2G: Is Telenor playing Kapil Sibal's game by upping ante?

New games are afoot in the 2G spectrum scam, where the government was caught with its pants down when the Supreme Court unexpectedly cancelled 122 licences issued by A Raja on 2 February.

With the court establishing mala fide intent and holding that auctions are the best way to sell scarce resources like spectrum, Communications Minister Kapil Sibal’s zero-loss theory on the 2G scam has been effectively debunked and his ministry is looking for a face-saver.

What Sibal and UPA need is a lever to get the Supreme Court to completely re-examine its verdict, and providentially this seems to be at hand.

While many of the companies whose licences were cancelled have moved the court for a review, the government now has something stronger to make its case.

Telenor, the Norwegian partner in Uninor, which lost 22 licences, has sent the government a notice threatening international arbitration under the Comprehensive Economic Cooperation Agreement (CECA) with Singapore. It also wants the matter of its cancelled licences sorted out in six months. (The company that invested in Uninor is incorporated in Singapore.)

But this is where the news gets fishy. The Times of India reported that Telenor was seeking damages of nearly $14 billion (Rs 70,000-and-odd crore) when the company has invested all of Rs 15,000 crore so far.

Telenor spokesperson Glenn Mandelid emailed a response to Firstpost saying no compensation amount had been conveyed as yet. “We can confirm that we have informed the government of India of our intent to invoke the provisions of the CECA between India and Singapore. While we haven’t stated any amount, we do intend to seek compensation for all investment, guarantees and damages. We are hopeful that it remains the government’s intent to protect and encourage bonafide foreign investment in the country.”

Then where did the $14 billion figure come from? Did the reporter goof up or was it planted to give everyone, including the courts, the shivers about the money involved?

An equally significant statement came from Sistema, which had the Russian envoy batting for this company which lost 21 licences.

BusinessLine quoted Russian Ambassador Alexander Kadakin as saying that it was India’s responsibility to safeguard its investment. In an aggressive statement, he said: “We will not allow $3.1 billion of our people’s money to be just thrown out.”

Kadakin should know that his investment was not just “thrown out” arbitrarily, but went through a due process of law and it was the highest court in the land that cancelled his company’s licences.

One may or may not agree with the court’s verdict, but any company working in India cannot expect to get away with breaking the law as interpreted by the Supreme Court.

One wonders how Telenor and Sistema can threaten arbitration when both have anyway moved review petitions in the Supreme Court. Are these moves part of a concerted effort to grab the attention of the court or did someone in government encourage them to add to the decibel levels on the issue and confuse the picture? The right time to bring up the arbitration issue is after the review petition is disposed of, not now.

Is someone trying to send a message to the court to back off?

Both Telenor and Sistema can claim to be pure as the driven snow and unaware of the skulduggery involved in the allocation of 2G licences, but are we to assume that they committed billions of dollars without checking the antecedents of their partners or the telecom ministry’s flawed processes?

In fact, Telenor is trying hard to dump its partner Unitech and start again with a new partner. “We are not even thinking about what our partner (Unitech) did. This is now in the court. In the meantime, we want to have a fresh start. And the fresh start is with a new company and with a new partner,” Uninor Managing Director Sigve Brekke told news agencies earlier.

For its part, the government seems keen to muddy the waters to reduce the political embarrassment caused by the licence cancellation.

Kapil Sibal and the law ministry have been trying to lob a presidential reference in the Supreme Court asking whether the 2 February order also extends to licences issued between 2001-07.

This is nothing but a mischievous effort to bring in a complication that isn’t there. After being convicted for murder, its like the convict asking the court to decide whether other murders too are covered by the verdict.

One might as well ask if every licence issued since 1991 was fine. The intention seems to be to confuse and confound the Supreme Court - and then hope it will change its mind as the previous judgment is creating problems for foreign investment.

Sibal’s efforts were shown up by none other than Planning Commission Deputy Chairman Montek Singh Ahluwalia, who wrote to the Prime Minister : “I am not convinced these concerns are valid. I also feel raising these issues will create unnecessary problems.” He added: “There is nothing to be gained by making a Presidential reference on the lines of the draft….Challenges regarding past licences can be met in court with a clear indication of our position on the need for stability in policy. Decisions on pricing should be taken by a Group of Ministers/Cabinet, if necessary.”

More important, the Telenor-Sistema threats of arbitration raise questions about whether CECA or other investment protection clauses can be brought to contest a judgment of the highest court of the land.

If you buy stolen property, you may not have committed a crime. But there is no question it has to be returned to the person whose property it was in the first place. You have to sue the person who sold you the property. This means either their partners, or the government, or both.

But the time for that is after the review petition is dealt with.

(Additional reporting by Sindhu Bhattacharya)