New Delhi: The Supreme Court on Wednesday asked the Centre and CBI to file replies on a plea seeking to direct the government to take action on findings of Serious Fraud Investigation Office (SFIO) which found irregularities in some business transactions including RIL’s role in television channel News X sale and Unitech acting as a front company for Tata group to get 2G spectrum in 2008.
The matter came up in the Supreme Court through a PIL of Center for Public Interest Litigation (CPIL) to order fresh investigation into the allegations against Reliance Industries and Tata Group on the basis of the Serious Fraud Investigation Office (SFIO) report.
The petition alleges that government is sitting on SFIO report which was submitted in April 2013. The SFIO report has leveled charges of serious corporate frauds which include big names like Mukesh Ambani, Reliance Industries, Tata group, Ratan Tata and Unitech.
Based on the evidences collected from the investigation wing of the income tax department, the SFIO recommended following charges in its investigation report in April 2013.
1. Charge under section 415 r.w.s. 418 r.w.s. 420 r.w.s. 120B in case of News X sale.
2. Charge under section 420 r.w.s. 120B in case of Eenadu sale.
3. Charge under section 628 of the Companies Act in case of M/s Neucom Consulting Pvt Ltd.
4. Charge under section 420 r.w.s. 120B in case of Unitech and Tata’s.”
On television channel News X sale the SFIO report concludes “ as the evidence unfolds the promoter group of companies of Reliance advanced funds in the guise of convertible loans only to acquire the equity in INX Media Pvt Ltd and M/S IM Media Pvt Ltd. The two companies in turn acquired the equity of M/S INX News Pvt Ltd, which was operating the News X channel.”
The report further says “At one hand the promoter group of companies of Reliance advanced funds to acquire equity of INX News Pvt Ltd at a premium and on the other hand one of the RIL companies namely M/S Aarthik Commercials P ltd advanced funds to M/S Indi Media Co Pvt Ltd through M/S Suvi Info Management Pvt Ltd to acquire the same equity from INX Media P Ltd and IM Media P Ltd at Rs 10 Per share at par causing wrongful loss Rs 168 Crore to the companies namely INX Media P Ltd and IM Media P Ltd and an equivalent wrongful gain to M/S Indi Media P Ltd.”
The report adds “It can be seen that the buyer and the seller were one and the same group that is Reliance. The maze of companies and the web of fund movement was created only to hide the identity of the group and to induce losses in the hands of M/S Indi Media Pvt Ltd as per the premeditated plan”
It concludes “the group which was behind causing wrongful loss to the companies is Reliance group. The head of the group Mr Mukesh Ambani from whom the directions were dissipated to Mr Manoj Modi, Consultant to Mr Mukesh Ambani and the job accomplished by Shri K R Raja Senior VP RIL and Shri L V Merchant Coontroller of accounts RIL are all liable to prosecuted under section 415 r.w.s. 418 of IPC.”
The SFIO report also confirms reported news items that Unitech was fronting for the Tata s and had obtained 2G spectrum allocated by DoT in 2008 by cheating and fraud.
The report says “This money was not paid directly to Unitech Ltd. The companies of Tata Group were put into service to route funds to the group companies of Unitech and these companies finally passed on the funds aggregating 1,700 crore to Unitech Wireless (Tamil Nadu) Pvt Ltd during March 2007 to March 2008. The money advanced by Tata Realty was in turn received from Tata Sons.”
The report alleges a subsequent cover-up by Unitech: "After receiving the funds, the names of the companies were changed to conceal their identity. After procurement of the licences through the above eight companies, they were subsequently amalgamated with Unitech Wireless (Tamil Nadu) Pvt Ltd... an accused in the 2G scam".
The SFIO report further states: "The money received from Tata Realty, through its group companies, was utilised by Unitech to pay the licence fees to the government for acquisition of licences.”
The referred to what it described as a "back trail" of the money advanced to Unitech by TRIL. The telecom licence obtained by Unitech in October 2008 for 1,651 crore was sold to Telenor at a "huge profit" of 6,210 crore by offloading equity in "the guise of infusion of funds". The profits from this sale were shared with the Tatas and the monies were routed back in the guise of refund of advances, it said.
Similarly, TTSL and TTS (Maharashtra) Ltd also, after obtaining GSM licences, sold their stakes to NTT DoCoMo for 13,872 crore. "Thus, Tatas not only made profit on sale of the licences procured by group companies but also enjoyed the profits earned by Unitech, to which funds were advanced under the garb of acquisition of land-owning companies" the SFIO report states.
It also states that after obtaining the licences through the eight companies, Unitech "designed a scheme of amalgamation to wipe out the money trail". The report is critical about Unitech's bid to enter telecom. It said the company applied for telecom licences across India without carrying out any field research on the business model of its new venture and having no infrastructure. "The company knew that lacking knowledge, expertise and experience in the field will not lead the new business venture anywhere, but still application for licence was made," states the SFIO report.
All this, SFIO finds, that the "stage was set in 2007-08 itself" for advancing funds, signing agreements for towers and telecommunications services, identifying the subsidiaries which will play a role in the entire process, and sale of licences to Telenor and NTT DoCoMo.
It said Unitech had entered into agreements with the telecommunications arms of Tata Teleservices for procuring infrastructure in 2007-08 after it had received funds from TRIL. Unitech, therefore, acted as the "front for Tatas which not only funded Unitech for the licence but also ensured its towers by way of signing agreements”.
A bench of justices G S Singhvi and V Gopala Gowda asked former Tata chief, Ratan Tata who has filed a plea for not making public tapped conversations of Radia, to file reply within a week.
The PIL sought a direction to the government, SFIO, RoC, DGIT and the CBI to take all of these investigations to their logical conclusion under court supervision.
The matter will now be heard before a new bench of Supreme Court on December 2nd after government and CBI files its reply. It would be interesting to see how two of the biggest names in Indian corporate world will cope with serious fraud allegations against their respective companies.