Essar not a Loop associate: Deora

CBI had slammed the ministry of corporate affairs for giving a clean chit to Loop Telecom.

A day after the Central Bureau of Investigation (CBI) slammed the ministry of corporate affairs (MCA) for pre-empting the investigation into 2G spectrum scam by giving a clean chit to the Essar groups Loop Telecom,corporate affairs minister Murli Deora asserted his ministrys stand on Friday that Essar was not an associate of Loop Telecom.

We stand by what we have given (to CBI)… Essar holding in Loop Telecommunications is below 10%, Deora said. His statement comes in the backdrop of CBI claims that Essar held more than 10% stake in Loop,thereby flouting Clause 8 of the UAS guidelines which debar companies or their associates from holding more than 10% stake in two licences.

Though Deora did not mention this,a senior MCA official provided a rather hilarious explanation for the discrepancy in the ministrys report prepared in 2009 stating that Essar group had a 9.9% stake in Loop while a recent April note revised this to 2.15%. The official said that the MCA had made a clerical error in 2009 when it had reported that Essar held 9.9% stake in Loop indirectly. The error was,however,corrected in 2011 when the regional director of Mumbais registrar of companies (RoC) Western region had found Essar to hold just 2.15% stake in Loop Telecom,far below the 10% cap.

The investigating officer had made a genuine mistake. But the fact is that the stake was always below 10%. So whether it is 2% or 9.9%,it should not matter, a government source told FE.

According to the source,the mistake has also been communicated to the CBI. Interestingly,it was based on MCAs initial findings that the CBI had started probing Loop Telecoms shareholding pattern. MCAs sudden reversal of its stand has caused an immense embarrasment to the government. The episode has been an embrassing one, the source acknowledged.

Deora added that there was a communication gap between the MCA and CBI which was being duly addressed. We have worked to fill the communication gap and we are completely cooperating with the CBI on investigation, he said.

According to the RoC letter to MCA dated April 12 this year,Essar group had been a net borrower from the Khaitan group as on March 31,2006 and even thereafter,including as on September 3,2007,the day 2G licence applications were submitted by Loop to the DoT.

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Therefore,the probe report concluded that Essar was not an associate of Loop. MCAs internal noted further clarified that preferential shareholding could not be taken into account at the time of determing the stake in a company.

Meanwhile,the ministry tried to douse the fire over the mandatory spending on Corporate Social Responsibility (CSR) of up to 2% of net profits by companies. It said that it had no intention of coercing companies into it since the guidelines were purely voluntary in nature.