Swan acted as front for Reliance: CAG

CAG slammed Anil Ambani's Reliance Tele for fielding Swan Telecom as a front to bag spectrum.

Highlighting irregularities in 2G spectrum allocation,the CAG has said Swan Telecom,one of the companies that got the licence,appeared to act as a 8220;front company8221; on behalf of Anil Ambani-led Reliance Telecom and doubted the latter8217;s 8220;intention8221;.

In its report tabled in Parliament,the CAG said the Swan Telecom8217;s application was 8220;in effect against the intent and spirit8221; of the Unified Access Service Licencing UASL guidelines as it was among those beneficiaries which 8220;suppressed facts,disclosed incomplete information and submitted fictitious documents8221; to the Department of Telecom.

The audit by CAG found that the e-mail ID of the corporate as well as registered office of Swan Telecom Pvt Ltd in its application dated March 2,2007 was shown as hari.nairrelianceada.com,the report said,adding the same e-mail ID was also given for the correspondence address and the authorised contact person of the applicant company.

The CAG said the Company Secretary Hari Nair had given a certificate while applying for a UAS licence for Jamp;K service area in January 2007 that the Tigers Traders Private Limited held the shares of Swan then Swan Capital Private Limited as trustees of Indian Telecom Infrastructure Fund and these corporate beneficiaries are not part of Reliance ADA Group and neither Anil Ambani nor his family or Reliance ADA Group companies holds any shares in these companies.

However,8221;the total equity/stakes of Reliance Telecom Ltd RTL in Swan Telecom was of Rs 1002.79 crore against equity holding of Rs 98.22 crore by the majority share-holder Tigers Traders Pvt Ltd8221;,the CAG said,adding it 8220;raises doubts about the intention of the RTL and the control it would exercise in a new company incorporated barely few months ago8221;,the audit report said.

8220;Hence,the application of such company to enter telecom sector goes against the intent and spirit behind the UAS guidelines,8221; the CAG said,while noting that the 8216;substantial equity8217; was defined as equity of 10 per cent or more.

8220;Thus,it would appear that Swan Telecom Pvt Ltd,while applying for the UAS licences in 13 service areas,was acting as a front company on behalf of RTL and their application was,in effect,against the intent and spirit of the UAS licensing guidelines,8221; the report observed.

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It noted that it was 8220;evident8221; that at the time of applying for UAS licence,the equity stakes of Reliance Telecom Ltd in Swan Telecom Pvt Ltd was 10.71 per cent.

8220;Since Reliance Telecom Ltd was operating in all the service areas for which Swan Telecom Ltd had applied for UASL,the application of Swan Telecom Pvt Ltd was not in conformity with the UASL guidelines and hence was not eligible to be considered,8221; the CAG said.