Telecom, nor Reliance Communications, or any other Reliance Group individual, company or affiliate has obtained any monetary gain or other benefit, directly or indirectly, from the grant of 2G licence to Swan Telecom in January 2008," said Gaurav Wahi, an ADAG spokesperson.
The moving spirit behind the CBI action has been the Supreme Court rather than the Government, but officials in the Prime Minister's Office (PMO) discussed the fallout on the country's telecom sector, which is the fastest growing in the world. "If the top telecom bosses are called for questioning, it could send a very wrong signal to investors," said a senior PMO official, speaking on conditions of anonymity.
The CBI has assured the Government that the next lot of questioning of the corporate captains will be held at secret locations to avoid embarrassment to the company heads. The CBI, bolstered by a Supreme Court directive, is determined to get to the bottom of the scam, estimated by the CAG to be around Rs 1.76 lakh crore. This staggering figure has caused a debate. Telecom Minister Kapil Sibal dismissed this figure as fiction. He called it a "zero impact" game because everything was based on notional earnings. This assertion was greeted with derisive guffaws by an energised opposition. On February 15, CBI Director A.P. Singh, in a presentation, told the PAC that their estimate was at least Rs 50,000 to 60,000 core, and the figure could rise.
The Supreme Court directive, asking the CBI not to be selective in issuing summons to officials of companies that allegedly benefited from the spectrum scale, came on February 9 after veteran advocate Prashant Bhushan accused the CBI of hitting minor players and ignoring big companies. The court has given the CBI time till March 1 to submit details of its investigations.
The same week, senior officials of Unitech, Tata Realty, Reliance Communications and Loop spent hours at the CBI headquarters. In distant Barcelona, Bharti Airtel Chairman Sunil Mittal-amid rumours of CBI summons-urged Indian telecom companies to allow the investigators to do their job. "My plea is that the industry shut its mouth up and let the various investigation agencies do their job," Mittal told reporters on the sidelines of a conference. Mittal was hinting at the continued slugfest between Reliance Communications and Tata Teleservices, both named as beneficiary companies (see Tracking the Network).
Mittal also has reasons to be worried. The Justice Patil Committee said in its report that arbitrary decisions taken by the Telecom Ministry may have helped Bharti Airtel and Idea Cellular get additional spectrum during the NDA regime for Delhi service area though no criteria for allotment existed. "This decision was taken on the basis of a note put up by the then engineer and approved by the Wireless Adviser along with his deputies. This was arbitrary and selective, besides being unfair to other intending applicants," the report said.
The Patil report also levelled a similar charge against the Kumar Mangalam Birla firm, Idea Cellular. He said Idea Cellular had applied for a licence in August 2005 for the Mumbai circle but the LoI was issued in November 2006. "In the intervening period, time was extended to enable the applicant to acquire eligibility," it said. Rajat Mukarji of Idea Cellular said the notion of any excess spectrum is "pure fiction".
CBI officials told INDIA TODAY that the agency would initially probe companies which benefitted by selling their 2G spectrum quota to others at a higher stake, set up dubious front companies and influenced decisions of the telecom ministry. The agency has also questioned Sanjay Chandra, MD, Unitech Limited. He was grilled on February 14 on his telecom venture, Unitech Wireless, that acquired licences in all the 22 telecom service areas in India for Rs 1658 crore but sold a 67.25 per cent stake to Norway's Telenor ASA for Rs 6120 crore. The CBI has cited this as an example of how licences were undervalued. "We have nothing to hide and provided records for examination and also clarified issues raised by the CBI," Chandra told INDIA TODAY.
The noose is tightening on many. Balwa, the newest face of a spreading stain, has left enough damaging footprints for investigators to track.
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