The CBI chargesheet against Anil Ambani's ADAG showed how the group created and controlled Swan Telecom till October 2007.
The CBI chargesheet against Anil Ambani’s ADAG showed how the group created and controlled Swan Telecom till October 2007. That was when Reliance Communications got GSM spectrum in circles where its 100% subsidiary Reliance Telecom didn’t have it. Once RCom got GSM spectrum in October 2007, ADAG officials transferred the management and control of Swan to Shahid Balwa and his partner Vinod Goenka. The chargesheet said investigations had revealed ADAG officials created a kind of a crossholding structure whereby no one entity could be seen to be the absolute owner of any company. For instance, Reliance Telecom Ltd (RTL) held just 9.9% in Swan Telecom with the remaining 90.1% held by Tiger Traders Pvt. Ltd. (later knows as Tiger Trustees Pvt. Ltd.) although the company was held by ADAG subsidiaries through funds raised from RTL etc. The CBI noted the day-to-day affairs of Swan Telecom and Tiger Traders were managed by the three accused ADAG officials – Gautam Doshi, Group MD, Surendra Pipara, senior VP and Hari Nair, company secretary – either themselves, or through other officers/consultants related to ADAG. Other companies, such as Zebra Consultancy Pvt. Ltd. and Parrot Consultants Pvt. Ltd., were also created with inter-locking stakes. By April 2007, by which time Swan Telecom had applied for telecom licenses, 50% of the equity of Zebra Consultancy and Parrot Consultants was purchased by Tiger Traders. Similarly, 50% of the equity capital of Parrot Consultants and Tiger Traders was purchased by Zebra Consultancy.
Also, 50% of the equity shares of Zebra Consultancy and Tiger Traders was purchased by Parrot Consultants. These three companies, therefore, had crossholdings in an inter-locking structure. The CBI said investigation into Tiger Traders disclosed the company had sourced funds to raise its equity stake and also to subscribe to shares of other companies from ADAG companies. For instance, a sum of Rs 3 crore during January 2007 and Rs 95.51 crore during March 2007, utilised by Tiger Traders to subscribe to the majority equity of Swan Telecom, was arranged through group companies of ADAG. Further, Rs 992 crore, which constituted a bulk of the net worth of Swan Telecom, was also paid by RTL under the garb of subscribing to its preference shares. The preference shares were purchased at an abnormally high premium of Rs 999 per share of the company, which had no business history. Interestingly, the entire amount of Rs 992 crore was immediately returned by Swan Telecom to Reliance Communications showing an advance purchase order. The CBI has said that ADAG’s Pipara, Doshi and Nair prepared false minutes of board meetings of Swan Telecom and Tiger Traders showing the appointment of one Ashok Wadhwa as director and his presence during the meetings.
Pipara also presided over board meetings of Swan Telecom when the crucial decisions regarding raising its equity, allotment of shares, applications to DoT were taken by Swan. He also chaired the board meetings of Tiger Traders when the company subscribed and funds for the purpose were arranged. “Doshi, Nair and Pipara of Reliance ADAG on receipt of approval of allocation of dual technology spectrum to Reliance Communications knowingly did not withdraw their fraudulent application for UAS license and in conspiracy with the accused Balwa and Goenka, transferred the management and control of Swan to them, thereby intentionally aiding and facilitating the accused Balwa and Goenka to get UAS licenses for Swan despite full knowledge that the company was ineligible on the date of application as it was in violation of Clause 8 of the UASL guidelines dated 14.12.2005,” the CBI chargesheet has said.