INDIA'S Bharti Airtel, the parent company of one of Nigeria's leading telecommunication outfits, Airtel Nigeria Limited, is presently going through difficult times about the same time its indigenous arm is being pilloried by several unpalatable court rulings.
In what many experts considered as a further blow to the beleaguered Indian telecommunication industry, the 2G telecom trial court in New Delhi, a special court, last week issued summons to four accused persons; Shyamal Ghosh, Former DoT Secy; Sunil Mittal,
Chairman Bharti Airtel and Managing Director Bharti Cellular; Ravi Ruia Vice-Chairman, Essar Group, Ex-Chairman Hutch Essar and Asim Ghosh former MD, Hutchison Max Telecom. The three accused companies are Bharti Cellular, Hutch Max and Sterling Cellular, in an ongoing additional spectrum allocation case.
These men were summoned
based on the Central Bureau of Investigation's (CBI) charge sheet against Bharti Airtel and Vodafone in matter of grant of additional spectrum to these companies in 2002, the trial court named the four persons and three companies as accused in the case.
The case, again, coincides with Indian government's decision to ban Bharti Airtel from offering 3G services in seven circles and fined it INR3.5 billion ($64.6 million).
India's largest operator by connections must stop 3G services in the circles that include Kolkata, Maharashtra and Gujarat. The move is part of the government's efforts to crack down on operators providing services in regions where they do not have operating permits.
SummonIn the 2G Spectrum case, the court said that it had found enough evidences against Sunil Mittal, Asim Ghosh and Ravi Ruia, who are in control of accused companies in the case.
Passing the order, Special CBI Judge OP Saini said “I have gone through the copy of the FIR, charge sheet, statement of witnesses and documents on record. On perusal of the record, I am satisfied that there is enough incriminating material on record to proceed against the accused persons.”
“I also find that at that relevant time Sunil Bharti Mittal was Chairman-cum-Managing Director of Bharti Cellular, Asim Ghosh was Managing Director of Hutchison Max Telecom and Ravi Ruia was a Director of Sterling Cellular Limited, who used to chair the meetings of its board. In that capacity, they were/or are, prima facie, in control of affairs of the respective companies. As such, they represent the directing mind and will of each company and their state of mind is the state of mind of the companies. They are/or were “alter ego” of their respective companies. In this fact situation the acts the companies are to be attributed and imputed to them. ”
The CBI in its charge sheet had accused Shyamal Ghosh, the then, telecom secretary for allocating additional spectrum to these companies.
The charge-sheet that was filed by the CBI in December 2012 had named only the government conspirators the late Pramod Mahajan, who was then Telecom Minister and the former telecom secretary Shyamal Ghosh, but not named any promoter or executives of the accused the telecom companies.
Quoting from the charge-sheet: “Investigation has revealed that Shyamal Ghosh, then chairman of Telecom Commission and Secretary DoT, in conspiracy with late Pramod Mahajan, then telecom minister and the accused beneficiary companies that is Hutchison Max and Sterling Cellular (Hutchison Max is now Vodafone India Ltd and Sterling Cellular is now Vodafone Mobile Service Limited), and Bharti Airtel Limited through their representatives, abused his official position as public person and showed undue favour which caused loss of Rs 846.44 crores to the government exchequer and corresponding undue gain to the aforesaid telecom companies.”
According to CBI, Mahajan had allotted additional spectrum to these companies 'in haste' and in violation of the then telecom policy by charging additional one per cent of AGR (adjusted gross revenue) instead of charging the required additional two per cent of AGR for allocation of additional spectrum.
At an earlier hearing, the special CBI judge, pulling up the CBI for not naming the heads of the telecom companies in the charge-sheet had asked, “In a conspiracy, there must be two parties. You (CBI)are blaming only the government servants. Why not the private persons? Who did the conspiracy with the government servants?”
In response, the CBI prosecutor had said that they had tried their best to find out if any company officials were part of the conspiracy but could not find anybody's name.
In the 57-page charge sheet, the CBI has booked Shyamal Ghosh and the three telecom firms for the offences of criminal conspiracy (120-B) of the IPC and under provisions of the Prevention of Corruption Act.
The trial court has summoned all the accused to be present on April 11 when it plans to open hearing on the spectrum case.
Tough times ahead
HP Ranina, a Corporate Tax Lawyer feels that the impact could be quite substantial and there will be lot more information, which will be coming out which translates to a big setback for Bharti Airtel.
He explained that “the impact could be quite substantial. Lot of investigation having been brought in the charge sheet will now become open in the public domain. When the party is to appear before the court and give evidence certainly there will be lot more information, which will be coming out.
Bharti will of course defend itself. It will cross-examine the witnesses for the prosecution. Therefore, it is only the tip of the iceberg. We really do not know how it is going to pan out. However, it is certainly going to have a very serious impact on company's fortunes.”
He, equally, submitted that Sunil Mittal, one of the main actors will experience some difficulties.
“They will certainly ask for time in case they need more time. If they are travelling outside India they will also ask for some exemption. It all depends on how long the proceedings take place.
However, certainly in these types of trials which are going to be monitored on a day to day basis in the initial days there will be a lot of tension and certainly a lot of pressure on the promoters and to that extent possibly the business may suffer. They have a fairly good organization and even though the promoter himself is busy in court I am sure the organization will continue.”
At this stage of the matter, Ranina ruled out the possibility of Sunil Mittal appealing against the summon. “It is just court trial. Once the judgment comes then of course there will be an appeal. However, normally one cannot appeal against being summoned by a trial court. I do not think a higher court will interfere in the case of such an appeal.”
Ally indeed
As the storm rages, SingTel, a Singapore telco has, however, expressed "full faith" in its associate Bharti Airtel, whose chairman, it acknowledged, was among several key telecom executives summonsed by an Indian special court, regarding the allegedly corrupt allocation of 2G licenses.
SingTel, which owns about 30 per cent of Bharti Airtel, defended the Indian telco and its group chairman Sunil Mittal, amid ongoing investigations by an Indian special court.
In a statement the company informed that, "With reference to the court summons issued to Bharti Airtel, and its chairman, Sunil Bharti Mittal, we reiterate that we have full faith in the company's corporate governance standards under the leadership of Mittal,"
No charges have been laid against either individuals, however the CBI added Bharti and two Vodafone entities to the charge sheet--which has broadly alleged that in 2002, India's then telco minister elicited bribes from carriers eager to secure 2G licenses.
In its counter claim, Bharti Airtel stated that, "The Central Bureau of Investigation has asserted that they have not found any evidence of conspiracy against any individual whatsoever." Bharti was "saddened" by the development, and explained the company played by the rules of the day.
"The spectrum allocation--i.e. subject of the charge sheet--was made to Bharti Airtel in December 2003 under the charge of then Minister of Communications in the National Democratic Alliance (NDA), Arun Shourie, who has already been given a clean chit," it said in the statement.
"The fact also is that the spectrum under [the] government policy of February 1, 2002, which the charge sheet alleges, was issued to benefit Bharti Airtel and Vodafone continued until April 2010 under 3 separate Ministers of Telecom and 6 Secretaries in the Department of Telecommunications (DoT) and despite being considered by several formal and informal committees of the DoT and Telecom Regulatory Authority of India (TRAI)."
More Defence
While the telcos are confident that Bharti will beat the CBI's allegations and due process will prevail, they felt that the summons would have brought unwanted attention to the company's chairman.
"We would like to reiterate that Bharti Airtel and its promoters have always practised the highest standards of corporate governance and accordingly view the charge sheet as an attempt to tarnish its high reputation," according to Bharti's press release.
"We are disappointed with the charge sheet against a company which is one of the few Indian MNCs, with a reputation for good governance standards.
"We will fight this charge sheet against Bharti Airtel and Sunil Bharti Mittal, chairman of Bharti Airtel and a global leader associated with some of the best known institutions of the world and a brand ambassador for India."
Earlier on March 19, it was widely reported the CBI could not identify the telecom company executives involved in the irregularities, which raised the ire of special court judge O. P. Saini.
However, he believed there was enough merit to summons the telco chiefs, who steered their companies through the murky auction process.
"The acts of the companies are to be attributed and imputed to them. Consequently, I find enough material to proceed against them also," Saini was quoted as saying.
Not the one to go down without a fight, Bharti Airtel charged CBI with attempting to tarnish its reputation while Essar Group said it will take appropriate legal proceedings to challenge the order.
"We will fight this charge sheet against Bharti Airtel and Sunil Bharti Mittal, Chairman of Bharti Airtel," the company said.
An Essar Group spokesperson said, "We are consulting our legal experts and exploring all legal options and will in due course take up appropriate legal proceedings to challenge this order."
The company said all other telecom operators including MTNL and BSNL received additional spectrum under this policy of February 1, 2002. "The fact also is that the spectrum under government policy of February 1, 2002, which the charge sheet alleges, was issued to benefit Bharti Airtel Ltd and Vodafone continued until April 2010 under three separate Ministers of Telecom and six Secretaries in the DoT and despite being considered by several formal/informal committees of the DoT/TRAI," it added.
The company said it has "full faith in the judicial process" and is confident its "position will be vindicated before the courts".
On the suspension, Bharti has opposed the directive from the Department of Telecommunications in the Delhi High Court. A government official said that similar bans and penalties will be issue for Vodafone and Idea Cellular.
Bharti won 3G licences in 13 circles in the auction in 2010, while Vodafone secured spectrum in nine circles and Idea in 11 circles. The companies subsequently entered into intra-circle roaming pacts in which they could use each other's spectrum where they did not hold it themselves. The government has now decided these pacts are illegal. Following the news the shares of Bharti Airtel has plummeted.
Back in Nigeria, National Daily had earlier reported that the country's chairman of Airtel, Oba Otudeko, has decided to sell his shares portfolio totaling 26,889,364 shares or 13.36per cent at a ridiculous price far below its current market value. This was as a result of serious boardroom wrangling in which the Indian technical partners were gaining the upper hand.
A situation coming amidst the company's inability to shake off Econet Wireless International, which is claiming damages for wrongful dismissal from the company's board in 2003 under suspicious circumstances; Econet has since been vindicated by the International Arbitration Tribunal and several other courts in the country. Airtel has however pushed the case to the Court of Appeal.
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