2G: Was It Really A BJP Motivated ‘Scam Of Lies’ As The Congress Now Says?

NEW DELHI: The United Progressive Alliance (UPA) government appointed Comptroller and Auditor General (CAG) Vinod Rai while auditing various executive decisions often dissented on the substantive nature of these decisions. Rai in the Telecom spectrum allocation case took liberty for calculating loss figures on a “what if” basis, dependent on several variables, thereby reaching a figure of 1,76,000 crores. Rai was of the view that the state had lost possibly Rs 1,76,000 crores by selling spectrum in the bands of 800,900 and 1800 MHz at 2001 prices, instead of auctioning them afresh in 2008.

On the other hand, as noted by the Supreme Court of India, in the 2G Judgement, the Telecom Regulatory Authority of India (TRAI) had recommended the allocation of 2G Spectrum be done on the basis of 2001 price by keeping in mind the requirement of a level playing field.

TRAI was also of the opinion that keeping a lower price would help in increasing growth, affordability, penetration of wireless services in semi-urban and rural areas.

It is to be noted that what and how the price of spectrum should be decided is itself a matter of constant debate. Vodafone CEO Vittorio Colao had argued that there is a misrepresentation in the price of spectrum and that the reserve prices are too high. He seems to believe that the Government has been influenced by auctions, while ignoring the fact that benefits will come from having a lower value of spectrum rather than setting a very high price for spectrum leading to a situation where very few bid.

This is also highlighted by the fact that in 2017 Indian 700MHz auction reserve price was effectively 46 times more than the US auction price of 600MHz. As an article in the Financial Express pointed out, the 700 mhz auctions did miserably. Over the last few years spectrum auctions have seen underwhelming bids and also a telecom sector in huge trouble.

Going back to the 2012 Supreme Court judgement in the 2G allocation. The Court held that auction would be the best possible economic policy for allocating natural resources as it would generate more revenue for the state. Further it was also of the opinion that the “first come first serve policy” was fundamentally flawed and could give rise to corrupt practices.

The Court then went on to showcase that certain policy decisions seemed to have been taken without complete consultation, for example the fact that the Ministry of Finance was not taken into confidence on the issue of allocating spectrum at 2001 prices. This the court opined was possibly done as the Finance Secretary was not in favour of such a decision. Similarly it was highlighted that the suggestion of the Prime Minister’s office to have a system more transparent for auction was also ignored by the Department of Telecommunications (DOT).

Most important was the fact that the cut-off date for application for spectrum in the First Come First Served (FCFS) policy was changed at the last minute. The Court found that the few companies that were to benefit from this auction had already been fixed by DOT. It was noted that those with access to the right persons were in advance prepared with their Letter of Intent and were aware of the last minute changes that might occur in the application process. In view of the above facts the Court cancelled all telecom licences sought to be issued by the Government of India.

The 2G judgement’s finding that auction was the best economic methodology to allocate spectrum was overruled by a Constitution Bench of the Supreme Court.

What remained now was the criminal investigation to find criminal conspiracy between the public officials of the Telecom Ministry and those who succeeded in getting licences.

The Trial Court was looking into the fact on whether there was any criminal conspiracy involved in the process of first come first serve as applied to the 2G spectrum allocation. As the Supreme Court in the Presidential reference held, it’s not the policy itself that’s an issue but that it should not suffer from arbitrariness as found in the 2G judgement . Therefore the question is whether FCFS was done in a manner that involved corrupt practices on behalf of the Telecom Ministry at the time.

The first issue is whether the then Telecom Minister gave advance information in the Letter of Intent, and whether the change of procedure brought in was done to benefit certain companies?

CBI Judge O.P. Saini claimed that the DOT seemed to have information floating around, and that officers of the private companies were always standing outside the office to know the latest developments. However The Judge has held that the prosecution failed to show evidence that information leaked could be traced back to any one event or person. Therefore the order states that there is no merit in the submission of the prosecution that advance information about the issue of Letters of Intent and change of procedure for allocation of spectrum was conveyed to STPL and Unitech group of companies by the accused public servants. (See para 1007, 1008 and 1009).

A second issue is of the 200 crore loan that was given by Shahid Balwa and Vinod Goenka to M/s Kalaignar TV Pvt. Ltd. It was allegged that this was done on behalf of accused A. Raja, Sharad Kumar and Kanimozhi Karunanithi for benefiting the company Swan Telecom Limited. And then at a belated stage this exchange was given the colour of a regular business transaction.

The same was alleged regarding a 200 crore transaction between Kusegaon Fruits and Vegetables (Pvt Limited) and Cineyug Films where it was alleged that there was illegal gratification by A.Raja as director of Kusegaon fruits and vegetables (Pvt Ltd) (who received money)and included Ms Kanimozi Karunanidhi and M. Karunanidhi.

In neither of the above two cases the prosecution could prove that there was a quid pro quo and therefore a case of bribery and corruption.

The Judgement seems to indicate that the CBI Judge was exhausted with the prosecution team and states (see page 1385) that no question was asked from an important witness on whether the entire documentation of the loan was created to rationalize the payment of illegal gratification, as a bona fide business transaction amongst other important questions.

The Judge even remarked at one point that “this was the first time that the prosecution put up a question to any witness that the documents relating to the transactions were bogus” (see page 1411).

Eventually the court in both cases of loan found no reason to convict the accused.

What next and where are the Rs 1,76,000 crores?

First let's be clear that 1,76,000 crores was a loss calculated on the presumption that the Government conducted an auction and all 100 entities involved in it, and all market forces would all align as per Vinod Rai’s mathematical calculation. Unfortunately, this figure till date remains etched in the public mind!

It’s a different issue that Presumptive loss is a term that remains undefined in the Income Tax Act, 1961,. It also must be recalled that soon after the Supreme Court in the presidential reference on spectrum allocation held that the Government is not bound by public auction when contemplating policy on allotment of natural resources!

The Opposition then mocked the Prime minister and laughed at the zero loss proposition. The BJP is in government now and should seriously introspect on those statements and revaluate why the Telecom sector is in the crisis it finds itself in today.

As far as criminality to be proved is concerned, the prosecution has its work cut out. The trial court has done a great service by putting out in detail the documents related to alleged corrupt malpractices. It is for the High Court to see whether the Trial Court applied the correct legal approach in analyzing evidence available on record.

The rule of law has been upheld as the Trial court has followed procedure and relied on principles of law to reach a possible conclusion, one may argue that there could have been another manner of interpreting evidence on record and thereby a different decision. The view may or may not be overruled but nevertheless it’s one, which is within the framework of law.

(The Citizen Bureau adds: Politically a Pandora’s box might have opened. The Congress has trained its guns on Rao, Finance Minister Arun Jaitley has declared that it is not a clean chit for the Congress, the CBI has said it will appeal against the judgement in the Delhi High Court, and Prime Minister Manmohan Singh has said that the verdict has proved that it was just propaganda against his government. The telecom operators can claim compensation as per the acquittal now. The BJP, in opposition, had raised a storm demanding the arrest of A.Raja. It now remains to be seen how the acquittal impacts on DMK’s relationship with the ruling party at the centre. The BJP is currently reported to be wooing the DMK as a possible ally in Tamil Nadu. A.Raja’s photograph above says it all)

(Abhik Chimni is a practising lawyer in Delhi)