{"id":534,"date":"2023-03-26T11:49:58","date_gmt":"2023-03-26T11:49:58","guid":{"rendered":"https:\/\/jgopikrishnan.in\/?p=534"},"modified":"2025-03-06T08:31:40","modified_gmt":"2025-03-06T08:31:40","slug":"rules-flouted-to-aid-mukesh-ambanis-reliance-jio-cag","status":"publish","type":"post","link":"https:\/\/jgopikrishnan.in\/?p=534","title":{"rendered":"Rules flouted to aid Mukesh Ambani’s Reliance Jio : CAG<\/strong>"},"content":{"rendered":"\t\t
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DoT  rules  flouted to aid Reliance Jio : CAG<\/b><\/p>\n

\u2018The Pioneer\u201d –  January 20,  2014 | J Gopikrishnan | New Delhi<\/p>\n

After the expos\u00e9 on irregularities in the KG Basin, the Comptroller and Auditor-General of India (CAG) has found blatant violations of Department of Telecommunications (DoT) rules and favouritism in the manner the Mukesh Ambani-led Reliance Group was allowed entry into the telecom sector. The CAG has raised several uncomfortable questions about the favouritism shown to Reliance Jio during the audit of 3G \/ Broadband Wireless Access auction.<\/p>\n

The CAG\u2019s recent findings and questionnaires to DoT detail the way the Government provided a backdoor entry to Mukesh Ambani\u2019s company in the telecom sector in 2010. The apex auditor also claimed that favouritism was shown to the company that led to possible loss of more than Rs 20,000-crore to the exchequer during 2011-13.  The CAG also blamed DoT for providing monopoly to Reliance Jio in the broadband and 4G sector by withdrawing State-owned companies BSNL and MTNL.<\/p>\n

The DoT has not yet answered the CAG\u2019s queries on violations.  Documents available with The Pioneer show that auction for Broadband Wireless Access (BWA) Spectrum was stage-managed to give backdoor entry to Reliance Jio.<\/p>\n

The CAG in its preliminary findings said, \u201ca small company\u201d Infotel Broadband Services Private Limited (IBSPL) was given approval to take part in the auction in mid-2010 without meeting the net worth limit and allowed to bid for more than Rs 12,750-crore.<\/p>\n

The small company, with a turnover of just Rs 16 lakh and a single subscriber, had only Rs 3-crore authorised capital during auction. \u201cThe DoT did,  however, neither seek the sources of funding for furnishing the EMD (Earnest Money Deposit) of Rs 252-crore (1,500 times the company\u2019s annual turnover or 100 times the paid-up capital of the company) in March 2010, at the time of application for the BWA spectrum,\u201d said the CAG\u2019s preliminary findings, seeking response from the DoT.<\/p>\n

The IBSPL won the auction in all circles of India. Within hours of winning the auction, the subsidiary of Reliance Industries Limited (RIL) was allowed to take over 95 per cent of the shares of the small company. The takeover deal was worth Rs 6,000-crore. In the preliminary findings, the auditors say this deal created a windfall of more than Rs 4,800-crore to the IBSPL, which became the RIL\u2019s subsidiary.<\/p>\n

The auditors blamed the DoT for violating the mandatory lock-in period of three years, which bars acquisitions and mergers in the telecom sector. \u201cA non-participant company exploited the loophole left by DoT officials in the eligibility criterion for obtaining BWA spectrum by acquiring a winning company without participating in the auction process, within hours of closure of the auction process, thereby vitiating the sanctity of the auction process,\u201d said CAG.<\/p>\n

The four-page communication to DoT, signed by Senior Audit Officer Rajendra Kumar, details the RIL\u2019s surrogate takeover plans of the small company during March-June 2010. The auditors also blamed DoT for allowing Reliance Jio to obtain voice service facility while paying only for the BWA Spectrum, which is widely termed as 4G in the Indian telecom sector.<\/p>\n

According to CAG auditors, Reliance Jio only paid Rs 12,750-crore for getting broadband operations across India. But later the DoT granted voice facility also without charging any extra money. According to the questionnaire sent to DoT, the auditors pointed out that for the similar voice service facility, the 3G auction winners paid more than Rs 33,000-crore for operating in all circles in India during the same period. Sources in CAG indicated that apart from favouritism, this move of DoT created a clear loss of Rs 20,000-crore to the public exchequer.<\/p>\n

After Reliance Jio\u2019s entry, the State-run BSNL and MTNL withdrew from the broadband sector. These PSUs were also granted BWA spectrum. The Union Cabinet recently approved the reimbursement of money to BSNL and MTNL. In its communication to DoT, CAG said this move will leave \u201cvirtually the entire field to a company that had not participated in the auction process.\u201d <\/p>\n

Questioning the withdrawal of State-run companies, CAG officials indicated this was a clear move to provide monopoly in broadband sector to the Mukesh Ambani-led Reliance Jio.  <\/p>\n

CAG flags Reliance Jio’s perjury in Axis Bank Rs.252 crore Gurantee perjury<\/b><\/p>\n

‘The Pioneer – July 22, 2014 \/ J Gopikrishnan \/ New Delhi<\/p>\n

After finding \u201crigging\u201d in 3G\/BWA spectrum auction and \u201cback door entry\u201d of Mukesh Ambani led Reliance Jio, CAG also found banking violations by Axis Bank in providing huge bank guarantee of Rs.252.50 crore to a small firm IBSPL with just Rs.16  lakh turn over. According to sources, CAG smells a forgery in the banking guarantee papers of the IBSPL, which was taken over by Reliance Jio after three months.  CAG in its Draft report observed the Axis Bank had covertly and overtly assisted the entire dubious operation in the auction.<\/p>\n

 CAG had already received reply from Axis Bank, admitting that certain norms of providing bank guarantee norms were violated. On March 17, 2010, IBSPL (Infotel Broadband Services Private Limited) with just Rs.3 crore share capital and Rs.16 lakh annual turn over applied for the auction of BWA (Broadband Wireless Access) spectrum, popularly known as 4G applied for the auction with Rs.252.50 crore bank guarantee provided by Axis Bank. The bank guarantee was mandatory for all applicants as Earnest Money Deposit (EMD). Axis Bank\u2019s Corporate Banking Branch at Worli in Mumbai provided this doubtful bank guarantee. This small little known company won the auction on June 11 by getting pan-India license and within hours Mukesh Ambani\u2019s Reliance Group announced acquisition of this firm.<\/p>\n

 During the inspection, CAG\u2019s auditors found in the computer generated bank guarantee of the Axis Bank in which the beneficiary name was erased and the name of the applicant IBSPL was hand written. \u201cFurther BG (Bank Guarantee) issued by the Axis Bank had a major alteration at the place of the name of the beneficiary (IBSPL). The name of the beneficiary \u2013 IBSPL \u2013 was hand-written in ink on the body of the BG after erasing the name of the beneficiary written earlier. It was therefore apparent that the bidder had either been acting as a front company on behalf of a hidden bidder or taken assistance of a third party in obtaining the BG for the auction which went against the sanctity and transparency of the auction process,\u201d said CAG in its Draft Report submitted to DoT Secretary, last month, seeking explanation. The DoT has not yet responded to the Apex auditor.<\/div>\n
 <\/div>\n
According to sources, the Axis Bank\u2019s reply to CAG was not at all convincing and lack of transparency in the reply about who provided huge fund or equal collateral security. As per banking norms mandated by RBI, there should be 100% cash or equal assets would be provided for generating any bank guarantee. It is learned that CAG is asking further queries to Axis Bank and also to RBI to find the actual source of money\/security for the Rs.252.50 crore worth bank guarantees provided for IBSPL, three months before the acquisition of Reliance. The IBSPL is a company promoted by veteran telecom player Mahendra Nahata and son Anant Nahata, registered in Chandigarh.<\/div>\n
 <\/div>\n
\u201cThis incident is clear case that Reliance Group was planning to enter telecom sector through back door,\u201d said sources. After winning the auction, the same branch of Axis bank gave security for the licenses fee of Rs.1658crore to IBSPL. The documents inspected by CAG auditors shows that the fund of 500 million dollar (more than Rs.2500crore)  was originated from foreign bank Royal Bank of Scotland (RBS)\u2019s Singapore Branch  and Axis Bank provided security for this foreign funding to IBSPL to remit licenses fee and other expenses. This transaction was happened on June 16, five days after the auction results were announced and the controversial take over by Reliance Group.<\/div>\n
 <\/div>\n
CAG already in its draft report submitted to Telecom Secretary, previous month had described the 3G\/BWA auction has a \u201ctell-tale sings of rigging.\u201d \u201cThe DoT failed to recognize the tell-tale signs of rigging of the auction from the beginning of the auction submissions of EMD of Rs 252.50 crore by a small ISP (Internet Service Provider) through the covert and overt assistance of third party\/Private Bank, bidding for Rs.12847.77 crore (5000 times of its net-worth) for Pan India spectrum to selling the company on the day of completion of the auction indicating IBSPL\u2019s collusion and sharing of the confidential information with a third party in violation of Auction Conditions\/Rules,\u201d said CAG in its Draft Report.<\/div>\n
 <\/div>\n
CAG also blamed the Cabinet Secretary headed Committee of Secretaries for approving the results of manipulated auction.  Secretaries of Finance and Telecom are the other members of this high power committee appointed to oversee the 3G\/BWA auction. In its draft report, CAG observed cancellation of spectrum of Reliance Jio and suggested thorough investigation and \u201cexemplary punishment on the colluding firm.\u201d<\/div>\n
 <\/div>\n
The CAG also blamed the Telecom Ministry for creating monopoly for Reliance in broadband sector by allowing PSUs BSNL and MTNL to withdraw from the field. BSNL and MTNL had surrendered their BWA spectrum in February 2014. \u201cIncidentally, the major Central Public Sector Undertakings BSNL and MTNL, which accounted for nearly 70 percent of the internet subscribers in the country, have surrendered their BWA spectrum in early 2014, leaving Reliance Jio as the only Pan India Broadband service provider in the country,\u201d observed CAG.<\/div>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<\/div>\n\t\t","protected":false},"excerpt":{"rendered":"

DoT  rules  flouted to aid Reliance Jio : CAG \u2018The Pioneer\u201d –  January 20,  2014 | J Gopikrishnan | New Delhi After the expos\u00e9 on irregularities in the KG Basin, the Comptroller and Auditor-General of India (CAG) has found blatant violations of Department of Telecommunications (DoT) rules and favouritism in the manner the Mukesh Ambani-led…<\/p>\n","protected":false},"author":1,"featured_media":535,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[36],"tags":[],"class_list":["post-534","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-36"],"_links":{"self":[{"href":"https:\/\/jgopikrishnan.in\/index.php?rest_route=\/wp\/v2\/posts\/534","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/jgopikrishnan.in\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/jgopikrishnan.in\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/jgopikrishnan.in\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/jgopikrishnan.in\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=534"}],"version-history":[{"count":37,"href":"https:\/\/jgopikrishnan.in\/index.php?rest_route=\/wp\/v2\/posts\/534\/revisions"}],"predecessor-version":[{"id":927,"href":"https:\/\/jgopikrishnan.in\/index.php?rest_route=\/wp\/v2\/posts\/534\/revisions\/927"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/jgopikrishnan.in\/index.php?rest_route=\/wp\/v2\/media\/535"}],"wp:attachment":[{"href":"https:\/\/jgopikrishnan.in\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=534"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/jgopikrishnan.in\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=534"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/jgopikrishnan.in\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=534"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}