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Even as the Central Bureau of Investigation (CBI), in its third charge-sheet in the 2G spectrum allocation case, said that both the Department of Telecom and the Ministry of Corporate Affairs were responsible for not taking appropriate action against the Ruia-owned Essar group, the Ministry defended its opinion on Loop Telecom.
“Under present company laws, there is no definition of ‘associate'; so, how could we have considered Loop to be an associate of Essar?” a senior Ministry official told Business Line .
This despite the fact that the Companies Bill, 2011, recently introduced in the Lok Sabha, has introduced the concept of ‘associate' companies, especially in the light of cases such as the 2G scam.
“But the improvement in the law may apply only to fresh cases and not retrospectively,” said the official.
It has been alleged that Essar used Loop as a front company to acquire 21 spectrum licences in 2008.
The MCA has flip-flopped several times in its view on the matter. While under Mr Salman Khurshid, the Ministry was of the opinion that Loop is an associate company of Essar and should not have been eligible for licences in 2007, in April this year, the Ministry gave Loop Telecom a clean chit, saying that the company was not an associate of Essar, as the group had only a 2.15 per cent stake in the firm when it applied for the Unified Access Service Licence (UASL) in 2007.
“Our view on cross-holding of shares was based on the percentage of equity shares held. But the CBI has included non-convertible debentures also; even after this, Essar's share comes to 9.9 per cent,” said the MCA official.
According to the rules, no company can own more than 10 per cent in another telecom player operating in the same circle. The CBI has charge-sheeted the Ruias, stating that the accused structured Loop through a ‘complex corporate veil' despite owning nearly 33 per cent equity in Vodafone Essar, an existing operator.
The MCA official also alleged that it's Ministry's third report, sent to the DoT, had not been taken seriously.
“We sent them three reports, of which the third one was comprehensive and detailed. They took cognizance of only the first two. Whether the DoT chose to ignore the third report or whether the CBI did not take it seriously, we don't know,” said the official.
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