CBI chargesheet delinks Ruias from A Raja and 2G scam

The third Central Bureau of Investigation (CBI) chargesheet in the 2G spectrum scam accuses the Ruias of Essar of cheating and criminal conspiracy, but steers clear of linking them to Andimuthu Raja or booking them under the Prevention of Corruption Act – as the Reliance ADAG, Swan and DB Realty businessmen were.

The CBI’s main claim is that the Ruias are the real promoters of Loop Telecom – something the policy forbids since they were already promoters in rival Vodafone Essar.

The chargesheet is no small gain for the Ruias, since it means they weren’t involved in the 2G scam. But the CBI still maintains that their “crime” is not any lesser under section 120B read with section 420 of the Indian Penal Code, because the Ruias could face up to seven years of jail if proved guilty.

It also means that the Ruias could face arrest when the case comes up for hearing at the CBI Special Court on 17 December.

The backstory, however, is that top investigators in the CBI were divided on the Loop-Essar chargesheet till the last moment. The first chargesheet in the 2G scam came on 2 April 2011 and within 20 days the second one was filed. The Ruia chargesheet took all of eight months, even when the CBI had already told the Supreme Court in July that Loop was a front or ‘alter ego’ of Essar.

Why did the CBI change its mind about Essar?

The case is simple: Loop applied for a Unified Access Service Licence (UASL) in 21 circles and obtained it on 10 January 2008 along with the rest of Raja’s beneficiaries. Till 10 January, there is not a single document that indicates any collusion between the Ruias and Raja or any other senior telecom ministry official, CBI officials say.

But soon after the licence was allotted to Loop, rival telecom companies filed complaints with Raja alleging that Loop was not really owned by IP Khaitan and Kiran Khaitan. Rather, it belonged to Kiran Khaitan’s brother and relatives — the Ruias, who were till recently co-promoters of Vodafone Essar.

The Essar Group had a 33 percent stake in Vodafone through companies registered in India and Mauritius when Loop was given its licence. Under clause 8 of UASL rules, it should not have more than 10 percent in Loop or, for that matter, any other telecom company in the same circles.

Raja sent the complaints to the corporate affairs ministry for further investigation. In May 2009, the ministry confirmed that the Essar Group had “significant control or influence’’ over Loop Telecom.

This is when Raja seemed to favour the Ruias. Instead of moving on the corporate affairs ministry’s report, he did not take any action against Loop.

In August 2009, the additional legal advisor to the telecom ministry, Santokh Singh, held that the equity holdings of Essar in Loop were less than 10 percent and thus Loop was entitled to spectrum in 21 circles allotted in January 2008.  Subsequently, ex-telecom secretary Sidhartha Behura endorsed Santokh Singh’s decision on the advice of Raja. Thus, in August 2009, exactly a year-and-a-half after the allotment of the licence, Raja’s alleged complicity with the Ruias came to light.

When the CBI concluded its investigations, it made out a case of criminal conspiracy and cheating under the IPC and the Prevention of Corruption Act. It argued that Raja’s silence despite the corporate affairs ministry’s recommendation suggested that he knew about the Loop-Essar connection even when he was allocating the UASL licence.

This is when the Loop issue changed course. The ministry of corporate affairs, the law ministry and the Telecom Regulatory Authority of India (Trai) sent missives and recommendations to the CBI saying that Loop and Essar were not associates under UASL rule 8.

Law Minister Salman Khurshid also chipped in and claimed in the media that Loop and Essar were not a common entity. Even when the supreme legal advisor in the country, Attorney General GE Vahanvati, cleared the decks for pressing charges of cheating against the Ruias, Khurshid again reiterated that Essar had not violated any rules.

Vahanvati, however, pointed out that the case against the Ruias under the Prevention of Corruption Act was weak because the CBI had no proof that Raja had conspired to allocate UASL licences to Loop on 10 January 2008. Raja’s complicity with the Ruias began in August 2009 and the CBI could not draw the conclusion that Loop and Essar were already in league when licences were being allotted.

Thus there is no sequence of proof between 10 January 2008 and August 2009 suggesting any collusion between the Ruias and Raja’s telecom ministry. Against this backdrop, the CBI decided to drop charges under the Prevention of Corruption Act and instead press the charges of cheating and forgery against the Ruias.

The 106-page FIR was filed on Monday with the designated CBI court at Patiala House and it names five Essar group promoters — Prashant Ruia, Ravi Ruia, Loop Telecom promoters IP Khaitan, Kiran Khaitan, and Essar Group Director (Strategy and Planning) Vikas Saraf.

Essar, in a press note released immediately after the CBI chargesheet, shrugged off the charges and stated that it was merely an “interpretation of clause 8 violation of the UASL guidelines. The Ruias will take legal recourse.”