Kanimozhi & seven dwarfs-By Aditya Sinha
May 2, 2010 17 Comments
(The Editor-in-Chief of The New Indian Express and is based at Chennai)
22 Nov 2008 01:00:00 AM IST
http://www.expressbuzz.com/edition/story.aspx?Title=Kanimozhi+&+seven+dwarfs&artid=8j|oxJJOh04=&SectionID=d16Fdk4iJhE=&MainSectionID=HuSUEmcGnyc=&SectionName=aVlZZy44Xq0bJKAA84nwcg==&SEO=
Actually, the fairytale of Kanimozhi, d/o Mr Kalaignar, is a bit different from that of Snow White, a beautiful princess who was abandoned by her stepmother in a forest where she met seven lovable midgets, and where she went into coma after biting a toxic apple. For one thing, in Snow White’s tale, there is no global economic crisis, and general elections are not around the corner. Another difference is that while Snow White’s step-mother always had the King’s ear and thus the upper hand, Kanimozhi’s step-mother has long lost control of Mr Kalaignar. And while Snow White’s seven friends were biological dwarfs, Kanimozhi’s are sized by their moral stature.
Take communications minister A Raja, who is akin to Dopey among Snow White’s dwarfs. He and Kanimozhi took over from Dayanidhi Maran when Mr Kalaignar banished the latter from his kingdom in April 2007. Dayanidhi and brother Kalanidhi had become too ambitious, holding popularity contests in their newspaper; so it was burnt down. Prior to his downfall, Dayanidhi served dual roles in distant Delhi: as minister in a financially-busy ministry, he was also Mr Kalaignar’s pointsman in the Capital. After Dayanidhi’s departure, Raja assumed the first role, Kanimozhi the second.
Raja was focused on his task from the start; this July, the Express reported his underselling of 2G spectrum (a designated part of the airwaves for use by mobile phone operators) which caused a loss of Rs 22,466 crore. Turns out we were wrong by around Rs 37,500 crore. Now the Left and the BJP want Raja’s head; the central vigilance commission is deep into its investigation; and the Delhi High Court has admitted a public interest litigation against the allotment.
The scam, briefly: Raja did not auction the spectrum, but sold it on a first-come-firstserve basis. And not at 2007 prices; he charged the 2001 price of Rs 1,650 crore. That would have been okay, except he did not give any genuine operator time to react; in effect, the sale announcement came at the start of a weekend, and it closed after the weekend was over. Foreign players did not get time to mobilize their Rs 1,650 crore – which again would be okay, if it weren’t for the fact that two operators who did get the Spectrum, Unitech and Swan (realty players who do not even own a simple telecom asset like a network tower), effectively and profitably resold their spectrum to foreign players.
Raja not only undersold, but blocked genuine foreign players, who came in anyway, after enriching someone other than the Government of India. Was it just the Delhi responsibilities that Kanimozhi shared with Raja? Or should she share culpability as well? Then there is T R Baalu, who’s like the dwarf Sleepy, considering his accomplishments in nearly five years as surface transport minister in the UPA government. The highways programmes of the NDA government have all but come to a halt. And now that the world is in an economic slowdown, it ought to be a time when India pumped money into this sector of infrastructure – but private companies are getting cold feet because bank credit has dried up. Some economists think India can be among the first to recover from the global recession; that might have been true had Baalu done his job and kept performance high. Instead, Sleepy has been fruitlessly pursuing the Sethusamundram Canal project, and he has tried to divert cheap gas to companies owned by his sons.
Back home in Tamil Nadu, there is the electricity minister Arcot Veeraswamy, possibly the dwarf Happy. He has reigned over a deteriorating power situation which makes a mockery of the UPA’s hopes that India will help pull the globe out of recession.
Ask any industrialist in the state that has been among the most industrialized in the country. Factory owners in Sriperumbudur lament the open extortion by “rowdies”; they lament the money they spend on private generators due to power rationing; they lament the drying up of the US market. One reason it is so bad is Veeraswamy’s great interest in monitoring the rise of actorturned politician Vijaykanth, a man with no ideas, no neck, but lots of supporters, as a recent rally in Chennai demonstrated.
Kanimozhi’s two step-brothers, Stalin and Azhagiri, can be likened to Snow White’s Sneezy and Grumpy. These guys are certainly not the Brothers Karamazov. If they were, nobody would spend their time wondering what lies in store for the DMK after Mr Kalaignar departs from the scene.
By protocol, Stalin as a senior minister in the state government would appear to be the natural heir. But Azhagiri, the elder brother who is more straightforward than subtle, has been ruling the roost in the southern part of the state, and has of late turned his gaze to the Capital.
Kanimozhi seems to have taken a liking for Grumpy. And in doing so, her well-wishers may have displayed a bit of ruthlessness as well. For, back in June there were a bunch of mysterious rumours about Stalin, saying that he had returned from a London trip with some dreaded disease which would cut his life short and which had forced Mr Kalaignar to reconsider his succession. It was a false rumour. Stalin found that he had sarcoidosis, a node in the lung that is easily curable. At worst, he is simply, well, Sneezy.
The rumours, however, are an example of how absurd the fallout of sibling rivalry can get.
The last two in Kanimozhi’s troupe would be her rivals for Mr Kalaignar’s mantle: PMK founder S Ramdoss and film icon Rajnikanth.
Ramdoss, whose son is the health minister in Delhi (so we can call him Doc), thinks he is the natural successor. He overplayed his hand recently, however, and finds falling between both the DMK’s and Ms J Jayalalithaa’s stools. But he is a potent force, demonstrated by the fact that Baalu visited him at his house in Tindivanam two weeks back – some say to request Ramdoss not to raise the 2G spectrum controversy in the state. Perhaps his silence will be his price for his return to the DMK-led front.
Rajnikanth is a force greater than a tsunami, and was almost lured into politics by the late G K Moopanar. The talk is that he will start his own party – but only after Mr Kalaignar goes. Naturally, of Snow White’s dwarfs, he should be Bashful.
None of this can be good for Kanimozhi, who, if you’ve noticed, has been unable to live up to her responsibility as Mr Kalaignar’s pointsman in Delhi, as evidenced by her lack of handling of the Sri Lankan Tamils’ issue and the 2G spectrum controversy.
It’s probably because she spends all her time in Chennai, rushing from one local function to the next, keeping her visibility high, and feeding her obscenely growing ambition. Unlike Snow White, however, she has enviable maternal support, and it looks as if more than her, it will be the residents of Tamil Nadu who will be biting the poisoned apple and slipping into coma, with no prince charming to rescue us in sight
தேவப்ரியா 
Shorlisted firm with Raja-link flouts rule
J Gopikrishnan | New Delhi
In shortlisting WiMax franchisees, the BSNL has violated its own guidelines which make it mandatory for the eligible bidder to have Rs 100-crore turnover per year for two consecutive years. Neither the shortlisted company, Ampoules & Auto Pvt Ltd, nor its re-born entity Starnet communication Pvt Ltd meets the criteria.
When Ampoules & Auto Pvt Ltd submitted the bid in June 2009, the company was non-functional. The company filed its last annual returns in 2004, which showed the pathetic situation of this firm engaged in automobile spare parts and medical supply. No money flow was shown in the last annual returns and the company said on affidavit that it was in the category of companies with less than Rs10-crore annual turnover.
During the bidding process in November 2009, the name of Ampoules was changed to Starnet Communications Pvt Ltd and six years of pending annual returns were filed in just two days. All these returns showed little money on the company balance sheet. Once again, in the mandatory affidavit filed before the Registrar of Companies (RoC), West Bengal, they admitted it belonged to the category of companies with below Rs10-crore turnover.
According to highly placed officials of the BSNL, they were under pressure from the Telecom Ministry’s “political master” to accept the manipulated annual returns showing inflated figures above Rs 100 crore per year.
Incidentally, in a rejoinder to an earlier report of The Pioneer on this subject, the BSNL said that, “The company (Ampoules & Auto Pvt Ltd) has submitted certified copies of balance sheet of last two years and has requisite turnover.” The rejoinder was issued by AGM (Adm & Legal) of BSNL Chennai unit.
This is not the end of the story. Raja’s men virtually took over the new-born Starnet Communications Pvt Ltd. One of its directors is 40-year-old Rajesh Ishwarbhai Bhatt, popularly known as Rajesh Bhatt, hailing from Mumbai. He is an engineer, now in Malaysia, and currently working as vice-president of Raja’s favorite company Wellcom Communications of Malaysia.
Raja had first tried to grant WiMax franchise to Wellcom Communications, after lobbying by its owner Dato Vijayakumar Ratnavelu, for Delhi and Chennai. Dato Vijayakumar, a Tamil-origin Malaysian, floated Wellcom Communications India Pvt Ltd with 15 per cent share of Raja’s close aide T Silvarajoo.
T Silvarajoo is a frequenter at Raja’s office/home and a sub-contractor of CPWD. Hailing from Raja’s home town Peramballur, Silvarajoo is also the manager of Dr C Krishnamoorthy’s quarry mine, which supplies pellets to the CPWD. Before becoming an MP, Raja operated his legal office in Krishnamoorhty’s building in his hometown.
Raja had also faced allegations of calling Justice Reghupathy of Madras High Court in June 2009 for granting bail to Krishnamoorthy in a criminal case.
Another director of Starnet is one Manoharan Shanmugasundaram of Chennai and reportedly close to Silvarajoo. This is his first corporate venture. The company had already filed application to change its registered office to Chennai.
The Pioneer’s previous expose about Raja’s link with Silvarajoo and Wellcom aborted his ploy to grant them WiMax franchise and the BSNL was forced to cancel the bidding process.
The new tender was floated with the criteria of Rs 100-crore turnover for bidding. That process has also now got into controversy with Raja trying to bring his favourite Wellcom Communications via Starnet Communications via Ampoules & Auto Private Limited.
Incidentally, the fraud of changing Ampoules name to Starnet took place during the same period in November 2009, when CBI had launched a countrywide probe to in connection with the 2G Spectrum scam.
http://www.dailypioneer.com/233031/Shorlisted-firm-with-Raja-link-flouts-rule.html
One address, 38 investors, all via Mauritius
J Gopikrishnan | New Delhi
The daily updated list of Foreign Venture Capital Investors (FVCI) registered with the Stock Exchange Board of India (SEBI) shows that out of the total 135 foreign companies, as many as 38 are Mauritius-based having same address, phone and fax numbers.
It is strange to note that these companies, which pump billions of dollars into Indian market, do not either need or cannot afford separate offices and business infrastructure.
The daily updated list, which exhibits the registered foreign investors from 2001, shows that these 38 companies address as: IFS Court, Twenty Eight Cybercity, Ebene, Mauritius. Tel: (230) 467 3000 Fax: (230) 467 4000. In fact, 2i Capital PCC is the first firm which was registered with the SEBI in 2001 on the above-mentioned address.
The scrutiny of the addresses leads to one International Financial Services in Mauritius. Apart from these 38 firms, another set of five FVCIs has also shown their address to ‘care of’ this Mauritian company, though the street is different.
According to the details provided by the website of International Financial Services, the company was founded in 1993 by one Kapil Dev Joory and Couldip Basanta Lala. The company also claims that they are administering the funds of financial majors like Lehman Bros, AIG, Citi Group, Merrill Lynch, New York Life, AMP etc.
The Mauritian firm also claims it is administering the funds of Indian companies like ICICI, HDFC, Tata Group, IL&FS and UTI. The company also claims it is a member-firm of the Institute of Chartered Accountants in England and Wales.
The Pioneer had sent a set of questions on December 23 to SEBI Chairman CB Bhave to know how these companies were registered with the SEBI. But there has not been any response from him so far.
As per the claims of SEBI guidelines and circulars, a FVCI has to undergo a series of scrutiny under several committees, including the Reserve Bank of India, to get it registered. But the question remains how the SEBI approved 38 companies from Mauritius with the same address, phone, fax numbers.
The scrutiny of the SEBI’s list gives some more interesting information. Out of the 135 registered FVCIs, pouring billions of dollars into India, barring two each from Singapore and Cyprus, rest are from Mauritius.
Following is the list of the 38 companies with same address:
2i Capital PCC, Aditi Investment Holdings Limited, Advantage Fund S3 DIF II, AIF III Sub Pvt. Ltd, AMIF II Ltd, AOF HS Mauritius Ltd, Aquarius Capital (Mauritius) Limited, Ares Investments, Ashoka Investment Holdings Ltd, Battery Venture VII Mauritius, Battery Ventures VIII FVCI (Mauritius), Canaan VII Mauritius, Canaan VIII Mauritius, Citigroup Venture Capital International Mauritius Ltd, CV Global Holdings Inc, CVCIGP II Client Ebene Limited, CVCIGP II Employee Ebene Limited, DFJ Mauritius Inc, Dynamic India Fund V, Greylock (Mauritius) Inc, Hema CGPE Ltd, Hema CiPEF Ltd, IDFC Private Equity (Mauritius) Fund III, Jafco Asia Technology Investments IV (Mauritius) Limited, JAFCO Asia Technology Investments III (Mauritius), LB Ventures (Mauritius) Ltd, Monet Limited, Nea FVCI Ltd, Nea Indo US Venture Capital, Norwest Venture Partners X – Mauritius, NYLIM Jacob Ballas India (FVCI) III LLC, Renoir Limited, Sandstone Private Investments, Sequoia Capital GF IV Mauritius, Sequoia Capital India Growth Investment Holdings II, Tano Mauritius, Walden Investments VI, Zephyr – Peacock India-I.
http://www.dailypioneer.com/225652/One-address-38-investors-all-via-Mauritius.html
Raja defied PM, ignored Bhardwaj’s noting
J Gopikrishnan | New Delhi
The 2G spectrum scam might not have taken place but for the clout that A Raja wielded in the UPA-I Government, when his party (the DMK) — as a major ally of the Congress — called the shots at the Centre. Documents available with The Pioneer show how the Telecom Minister got away with serious misdemeanour: He flouted Manmohan Singh’s written directions to take the PM’s clearance before acting on the matter; contemptuously dismissed a crucial suggestion by then Law Minister H R Bhardwaj for an EGoM to decide on spectrum licence auctioning; and claimed to have been enlightened (to go ahead in the manner he did) in a deliberation with senior Congress leader Pranab Mukherjee.
Bhardwaj was perhaps the first senior Minister then to smell a rat in Raja’s decision on spectrum allotment. On November 1, 2007, he forcefully advocated that an Empowered Group of Ministers (EGoM) be formed to decide the formalities in allotting the spectrum. Bhardwaj wrote, “In view of the importance of the case (2G spectrum allocation) and various options indicated in the statement of the case, it is necessary that the whole issue is first considered by an Empowered Group of Ministers and, in that process, the legal opinion of A-G (Attorney General) can be obtained.”
The then Union Law Minister was responding to an opinion sought by the Telecom Ministry on going ahead with the allocation of 2G spectrum on first-come-first-served basis and on prices fixed in 2001.
This sensible suggestion did not go down well with Raja. Without wasting time – on the following day, November 2, 2007 — a furious Raja wrote to the Prime Minister and questioned Bhardwaj’s wisdom in asking for setting up an EGoM.
The Telecom Minister’s letter is a classic example of arrogance. He wrote, “The Ministry of Law and Justice, instead of examining the legal tenability of these alternative procedures, suggested referring the matter to EGoM. Since generally new major policy decisions of a department or inter-departmental issues are referred to the GoM, and needless to say that the present issues relate to procedures, the suggestion of the Law Ministry is totally out of context.” (The emphasis is as in the letter.)
Raja also informed the Prime Minister that he wished to advance the cut-off date for the receipt of applications for the spectrum/licence from October 1, 2007, to September 25, 2007.
This was on the morning of November 2, 2007. The same afternoon, the Prime Minister — alerted by Bhardwaj’s noting on the mega scam-in-the-making — wrote back to the Telecom Minister and cautioned him against taking any measures without informing him. This was clearly a directive to freeze all action on 2G spectrum allotment.
“I would request you to give urgent consideration to the issues being raised with a view to ensuring fairness and transparency and let me know of the position before you take any further action in this regard,” the Prime Minister said.
In the two-page letter, Manmohan Singh also objected to Raja’s proposal to go ahead with the first-come-first-served model and cheap pricing. Singh instructed the Minister to adopt “correct pricing of spectrum and revision of entry fee”. The Prime Minister also asked Raja to clarify on the objections raised by TRAI over the first-come-first-served basis and the 2001 pricing for sale in 2008.
The unambiguity appeared lost on the Telecom Minister. Responding to the Prime Minister, Raja offered an evasive reply, though drooping with courtesy. The same evening, he wrote in his second missive to the Prime Minister, “I would like to assure you that all my decisions and endeavours are honestly aimed at the development of the telecom sector….” He then launched into a technical background on the telecom sector in the country. But not one word did he utter on the Prime Minister’s instructions to refrain from taking any decision without informing him (the PM). He also remained silent on the issue of auctioning.
After this flurry of exchanges, Raja suddenly went into a shell. Finally, breaking his silence 50 days after his last note to the Prime Minister, Raja wrote another letter to him on December 26, 2007. Therein, he claimed that he had received consent from the then External Affairs Minister Pranab Mukherjee and the then Solicitor General (currently Attorney General) Goolam Vahanvati to go ahead with the spectrum allocation.
It is here that the Telecom Minister got enlightened. “In these circumstances, the discussions with External Affairs Minister and Solicitor General of India have further enlightened me to take a pre-emptive and pro-active decision on these issues as per the guidelines and rules framed thereunder to avoid any further confusion and delay,” a grateful Raja stated.
It remains a mystery why Raja quoted Mukherjee and Vahanvati as both have no locus standi in allotting the 2G spectrum. The Prime Minister routinely acknowledged the letter on January 3, 2008, but said nothing more. Certainly, he never supported or endorsed Raja’s decisions, as the Telecom Minister is claiming ad nauseum.
Ironically, while Bhardwaj is out of the Cabinet in UPA-II, Raja continues in the Ministry, defending what is increasingly becoming an indefensible position.
http://www.dailypioneer.com/211888/Raja-defied-PM-ignored-Bhardwaj%E2%80%99s-noting.html
TAPPED and TRAPPED
J Gopikrishnan | New Delhi
Govt taps PR honcho’s phone, gets clinching evidence against Raja
The cat is finally out of the bag. The CBI has acquired clinching evidence showing that a high-profile woman public relations lobbyist acted as powerbroker in the mutli-crore 2G spectrum scam and that she was in regular touch with Telecom Minister A Raja.
The investigating agency unearthed damning evidence of wheeling-dealing in the spectrum scam by authorised tapping of telephones of several persons, including Nira Radia, who runs several public relations and consultancy companies — like Vaishnavi Corporate Consultants, Noesis Strategic Consulting Services, Vitcom Consulting and Neucom Consulting.
All these companies are filled with retired bureaucrats, who ostensibly lobby with the Government on behalf of different companies. Radia is an NRI, who landed in India in early 2000 for some liaison work for aviation companies. Of the nine companies that benefited from the dubious spectrum allocation by Raja, the CBI found that four companies were “serviced” by Radia.
Highly-placed sources said the CBI was denied permission by top authorities to interrogate Radia even though the telephone intercepts clearly exposed her role in the scam, which cost an estimated Rs 1,00,000 crore to the exchequer.
A communication between the Income Tax Department and the CBI shows that nine phone lines were tapped by the I-T Department’s investigation wing. The first phase
of 120 days of tapping started on August 20, 2008, and the second phase of 180 days on May 11, 2009.
Sources in the CBI said that in addition to Radia’s, the telephone lines of several other influential businessmen, politicians and advertising professionals were tapped for uncovering the extent of lobbying in the scam.
Sources said that the first-phase conversation tapping, lasting 120 days, exposed the parking of ill-gotten money from the spectrum scam in the form of real estates holdings, company shares and derivates within the country and in tax havens like Mauritius.
Documents available with The Pioneer show that Central Bureau of Investigation DIG Vineet Agarwal had on November 16, 2009, sought call detail records of Nira Radia from Director General of Income Tax (Investigation) Milap Jain. “It has been reliably learnt that certain middlemen, including one Ms Nira Radia of M/s Noesis Consultancy, were actively involved in the above-mentioned (spectrum scam) criminal conspiracy,” Agarwal’s letter to Jain, seeking the detailed call records, stated.
On November 20, 2009, as per Jain’s instructions, Joint Director of Income Tax Ashish Abrol provided the details of conversation between Radia and key players in the spectrum scam, including A Raja.
“There are some direct conversations between Ms Radia and the Telecom Minister. In some other conservations, Ms Radia boasts of having helped some of the telecom operators in their efforts to obtain licences/spectrums. Ms Radia has also been in regular touch with Shri Chandolia,” confirmed Abrol to the CBI. RK Chandolia was Raja’s private secretary during the time of spectrum allocation and has since been elevated as an economic adviser in the Department of Telecommunication.
“On the basis of specific information received from CBDT, the telephone lines of Ms Nira Radia and some of her associates were put under observation after obtaining permission from the Home Secretary,” Abrol wrote to Agarwal in a letter, marked “Strictly confidential and top secret”.
“The intercept provides the conversation of the target and associates indicating laundering and structured payoffs, transactions and liaison for projects of telecom, petroleum and also the media,” the I-T Department communication to the CBI stated.
Radia’s companies are involved in consulting in telecom, power, aviation and infrastructure. These entities not only managed the media but, as per the recorded conversations, apparently tried to influence policy changes and decisions of various Government departments to suit the commercial requirements of their clients, confirmed the Income Tax Department’s investigation wing to the CBI after analysing the telephone conservations.
“From these conversations, it appears that Ms Nira Radia might have had some role with regards to the award of telecom licences. In a conversation, she guided a new telecom operator on the need to delay the inflow of funds from the overseas investor and not to give the impression to the Government that there has been any ‘windfall’ profit,” the letter added.
In the conversation details available with The Pioneer, Radia was talking about arranging huge money from abroad for Unitech Wireless, which is a major beneficiary in the spectrum scam.
According to CBI sources, Radia got information about the agency’s moves against her from her vast network in the South and North Blocks and left for London in February to avoid arrest for criminal conspiracy in the spectrum scam.
“The detailed telephone transcripts of Radia clearly show how our politicians and bureaucrats were hand in glove with the corporates in looting the public exchequer,” a top CBI official said.
Needle of suspicion points to Raja
J Gopikrishnan | New Delhi
Petitioner duo who sought bail in Chennai close to Telecom Minister
The father-son duo that tried to influence a Madras High Court judge through a Union Minister for a favourable verdict in a criminal case, was close to Telecom Minister A Raja.
Justice R Reghupathy created a sensation on Monday evening in open court in Chennai when he alleged that a Union Minister had tried to influence him for grant of anticipatory bail to a doctor and his son in a forged marksheet case filed by the CBI. The judge said the Union Minister called him twice for granting anticipatory bail to Krishnamoorthy and son S Kiruba Sridhar, facing a CBI inquiry for malpractices in medical college exams of Pondicherry University.
While the judge did not name the Minister who had tried to put pressure on him, documents available with The Pioneer show Dr C Krishnamoorthy enjoys close proximity with Telecom Minister A Raja.
Krishnamoorthy is a close associate of Raja and belongs to the Minister’s hometown, Peramballur. He is the owner of the building which housed a law firm run by Raja before he became a Minister. Krishnamoorthy is also the managing director of a Coimbatore-based real estate company, Kovai Shelters Promotors India Pvt Ltd, formed on January 19, 2007. As per the documents available with the Registrar of Companies, Raja’s nephew Dr R Sridhar and nieces R Anandabhuvaneswari and R Santhanalakshmi are directors in this company and jointly hold 45 per cent shares in Kovai Shelters.
The Pioneer had on January 12, 2009, reported that Raja’s nephew, a Class-I officer in the Ministry of Environment and Forests, violated the service conduct rules by remaining on the board of a private firm without informing the Government. Sridhar had secured the Government job by providing false experience certificates. Applications for this post were invited during Raja’s tenure in the Environment Ministry. The mandatory five-year experience certificate was falsely issued to Sridhar by his research guide Dr L Kannan, who was later elevated as the Vice-Chancellor of Thiruvalluvar University.
Krishnamoorthy also owns a big investment company, AGM Investments Finances Pvt Ltd. This company, formed in September 1990 by one Arun G Mehta in Chennai, was acquired by Krishnamoorthy in February 2008 along with his brother Satyanarayanan.
On Tuesday, Justice Reghupathy spilled the beans when the advocate, appearing for S Kirub Shridhar, a third-year student in a private medical college in Puducherry, and his doctor father Krishnamoorthy, complained that the judge was not granting bail to his clients on the basis of prosecution submissions.
The advocate’s remarks came after the judge said he was not inclined to grant any relief as their pleas had been rejected on June 15 itself. Annoyed, the judge said, “A Union Minister talked to me about the matter. You yourself know every thing. Unless an unconditional apology is tendered by you, I will incorporate every detail in my order.”
Justice Reghupathy said he would also write to the Prime Minister about the “pressure exerted” on him.
TRAI changes tune
J Gopikrishnan | New Delhi
Modified opinion coincides with arrival of regulator’s new boss
Having consistently taken the position that the first-come-first-served system adopted by the Telecom Department for allotting spectrum was improper, the Telecom Regulatory Authority of India (TRAI) has suddenly turned coy and tacitly started backing the controversial process. Incidentally, the change in opinion coincides with the arrival of a new face as the regulatory panel head.
In an affidavit filed recently in the Delhi High Court, which is hearing a public interest litigation against the controversial allotment of 2G spectrum, TRAI diluted its opposition to the first-come-first-served formula. The court had asked for the regulator’s opinion on the dubious allotment of spectrum in February-end. The affidavit, which downplays the organisation’s consistent opposition to the dubious allotment, was filed after the appointment of JS Sharma as the new TRAI chairman.
A copy of the affidavit — which The Pioneer possesses — does not even mention ‘first-come-first-served’ as a basis for allotment, though the court had asked it to comment precisely on the allotment process.
Even though TRAI did say that it had suggested the auction method to determine market price of the spectrum on several occasions, it did not comment on its stand regarding the first-come-first-served system, let alone express its known unequivocal opposition to it.
Seeking to distance itself from the contentious issue, TRAI told the court, “It is respectfully submitted that the policy of allotment of telecom spectrum is an administrative matter under the jurisdiction of the Department of Telecom.” It added, “In the 2G bands, the allocation through auction may not be possible as service providers were allocated spectrum at different times of their licence and the amount of spectrum with them varies from 2×4.4MHz to 2x10MHz for GSM technology and 2×2.5MHz to 2x5MHz in CDMA technology. Therefore, to decide the cut-off after which the spectrum is auctioned, will be difficult and might raise the issue of level playing field.”
Interestingly, TRAI did not mention a word about a crucial letter written by its former chairman Nripendra Misra to Telecom Secretary Siddharth Behura on January 14, 2008, in which he had vehemently criticised the spectrum allotment on first-come-first-served basis. Misra blamed the Telecom Department for “cherry picking” in adopting those recommendations that suited the department while ignoring other important ones. In that letter, the former chairman had criticised the allotment of spectrum to new players without specifying the availability of the scarce resource. Misra had on several occasions blamed the department for making claims that the 2G spectrum allocation process was conducted as per TRAI recommendations.
“It would be unfair and misleading if any decision and consequent action is initiated without identifying and implementing the linkages elsewhere in the recommendation. It was reiterated that the authority (TRAI) should be formally consulted if there is any deviation from the totality of the recommendation,” Misra pointed out in the letter.
The letter added, “The authority has emphasised that there is need to ensure availability of adequate spectrum, its efficient utilisation and making the process (of spectrum allocation) completely transparent and based on a roadmap and well-researched plan.
It is sincerely hoped that the above suggestions/observations and compliance of legal provisions would receive highest consideration as they have a long-term bearing on the telecom sector.”
Misra’s tenure ended in March and Sharma was appointed the new chairman on May 14. Sharma is a former Secretary of Telecom and, prior to this appointment, was a member of the Telecom Disputes Settlement Appellate Tribunal (TDSAT).
Spectrum Scam
TRAI dilutes its opposition to first-come-first-served formula in an affidavit filed in HC
Court is hearing public interest litigation against controversial allotment of 2G spectrum
Court had asked for regulator’s opinion on dubious allotment of spectrum in Feb-end
Affidavit does not even mention ‘first-come-first-served’ as a basis for allotment
TRAI tells court: “…policy of allotment of telecom spectrum is administrative matter under the jurisdiction of Department of Telecom”
TRAI did not mention a word about letter by its former chairman Nripendra Misra to Telecom Secretary in which he had vehemently criticised spectrum allotment on first-come-first-served basis
Milking BSNL Max-imum is in Raja’s spectrum
J Gopikrishnan | New Delhi
After the 2G spectrum allocation, the Telecom Ministry headed by Union Minister A Raja is embroiled in yet another controversy, this time over BSNL’s WiMax franchise.
While top officials of the public sector firm say nothing has yet been finalised, The Pioneer has learnt that the technical committee has short-listed six companies, of which five have been floated by Raja’s confidant Sanjay Kapoor and are filled with the latter’s relatives.
Not just that, all the five firms were registered on a single date, having the same notary, same auditor, same witnesses and even the same e-mail id. So much so that even the last annual general body meeting they held were on the same day. The sixth company is a BPO, owned by a former MP and Congress leader from Tamil Nadu.
The five firms are: WiExpert Communications, SV Telecom Systems, Digitelco Communications, Spectrus Communications and Technotial Infoways.
This reporter visited the ‘registered office addresses’ of these five companies and found they were residences with no display of even the firms’ name boards. These companies had applied for 14 circles across the country. These companies were incorporated on November 5, 2007.
Sanjay Kapoor is said to be a regular visitor at the Sanchar Bhavan and Electronics Niketan, the two main offices of the Ministry. He frequented the Environment Ministry when Raja was Environment Minister. Kapoor’s companies are technically supported by WiTribe, a Qatar-based telecom firm. WiTribe is a WiMax operator in Pakistan.
While Sanjay Kapoor was not available on phone despite repeated attempts, The Pioneer got in touch with his driver Vijay Pal who also happens to be a director of one of the five firms. According to Pal and documents available with The Pioneer, WiExpert’s Managing Director is Anamika Kapoor, Sanjay’s wife. Her mother, Sneh Prabha Arora, is a director of the company.
SV Telecom’s head is Anamika’s father Surendra Mohan Arora. The firm shares its registered office with WiExpert at Flat Number 8 in S-569 in Greater Kailash-II.
Satish Kapoor heads Spectrus Communication and the registered address of the company is Surendra Mohan Arora’s residence at Paschimi Marg in Vikaspuri, while Digitelco Communications, headed by Satish Kapoor’s wife Kamini Kapoor, is registered at their residential address in Vikaspuri. Driver Vijay Pal is also a director in Digitelco.
The fifth company, Technotial Infoways, is led by Sunita Kapoor, who is Sanjay Kapoor’s mother, according to Pal. This firm is registered at her residential address in Samrat Apartments in Vasundhara Enclave.
The Pioneer had made several attempts to contact Sanjay Kapoor, who floated all these companies, but he did not respond to them. Queries sent to his email id, provided as the contact address of all the five companies in the records of Registrar of Companies of Delhi, went unanswered.
The Pioneer on March 5, reported about another of Raja’s close associate’s company participating in the WiMax franchise allotment by the BSNL. Chennai-based Wellcom Communications owned by T Silvarajoo had applied for six circles of BSNL. Silvarajoo is from Raja’s constituency Peramballur in Tamil Nadu and considered close to the Minister.
After The Pioneer’s exposé, the BSNL refrained from short-listing Wellcom. “After the relation between the Minister and Wellcom Communications was exposed, Raja asked BSNL chief Kuldeep Goyal to re-work the entire plan of operations,” revealed a highly placed official of the BSNL. Along with Wellcom, two established names, Wipro and Cisco, too, were cut out from the shortlist.
The sixth company shortlisted was Bangalore-based Raasi Callnet, owned by C Narasimhan, former MP and Congress leader from Tamil Nadu. Raasi Callnet is a BPO company and in the business for the past eight years. Narasimhan was a Tamil Manila Congress MP in 1996, representing Krishnagiri constituency.
Meanwhile, the BSNL granted WiMax franchisee in January to Soma Networks in the three States earning most revenue — Maharashtra, Gujarat and Andhra Pradesh — without any tender or Expression of Interest. Soma Networks is a US-based company floated by Indians. Former Planning Commission member MS Pathak, son of former Vice-President of India GS Pathak, is the chairman of Soma Networks. Yatish Pathak, MS Pathak’s son, is the Chief Executive Officer of the firm. WiMax Forum, an association of WiMax operators, had complained to the Prime Minister over the unilateral allotment of franchisee to Soma Networks.
WiMax is a high-speed Internet service that provides connectivity in mobiles and laptops. The BSNL decided to invite franchisees from private players for providing WiMax services. In what raised suspicions, it invited Expression of Interest a few months ago and cancelled and re-opened the procedure several times. Highly placed officials of the BSNL and Telecom disclosed to The Pioneer that, by this procedure, the BSNL would get 25 per cent of the revenue while 75 per cent will go to the private player. The annual revenue from WiMax is expected to be Rs 900 crore, according to BSNL estimates. A total of 11 companies responded to BSNL’s WiMax franchisee allotment.
The main advantage of the WiMax franchisee of the BSNL is control over 20 MHz spectrum without any investment. “They can use BSNL’s 50,000 communication towers, 20,000 office premises and two million kilometres of fibre network across the country, which are the exclusive property of the nation, free of cost. The role of shell/benami companies is to sell the stakes at whopping prices to foreign companies. It will be like Swan and Unitech deals, offloading the shares to huge values. This is the profit of WiMax business,” a Telecom official said.
BSNL Chairman and Managing Director Kuldeep Goyal did not respond to repeated attempts to obtain clarifications.
CVC smells foul play
J Gopikrishnan | New Delhi
2G spectrum allocation
The Chief Vigilance Commissioner has confirmed large-scale irregularities by the Telecom department in awarding licences for 2G spectrum services, and said it would soon fix responsibility for the lapses. In an exclusive interview to The Pioneer, CVC Pratyush Sinha said his organisation had found “gross violation” in the “non-transparent” methods adopted in licence allotments.
The Pioneer had through a series of reports recently exposed violation of rules and regulations in the 2G issue and the role allegedly played by the Telecom Ministry headed by the DMK’s A Raja.
“We have found that there were gross violations and non-transparent activities in the allocation of 2G spectrum. Basically, the violations are: Granting licences on first-come- first-serve basis; licences being issued in 2008 at prices fixed in 2001, companies such as Swan and Unitech offloading their shares at whopping prices to foreign companies soon after the licences were awarded to them,” said the CVC. He said these steps had led to heavy losses for the national exchequer.
Sinha wondered why the Telecom department had not opted for the auction route. “The Telecom department says they had adhered to the TRAI (Telecom Regulatory Authority of India) guidelines. We found this version totally wrong. The department had used cherry-picking or pick-and-choose theory suit to their intentions. They selectively picked TRAI recommendations that suited them,” he said.
“We had already sent our findings to the department for clarification and fixing responsibility. We are not at all satisfied with their clarification and justification on the allocation 2G spectrum,” said the CVC, adding that they were in the process of “fixing responsibility”.
The CVC also blamed the department for not insisting on a ‘lock-in period’ for the licence-holders to prevent speculative sales. In its report, the CVC blamed the department for exclusion of clauses in the licence agreement that would have prevented ‘offloading’ of shares by the company.
The controversy over 2G spectrum allocation broke out when the Telecom department gave licences to new players like Swan and Unitech in October last year. These two real estate developers bagged the licences at throwaway prices.
Swan got the licence for Rs1,537 crore for starting telecom operations in 13 circles in mid-2008. Within months, Swan offloaded its 45 per cent of the share to UAE-based Etisalat for Rs 4,500 crore, making a whopping profit. Similarly, Unitech bagged the licence for Rs 1,651 crore for operating in 22 telecom circles. It too sold 60 per cent of the shares to Norwegian company Telenor, which is currently providing telecom services in Pakistan and Bangladesh, at a high price of Rs 6,120 crore.
Raja kin lied over resignation
J Gopikrishnan | New Delhi
Worked simultaneously for Govt and private company till Pioneer expose
Facing charges of holding the post of director in a private company while being in the service of the Central Government, Telecom Minister A Raja’s nephew Dr R Sridhar has found an ingenious way to wriggle out of the mess.
Serving a legal notice on The Pioneer for exposing the violation of All India Services (Conduct) Rules, which bar Government employees from associating with private business, Sridhar has claimed he resigned from the private company nearly a year ago, on March 24, 2008, to be precise. But the online registry of the Ministry of Corporate Affairs shows that Sridhar submitted his resignation on January 27, which is two weeks after The Pioneer expose on him. But to escape action for violating the Government rules, he pre-dated his resignation letter to March 24, 2008.
The Pioneer had on January 12 reported that Sridhar, who is a Deputy Director in the Ministry of Environment and Forests, simultaneously held the directorship in the Chennai-based Kovai Shelters and Promoters Pvt Ltd. Interestingly, documents of the Registrar of Companies, Coimbatore, show that Sridhar was very much a director of the Kovai Shelters and Promoters Pvt Ltd when its last annual general body meeting took place on August 7, 2008. Sridhar’s appointment to the post of Deputy Director in the Ministry of Environment and Forests was notified when his uncle Raja headed the Ministry in early 2007. Sridhar, who holds a doctorate in marine biology, did not have the mandatory five-year experience.
Sources in the Ministry said Sridhar had produced a certificate from his research guide that he had assisted him for five years. According to them, the officials were forced to accept the experience certificate produced by Sridhar and the guide — Dr L Kannan —was later elevated as the Vice-Chancellor of Thiruvalluvar University in Tamil Nadu.
In a legal notice sent to The Pioneer, Sridhar claimed that he had joined Government service on March 26, 2008, and left the real estate company’s directorship two days prior to that. Sridhar also violated the Government’s recruitment rules by suppressing the fact that he was holding the directorship and 15 per cent shares in Kovai Shelters. Apart from Sridhar, Raja’s nieces R Anandabhu-vaneswari and R Santhanlak-shmi also have 15 per cent shares each in the real estate firm. Raja’s close associate, Dr Krishnamoorthy, is the managing director of this company.
Krishnamoorthy also owns a Coimbatore-based finance company, AGM Investment and Finance Private Limited, along with his brother C Sathyanarayan. They bought the company in November 2004, soon after Raja became a Cabinet Minister. Incidentally, prior to becoming a Minister, Raja operated his law business in Peramballur from the first-floor office of Krishnamoor-thy’s building. The Pioneer has already reported the saga of two companies owned by Union Telecom Minister Raja’s close relatives. Green House Promoters (Private) Limited and Equaas Estates (Private) Limited were floated soon after Raja became a Union Minister. His wife Parameswari also served as a director on the board of these two firms.
Flouting rules, Raja had not filed information about his wife’s business to Prime Minister Manmohan Singh’s office. Raja’s nephews RP Paramesh Kumar and R Ramganesh, brother A Kalia Perumal and niece Malarvizhi Ram are the directors of these two companies.
Firm with Rs 1 lakh gets Rs 380-cr Swan shares
J Gopikrishnan | New Delhi
When the 2G spectrum controversy broke out and allegations of covert deals surfaced in awarding licences to Unitech and Swan, a defensive Union Telecom Minister A Raja had claimed that no person from Tamil Nadu, and least of all he, was associated with or knew any of the firms. “These all are west Indian and north Indian companies. How can you say I have favoured them? These companies do not even belong to Tamil Nadu,” he had told reporters on several occasions. But documents available with The Pioneer refute the Minister’s claims of innocence in the matter.
The links with Swan get established through a Chennai-based firm, Genex Exim Ventures Private Limited, which was formed four months ago with a paid-up capital of just Rs 1 lakh. Entirely out of proportion to its size, Genex was on December 17, 2008, allotted shares in Swan Telecom worth a little over Rs 380 crore. It may be recalled that Swan was one of the firms that was awarded the 2G licence on a first-come-first-served basis and, that too, on a licence fee fixed seven years ago. The resulting controversy impacted the 3G spectrum bidding process, which has been put on hold by the Union Government despite the Union Telecom Minister’s desire for a speedy allotment.
According to documents filed with the Registrar of Companies in Chennai, Genex was incorporated on September 17, 2008, with two directors — Mohammed Hassan (58) and Ahamed Shakir (41). The company was represented by Ahmed Syed Salahuddin (32) on the board of Swan. The three belong to Kilukarai, a small coastal village in Ramanathapuram district of Tamil Nadu.
The Tamil Nadu link now gets strengthened. Ahmed Syed Salahuddin is the younger son of Syed Mohammed Salahuddin, an NRI business tycoon heading the Dubai-based real estate conglomerate, ETA Ascon Star Group, which began its Indian operations in 2006 by floating several real estate firms across the State. Raja was then the Union Environment Minister and his party, the DMK, had assumed power in Tamil Nadu.
The ETA Group entered into an MoU with the Tamil Nadu Government for setting up an IT Special Economic Zone worth Rs 3,750 crore when A Raja became the Union Telecom Minister in May 2007. Tamil Nadu Chief Minister M Karunanidhi was present at the much-hyped MoU-signing ceremony for the project. It was proposed at Kancheepuram, near Chennai, on almost a 500-acre plot.
It is mysterious that a major business group should enter Swan’s board through a company with a meagre Rs 1 lakh paid-up capital. Incidentally, Genex Exim, having acquired more than 10 per cent of Swan Telecom shares, has not filed any document with the authorities to show its source of income. When contacted, a representative of the company refused comment.
Earlier, Swan’s plan to invest in Green House Promoters Private Limited, a firm run by Raja’s relatives, fell apart after The Pioneer reported the dubiousness of the deal on December 15, 2008.
According to the list of allottees filed by Swan with the Registrar of Companies in Mumbai, 1,33,17,245 shares having a nominal value of Rs 10 were allotted to Genex Exim at a premium of Rs 276 per share. Etisalat, one of the UAE’s major telecom players, was allotted shares in Swan. Etisalat was given shares worth more than Rs 3,000 crore through its Mauritius-based unit. Besides, 11,29,94,228 shares were allotted to Etisalat while the founder shareholder, Tiger Trustees, kept 1,73,01,463 shares worth Rs 495 crore with itself.
Raja’s kin in Govt job, but still on pvt firm roll
J Gopikrishnan | New Delhi
Minister’s dy director nephew has major stakes as director in real estate company
The presence of Union Telecom Minister A Raja’s close family members in private companies raised a political storm recently after The Pioneer revealed how the Minister, in contravention of rules, concealed the information from the Prime Minister.
While the Minister then wriggled out by offering lame excuses, he would have some explaining to do about the latest revelation: His nephew Dr R Sridhar, who happens to be a deputy director in the Ministry of Environment & Forests, is also a director with significant stakes in a private limited company. He was selected for the Government post during Raja’s tenure as the Environment & Forests Minister.
Just like his uncle, Dr Sridhar also flouted the service rules when he failed to inform the Government before joining its service that he was a director with 15 per cent stakes in Kovai Shelters Promotors (Private) Limited. Incidentally, he continues to be a director with the Coimbatore-based real estate firm, established in January 2007 and headed by the Minister’s associate from his Peramballur constituency, Dr C Krishnamoorthy.
Not just that, Section 13 of the All India Services (Conduct) Rules bars a Government servant from having any interest in any private business or company. But, sources said, Sridhar never informed the Government of his being on the board of the private company.
When The Pioneer contacted Sridhar for his reaction, he said, “I cannot comment right now. I have to check with Kovai Shelters.” He brushed off the important matter of holding private business interests while serving as a Class I Government officer. “I am busy now. I told you I have to consult my people,”
he said.
Sources in the Ministry told The Pioneer that Raja, then Environment & Forests Minister, had taken a keen interest in his nephew’s recruitment soon after the company was formed. They added that though the 29-year Sridhar lacked the mandatory five-year work experience, he was selected for the post on the basis of a dubious certificate of experience.
“Sridhar (who did his doctorate in marine biology) produced a certificate from his guide, Dr L Kannan, that he had been assisting him for the past five years. Though we objected to the claim, we were forced to oblige the Minister under pressure,” sources added. Kannan is currently the Vice-Chancellor of Thiruvalluvar University in Tamil Nadu.
Sridhar joined the Government’s service in November 2007 after obtaining the requisite clearances for the appointment of Class I officers. Sources said that he concealed the information of his private business all through the inquiry process.
Apart from Sridhar, Raja’s nieces R Anandabhuvaneswari and R Santhanlakshmi also have a 15 per cent share each in the real estate firm.
Krishnamoorthy also owns a Coimbatore-based finance company, AGM Investment and Finance Private Limited, along with his brother C Sathyanarayan. They bought the firm in November 2004, soon after Raja became a Cabinet Minister. Incidentally, prior to becoming a Minister, Raja operated his law business in Peramballur from the first-floor office of Krishnamoorthy’s building.
The Pioneer has already reported the saga of two companies owned by Union Telecom Minister Raja’s close relatives. Green House Promoters (Private) Limited and Equaas Estates (Private) Limited were floated soon after Raja became a Union Minister. His wife Parameswari also served as a director on the Board of these two firms.
Flouting rules, Raja had not filed information about his wife’s business to Prime Minister Manmohan Singh. Raja’s nephews RP Paramesh Kumar, R Ramganesh, brother A Kalia Perumal and niece Malarvizhi Ram are the directors of these two companies.
Why is BSNL sharing spectrum with pvt players?
J Gopikrishnan | New Delhi
Minister Raja makes company infrastructure available to competitors almost free
We have seen how Telecom Minister A Raja facilitated spectrum allotment to a bunch of private players on first-come-first-served basis. His decision resulted in a raging controversy, leading to the demands for his resignation and parliamentary probe into a range of affairs, including the business interests of his immediate family members. It now appears that the enterprising Minister had not just facilitated the spectrum allotment; his benign attitude went farther – in persuading the Ministry’s flagship unit, the Bharat Sanchar Nigam Limited (BSNL), to help out one of the licencees, Swan Telecom.
Within weeks of allotting the spectrum licence to Swan, Raja helped it have a strategic arrangement with the State-owned BSNL, literally for free. A memorandum of understanding (MoU) on September 13 between BSNL and Swan, called the Intra-Circle Roaming Agreement, does not indicate even a nominal sum that BSNL is charging for sharing its infrastructure. Incidentally, this is the first deal of its kind that the BSNL has entered into with any private player.
The BSNL has been rather secretive of its charitable attitude towards Swan. Its Website does not have a word on this important development wherein a public organisation offers its services for free to a private party.
BSNL chairman and managing director Kuldeep Goyal confirmed the arrangement and termed it a “limited MoU”. Talking to The Pioneer, he said he could specify what charges BSNL planned to levy for providing the unprecedented intra-circle roaming facility to a private operator.
When asked specifically on charges that BSNL may seek from Swan, Goyal replied, “See, this is only a limited MoU. No agreement has been signed with them. Swan has not yet started its operations. We are working out the details. I can’t tell you all details of the MoU. The money part will be specific in due course of time. I don’t know how much money we are going to levy on them. I told you this is only a limited MoU; specifics will be discussed when we come to a final agreement.”
The Pioneer has learned through highly-placed sources that the high-level management committee of BSNL had recommended 52 paisa per call from Swan for providing the intra-circle roaming facility. But this recommendation found no mention in the “limited MoU”.
Sources further informed The Pioneer that the “limited MoU” greatly helped Swan in later sewing up the deal with the UAE-based telecom company Etisalat, which picked up stake in Swan for a reported sum of $900 million (approximately Rs 4,500 crore) in October.
Some officers of the Wireless Planning and Co-ordination (WPC) section in Sanchar Bhavan, who objected to the BSNL-Swan deal, were shunted out. Joint Wireless Adviser RJS Kushwaha and Deputy Wireless Adviser D Jha were transferred out for questioning the arrangement.
Telecom officials say Swan is expected to benefit to the tune of at least Rs 1,000 crore since it would not have to invest in infrastructure.
Opposition up in arms
New Delhi: For the second day in a row, the spectrum allotment scam rocked Parliament with the Opposition joining ranks to demand a JPC inquiry and dismissal of Telecom Minister A Raja. The Left parties and the MDMK (Vaiko) staged a walkout in the Lok Sabha when the Speaker refused permission to table an adjournment motion initiated by CPI(M) parliamentary party leader Basudeb Acharia and CPI leader S Sudhakar Reddy. BJP leader Ananth Kumar criticised the Government for ‘covering up’ the scam.
Bengal firm flouts rules with impunity
Durbar Ganguly | New Delhi
Xenitis raises funds from bank by just filing draft documents
While the UPA Govern-ment is busy bailing out the economy from global crisis, will it also look at the local factors which have precipitated the crisis? Will SEBI investigate the companies which raised or attempted to raise public funding by a not-so-transparent mechanism? In fact a number of banks and financial institutions had opted for pre-issue purchase of shares in companies which had filed draft red herring prospectus (DRHP).
IFCI had gone to court to recover its money from the real estate company, Emaar MGF, which had hastily withdrawn its IPO when the subscribers refused to get enticed. Another case of similar nature is that of the SBI picking up Rs 25 crore worth stake in the aborted public issue of Kolkata-based Xenitis Infotech Ltd.
The company is a manufacturer and importer of computers and their components. It has its only production facility at Sugandha in Hooghly, West Bengal. The company, failing to establish its own brand of computers, has shifted to manufacturing parts and components of computers. It is treated as a pariah in the computer dealers’ community due to its inability to honour its commitments. Things had come to a pass where it settled the dues to a service provider in western India by offering cheap laptops imported from China.
The company filed its draft red herring prospectus before SEBI on November 26, 2007. The DRHP is a document in the public domain, available at http://www.sebi.gov.in. The company claimed, vide pages 58 and 59 of the DRHP, that it produced a certain number of computer equipment while it had a different set of figures for paying excise. The discrepancy would be apparent from the accompanying table.
The Commissioner of Central Excise Kolkata-IV ordered a probe resulting in raids, when alerted about huge evasion of excise duties apparent prima facie from the accompanying table. Excise sources revealed that during fiscal 2007-08, the company had become merely a manufacturer of computer cabinets and SMPS having annual capacity to manufacture 9 lakh pieces of cabinets with SMPS. That capacity can be achieved only if the factory ran in three shifts per day. The factory, however, runs only in two shifts; there is no night shift, allegedly, because of prevalence of female workers. Due to the constraint in procuring raw material for cabinets like galvanised iron sheets, the dealer can manufacture no more than 20,000 to 40,000 cabinet pieces per month. At the maximum wholesale rate of Rs 750 per cabinet, the turnover of manufactured goods cannot exceed Rs 3 crore per month or at the maximum Rs 40 crore per annum.
According to Excise sources, company president Indrajit Chandra jested that they would have been over the moon had a manufacturing turnover of Rs 40 crore been achieved. The company was not much perturbed by the discrepancy shown. He affirmed that the company did not have such capacities as mentioned in the DRHP. Curiously, neither SEBI nor the banks which funded the company cared to verify the figures furnished with the Excise returns filed by Xenitis.
The DRHP was submitted for rating to CRISIL, a premier organisation engaged in the business of rating and related activities. The State Bank of India had picked up 4.42 per cent stake in this company, spending Rs 25 crore of public money after due diligence on the basis of DRHP.
The question is: How the professionals of SBI visit the factory at Sugandha in course of their due diligence and find it worthy of picking up a stake in spite of what the Central Excise found? Who is being taken for a ride here — SBI? SEBI? CRISIL? Or Central Excise? Or, do they all feed off each other at the expense of the public?
Will the spotlessly clean Manmohan Singh, holding the Finance portfolio, care to investigate?
How to make Rs 125 cr for free? Ask Xenitis
Durbar Ganguly | New Delhi
The Xenitis story turns even more curious if one takes a look at the gullibility of banks which queued up to fund the promoters. The company had shown secured and unsecured loans at Rs 173 crore and Rs 31.17 crore respectively as on September 30, 2007, as mentioned on page 10 of the Draft Red Herring Prospectus (DRHP).
This is besides the cash credit enjoyed in excess of Rs 200 crore from a consortium of 11 banks, led by UCO Bank, as listed in the DRHP (page 15) and other banks like Development Credit Bank, Shakespeare Sarani branch, Axis Bank etc. The company borrows from one bank to pay another and every year it has to show healthy increase in top line to get higher loans and higher cash credit limits from banks so that the previous liabilities to them can be met by new borrowings. This is blatant abuse of public money.
But siphoning off this money, borrowed from banks, was not the sole purpose of inflating the business volumes. A news item on April 16, 2008, in The Economic Times, Kolkata edition, shows how Santanu Ghosh, the Xenitis owner, sold 5 per cent of his personal stakes in the company to SBI for Rs 25 crore and that another 20 per cent would be offloaded this year. Thus, within this year, Ghosh aims to earn Rs 125 crore by off-loading his personal stakes in the company.
Evidently all the window-dressing was not merely to borrow from banks to run the business, but to create a platform for selling the business itself to earn riches for the promoter. Earning personal riches of Rs 125 crore in five years from the profits of a legitimate business is a Herculean task. By window-dressing the books and logging in huge fake turnover, Ghosh did better to entice institutions into buying his personal stakes in the business.
The company did not claim any manufacturing capacity for the items like monitor, HDD, RAM and motherboard. Therefore, the company obviously traded in such items. In 2006-07, such sales were shown at Rs 225.6 crore, ie 36.33% of the total sales. A similar amount, ie Rs 212.77 crore of trading sales, was achieved in 6ME 30.9.07, constituting almost half of the company’s turnover. A dealer can show any amount of turnover at no cost of paying sales tax or VAT, just by cooking up similar amount of fake purchase because in the VAT regime, tax payable on sales is offset by the tax payable on purchase.
The Central Excise investigation revealed that, to clock up fake turnover, the company had set up a network of phantom dealers, who were registered under the WBVAT Act, 2003, and had no business activity other than transactions with the company or with another entity within this network.
All such transactions were solely on paper and were not backed by any actual transfer of goods and the motif of such mischief was to claim false input tax credit, logging up fake purchases from such phantom dealers.
From verification of bank accounts, it transpired that payments had been made against only a fraction of such purchases and these too had immediately been routed back to the company. One such network of more than 20 phantom dealers was maintained by one Mahesh Kedia, FCA, who had his office at Afreen Plaza, 7 Munshi Sadruddin Lane, Kolkata.
Kedia claims that neither he nor the persons in whose name such paper transactions were run were duly paid for such services. The company allegedly hounded him out of its premises when he went there to collect his charges. As his claims cannot be settled in a court of law, Kedia is resorting to tantriks to collect his dues. In fact, the Directorate of Sales Tax has nailed at least Rs 150 crore of trading turnover in 2006-07 as fake and issued show-cause notices, pointing out evasions of VAT exceeding Rs 60 crore.
Global Automobiles (P) Ltd, another arm of this company, has also been indicted for such fraudulent booking of turnover. But the company is using its proximity to the political bosses in West Bengal to sit pretty over the show-cause notices issued to it by the directorate.
Does the UPA Government require more to investigate activities of such companies working from the Left Front-ruled West Bengal?
India is Constantly ” BLEEDING ” by 2 side of Attack. Merciless KILLING SPREE by Terrorists & LOOTING SPREE by some Corrupted Politicians. One Side would never be stopped and Another side would never go. Could we aspect Kasab’s Judgement ” DEATH PENALTY ” for both side? Why not to put Corrupted Politicians, Traitors and Terrorists in same category? Unnecessary Powers to Useless Politicians is more Dangerous than Terrorists. Parliament only wakes up when Media breaks any story on Scams, and the left over Idiots would Strom & Adjourn Rajya Sabhas and Lok Sabha to prove them more Patriotic. RAJA / RADIA Nexus exposed by Media is the Perfect Combination CASE OF of POLITICAL PIMP & CORRUPTED POLITICIAN, who makes Ministry a ” HORE HOUSE “. Is every Portfolios in all Ministry for SALE under table?
“Poor Indians, still believing in this d(rama)..emocra……zy!, singing Janagana MANGALA…………………………..”
Singing Semmozhi song more rightly