Reliance Communications Ltd and its subsidiary Reliance Telecom Ltd (RTL) had won a contract under Shared Mobile Infrastructure Scheme of Universal Services Obligation Fund (USOF) to provide mobile services in rural areas.
"...treating the act of M/s RCL (RCom) and M/s RTL of unilaterally switching off the radiation BTSs in an arbitrary manner as mere interruption of services under clause of...of USOF Agreement by the Ministry instead as violation of terms and conditions of the UASL agreement...was unjustified," said the report by Comptroller and Auditor General of India.
The TERM cell, monitoring wing of DoT, found that both the companies had jointly unilaterally switched off services from 1,419 mobile towers out of 3,205 sites allocated to them across 13 telecom circles.
The DoT had levied about Rs 6 crore cumulative penalty on both the companies as per their agreement with USOF.
If the act by the firms was classified as violation of licence conditions, upto Rs 650 crore fine could have been levied going by a fine of upto Rs 50 crore per circle.
The department has issued showcause notice to RCom and RTL, under regime of then Telecom Minister Kapil Sibal, for violation under their telecom licence condition but did not impose penalty following the decision by a committee.
The CAG said RCom and RTL had not responded to a notice issued by the DoT within stipulated time frame of 15 days but received representation from the companies when penalty under licence agreement was mooted by ministry.
"However, even before the same (reply of RCom and RTL) was examined, the Ministry imposed a penalty on M/s RCL (RCom) and M/s RTL on February 18, 2011 under clause ...of USOF Agreement," the CAG said.
Telecom Ministry had then constituted a committee under Telecom Secretary to look in to the matter in July 2011.
Sibal had asked the panel to take appropriate steps to ascertain reasons and circumstances that led to the firms switching off mobile towers. "Action, if necessary, be initiated under UASL" (telecom licence agreement) upon receipt of reply, the panel was told.
The committee also stated that it is evident from terms of USOF agreement that mobile services are to be maintained by the USPs (companies working under USOF scheme) under its relevant telecom services licence.
The CAG report did not mention the date when the committee gave its recommendation.
The CAG rejected the logic of Telecom Ministry in this matter of only imposing penalty on RCom and RTL under USOF agreement, and not under license agreement.