IN THE SUPREME COURT OF INDIA
CIVIL APPEALATE JURISDICTION I.A. No. _______ of 2012 IN CIVIL APPEAL NO. 10660 OF 2010 In the matter of: Centre for Public Interest Litigation & Ors Versus The Union of India & Ors … Respondents … Petitioners
APPLICATION FOR INTERIM DIRECTIONS ON BEHALF OF THE PETITIONERS To The Hon’ble Chief Justice of India and His Hon’ble Companion Justices of the Hon’ble Supreme Court of India The humble application of the applicants above named most respectfully showeth:
1. The above civil appeal arises out of a special leave petition seeking court monitoring of the CBI & ED investigation into the 2G spectrum scam. This Hon’ble court vide order dated 16.12.2010 was pleased to grant leave in the said SLP and had given several directions to the CBI & ED. Vide order dated 02.02.2012, this Hon’ble Court asked the the Central Vigilance Commissioner and the senior Vigilance Commissioner to assist this Hon’ble Court in monitoring the CBI investigation. This Hon’ble Court had held that investigation agencies would investigate without any regard to the status or position of the person sought to be investigated.
2. Dr. Subramanian Swamy, intervenor in the instant case, had filed I.A. No. 18/2011 seeking CBI investigation against the former Finance Minister Mr. P Chidambaram to unearth his role in the 2G scam. This Hon’ble Court disposed off the said application vide order dated 02.02.2012 by stating that since the applicant therein had also approached the 2G special court raising a similar issue, the same be decided by the Ld. Special Judge. Thereafter, vide order dated 04.02.2012, the Ld. Spl Judge dismissed the application of Dr. Swamy.
3. The Ld. Spl Judge came to a finding of fact that Mr. P Chidambaram as Finance Minister agreed with accused Mr. A Raja then Telecom Minister on the 2 issues: fixing of spectrum pricing at 2001 levels and allowing the licensees to offload their stakes for huge profits. Despite this, Ld. Spl Judge said that there is not enough material to summon Mr. Chidambaram as a co-accused and therefore Mr. Swamy’s application was dismissed. While one could take the view that the 2 facts alone as noted by the Ld. Spl. Judge were not sufficient to summon Mr. Chidambaram as a coaccused, yet those facts coupled with the facts/documents that are being highlighted in this application, does not leave any room for doubt that further investigation is necessary in the case.
4. The petitioners, through this application, are not challenging the order of the Ld. Spl Judge where the prayer was made to prosecute Mr. Chidambaram. Petitioners are pointing out that
through the facts that have now been established and the documents that are now being filed herein, it is clear that: a) The then Finance Minister overruled the officers of his own Ministry who favoured auction / market-based pricing of spectrum, and instead allowed the 2G scam to take place and the companies to make windfall profits b) The then Finance Minister, in no time, revised his position from giving away 4.4 Mhz of spectrum at 2001 prices, to giving away 6.2 Mhz of spectrum at 2001 prices thus forcing an additional loss on the exchequer. c) The then FM knew full well even post issue of LoIs that it was legally possible to auction start-up spectrum and provisions of the license agreement being cited by the DoT were not
applicable since the LoI holders were not licensees at this stage. In spite of this, he allowed the DoT’s view to prevail over that of his officers. d) The then Finance Minister allowed the companies like Swan and Unitech to sell off their stakes, without charging any Government’s share of its premium on account of spectrum valuation and without enforcing his own agreement with the then Telecom Minister dated 30.01.2008. e) The then Finance Minister did all of the above knowing full well the kind of manipulations and irregularities that had occurred in allocation of LoIs on 10.01.2008. f) The then Finance Minister took contrary public positions, gave misleading explanations and did not disclose true facts, thus leading to a conclusion that he had much to hide.
g) The documents and evidence that have emerged present multiple contradictions and raise several questions, all of which remain irreconcilable or unanswered, and have a serious impact on the quality, direction, and outcome of the investigation
Hence, the facts that have now come on record, merit a
thorough investigation by the CBI into the role of the Finance Ministry and the then Finance Minister in the 2G scam as they were uniquely placed to stop the 2G spectrum scam. The said investigation, keeping in view the extremely sensitive nature of the case and current position of the then Finance Minister, would have to be closely monitored by this Hon’ble Court with the assistance of the Central Vigilance Commissioner and the senior Vigilance Commissioner.
Fixing of Spectrum Pricing 6. Mr P Chidambaram was the Finance Minister from May 22, 2004
to November 30, 2008. The Finance Secretary in a letter dated November 22, 2007 (Annexure A1) to the Telecom Secretary had stayed any further allocation of spectrum. The communication states, “Meanwhile, all further action to implement the above licenses (crossover technology) may please be stayed.” A copy of this letter was marked to Mr K.M. Chandrasekhar, Cabinet Secretary, and Mr Rohit Kansal, PS to Shri Chidambaram. On November 29, 2007 (Annexure A2), Telecom Secretary replied to Finance Secretary justifying the issuance of cross-technology licenses on 2001 rates. On this letter, an
officer in Finance Ministry noted, “No reply as to why a matter with financial implications has not been referred to MoF.”
On 7th December 2007, an agenda for the meeting of the full
Telecom Commission was prepared, which did not list spectrum pricing as an item. However, this meeting was not held. On 12.12.2007, the MoF officers wrote to the DoT, seeking
details/documents related to the letter of the DoT Secretary dated 29th November 2007. On 13th December 2007, in response to a letter from the Director (Infra)-MoF, the DoT replied (Annexure A3), enclosing copies of: The cabinet note of 2003; the cabinet decision in this regard; the DO from the DoT Secretary to the Finance Secretary of November 2007. The Cabinet note and decision with regard to spectrum pricing, which had been cited by the DoT Secretary on 29th November 2008 was received by the MoF. Section 2.1.2(3) clearly stated: “The Department of Telecom and the Ministry of Finance would discuss and finalize spectrum pricing formula, which would include incentive for efficient use of spectrum as well as disincentive for sub-optimal usages.” From the above, it was clear that the MoF officials were fully aware that unless such ‘concurrence’ based on discussion and finalization of spectrum pricing formula between the DoT and the MoF had been established, the DoT could not move ahead and allocate spectrum at 2001 rates in 2007/08.
Alarmed by press reports between October and December 2007
of Raja's potential manipulation of cut-off date, FCFS, and the imminent issuance of LoIs, MoF officials prepared a “Position Paper on
Spectrum Policy” dated January 3, 2008, which was attached to a covering note dated January 9, 2008 (Annexure A4) of the Additional Secretary (EA), Finance Ministry. This paper was to be presented in the Telecom Commission meeting that was to take place on January 9, 2008, which was postponed to January 15, 2008 at the last minute. In the paper, the Finance Ministry had recognized that 575 applications were pending and therefore had insisted that the price of spectrum must reflect spectrum’s scarcity value determined through auction. The relevant parts of this note are reproduced below: Extracts of notes dated January 9, 2008 of Additional Secretary (EA), of Finance Ministry 6.3 Given the fact that there are reportedly over 575
applications pending with DoT (including 45 new applicants) there is a case for reviewing the entry fee fixed in 2001. This is an administratively fixed fee. Therefore any change should be governed by transparent and objective criteria applicable uniformly to all new entrants.
The most contentious issue relates to spectrum
allocation. There is no disagreement that the price charged for spectrum should be based on its scarcity value, efficient usage and that the process of allocation should be transparent and fair. The payment is for a real economic resource. It is not a fee. According to DoT it is closer to royalty charged on Coal, Crude and Natural Gas.
transparent method of allocation of
spectrum would be by auction. However, there are two caveats to the auction method. (a) The ways in which the existing licensees in GSM and CDMA would be eligible to participate in the auction vis-a-vis the new entrants; and
(b) The advantages and disadvantages of the method itself. A detailed table is placed at Annexure V.
The possible non-optimal outcomes can be taken care of by prescribing suitable rules of auction before the bid in a transparent manner applicable to all eligible bidders. Any other method for allocating spectrum, being a scarce resource, would be economically inefficient.
…. Nevertheless, regardless of the allocation criteria,
auction has been recommended with transparent rules as the most suitable method of allocating spectrum. The quantum, of spectrum available for auction in 2G is to be decided by DoT.
Also, the above said note clearly states that Mr. Chidambaram
was personally keeping a watch on the spectrum issues through the media reports. The note stated that, “FM had instructed that the prolific Press reports over the last two months relating to pricing of spectrum and the "Telecom Wars" may be tracked.” A sample of the press reports of that time that had complete blown the lid over the manipulations and illegalities that were being done by the DoT much before the issue of LoIs are annexed as Annexure A5 (Colly). There were tens of other similar reports appearing in the press during October 2007 to January 2008. So, Mr. Chidambaram was fully aware of the complete developments that were taking place in the Department of Telecommunications (DoT). He was also aware that the TRAI recommendations (that DoT claimed to be following) were never approved by the full Telecom Commission of which Finance Secretary is a Member. Additionally, that Member (Finance) on the Telecom
Commission had objected to Mr. Raja's moves by opposing the 2001 entry fee vide her note on file dated 30th November 2007.
The DoT issued 122 Letter of Intents (LOIs) for Universal Access
Service (UAS) licenses on January 10, 2008; these LOIs were converted into licenses only during February 27, 2008 to March 7, 2008; and the spectrum allocation started only from April 22, 2008 and completed on May 6, 2009 (Annexure A6). During this period, Mr. Chidambaram had enough time to stop the scam. However, instead, he facilitated the same by silencing the stand of his officers on the issue of spectrum pricing.
Just before the Telecom Commission meeting that was
scheduled for January 15, 2008, Mr. Chidambaram wrote a note for the Prime Minister (Annexure A7). Instead of being straightforward, Mr. Chidambaram’s note was aimed to hide the illegalities in the award of licenses. In this regard, the relevant extract of the note where he categorically exempts the revision of entry fee is reproduced below: 9. This note does not deal with the need, if any, to revise entry fee or the rate of revenue share. This note deals with spectrum charges for 2G spectrum.
10. Spectrum is a scarce resource. The price of spectrum should be based on scarcity value and efficiency of usage. The most transparent method of allocating spectrum would be through auction. The method of auction will face least legal challenge. If the government is able to provide sufficient information on availability of spectrum, that would minimize the risks and consequently, fetch better
prices at the auction. The design of the auction should include a reserve price.
Through the above note, Mr. Chidambaram also put a lid on the issue of entry fee for start-up spectrum and of payment by existing operators towards excess spectrum from a retrospective date, probably to appease them so that they do not raise the issue of the scam in awarding new licenses. In this regard, the relevant extract of the note is reproduced below: 13. This leaves the question about licensees who hold
spectrum over and above the start up spectrum. In such cases, the past may be treated as a closed chapter and payments made in the past for additional spectrum (over and above the start up spectrum) may be treated as the charges for spectrum for that period. However,
prospectively, licensee should pay for the additional spectrum that they hold, over and above the start-up spectrum, at the price discovered in the auction. This will place old licensees, existing licensee seeking additional spectrum and new licensees on par so far as spectrum charges are concerned.
Thereafter, both Mr. Chidambaram and Mr. A Raja met on
January 30, 2008 (Annexure A8) to discuss the issue of licensing and spectrum pricing. In this meeting, Mr. Chidambaram announced the closure of the issue of reviewing the Entry Fee of 122 LoIs already issued by DoT. Even after issuance of LoIs, A Raja did not convert the LoIs into licenses until he got clearance from Mr. Chidambaram. The gist of the discussions is as follows:
It was noted that there is a mismatch in the demand
and supply of spectrum across circles. Redressing this mismatch will be another policy imperative; 5. FM said that for now we are not seeking to revisit the
current regimes for entry fee or for revenue share,
However, in the meantime, since the issue of spectrum pricing
was apparently not settled at the Telecom Commission level, the officers in both the ministries (Telecom and Finance) kept the discussions on. The Secretaries of both the ministries had four rounds of discussions in February 2008. In this regard, on February 8, 2008 Telecom Secretary sent an “Approach Paper on Spectrum Charges” to Finance Secretary (Annexure A9). This note revealed that the Finance Ministry officials were keen to stop the allocation of spectrum to the LoI holders. Also, the DoT’s position was: i) that it agreed with the MoF that it was legally possible to auction start-up spectrum (Para 2.1); ii) that license conditions imply that start-up spectrum of 4.4 MHz would be available contractually (Para 2.1.1, 2.1.2); and iii) that it agreed with the MoF that spectrum beyond 4.4 MHz until 6.2 MHz (additional 1.8 MHz) could be charged at a pro-rata basis. relevant part of this note is reproduced below: Extract of Telecom Secretary’s letter dated February 8, 2008 to Finance Secretary 2.1 Secretary (Finance) was of the opinion that auctioning The
is legally possible for initial allotment of spectrum of 4.4 MHz. Secretary (DoT) explained that auction of spectrum of 4.4 MHz though may be legally possible but it would not be practical proposition to auction or fixing a price for 4.4 MHz spectrum due to following: 2.1.1 As per clause 43.5 (i) of UAS License, which provides that: “initially a cumulative maximum of upto 4.4 MHz +4.4
MHz shall be allocated in the case of GSM based systems….” It implies that when a service provider signs
UAS License he understands that and contractually he is eligible for initially a cumulative maximum of 4.4 MHz subject to availability. 2.1.2 120 LOIs have been issued and the Department is contractually obliged to give them start up spectrum of 4.4 MHz under UASL. 3.1.4 It is however, proposed to price the spectrum of 1.8 MHz beyond 4.4 MHz upto 6.2 MHz. 3.1.5 The Department is of the view that it would be appropriate to a levy the charge for enhancement of the quantum of spectrum beyond the initial 4.4 MHz. For an
additional spectrum of 1.8 MHz making a total of 6.2 MHz spectrum acquisition charge may be on pro-rata basis i.e. Rs. 378 crores pan-India. It will be charged only to new allottees as the existing ones have got the spectrum as per license agreement. On receiving the note of 8th February 2008, the MoF officials
knew that the DoT’s representation of ‘contractual rights’ of LoI holders (Para 2.1.1, 2.1.2) was farcical and a gross misrepresentation simply because LoI holders were neither licensees nor did they hold licenses until 27th February 2008. After the above stated letter from Telecom Secretary, the officials in the Finance Ministry to counter the above also made an internal note dated February 11, 2008 (Annexure A10) reiterating their stand of market-based spectrum pricing of 4.4 MHz spectrum agreed to be allotted to 122 LoI holders. The relevant part of this note is reproduced below: 30. Ministry of Finance differs from the above position of
DoT. There is no contractual obligation to allot a startup spectrum of 4.4 MHz to every licencee free of cost.
The entire range of the spectrum allotted should be priced. The issue of level playing field can be addressed by charging this price even on existing operators. 31. Moreover, the differentiated pricing suggested by DoT,
viz. one price for spectrum between 4.4 and 6.2 MHz and a different price for spectrum beyond 6.2 MHz will be clumsy, non-transparent and legally questionable. It will be neat and transparent to fix a single circle-specific price for spectrum across the entire bandwidth. Between 27th February and 7th March 2008, even as MoF
officials fought a valiant battle to protect the exchequer’s revenue, not just with the DoT but with their own Minister, Mr Raja went ahead and issued 122 licenses. This could have easily been prevented by the FM if only he had stood by his officials. But all his notes and agreements (15th January and 30th January 2008) were against revising entry fee.
On 7th April 2008, the Finance Secretary discussed with the DoT
Secy and the FM the note on the issue of entry fee/spectrum pricing (Annexure A11). He noted that: “Pricing of spectrum: DoT is agreeable to pricing of spectrum beyond 4.4 MHz but wants this to be deferred till auction of 3G and WiMax is completed. In our note, we suggested pricing of all spectrum including spectrum already allocated. Is there a case for deferring this decision? Is there merit in disclosing the pricing intention right now if actual implementation is deferred?” It is thus clear that the Finance Secretary was uncomfortable about diluting the MoF’s position and more so on the ‘merits in disclosing the pricing intention right now if the actual implementation is to be deferred’. The Finance Secretary also noted on the covering letter: “I
have only communicated the gist of this to Secretary, Department of Telecom. The FM said that he will also speak to Minister of Communications.”
On the same day of 07.04.2008 , the FS noted on a file noting
(Annexure A12) continued from 3rd April 2008 that: “2. FM agreed that spectrum usage charge should be increased reflecting the scarcity value of spectrum as indicated in our note of 11th February, 2008. 3. On pricing of spectrum, FM’s view is that we must insist, in principle, on pricing spectrum (beyond 4.4 MHz) although details can be worked out after the auction of 3G spectrum.” This was the first clear dilution of the MoF officers’ position on specifically pricing start-up spectrum on the instructions of Mr. Chidambaram. Mysteriously, Mr. Raja did not start the process of allocating spectrum at this stage. Clearly, he needed a written confirmation from the MoF to begin the process of allocating 4.4 MHz of start-up spectrum at 2001 rates.
On 8th April 2008, one month after licenses had been awarded,
an OM (Annexure A13) which reflected the MoF’s original position of 11th February 2008 on the issue of subjecting the entire spectrum to specific pricing was issued to the DoT Secretary by the Director, MoF. This note came to light in the media on 9th April 2008, and the DoT’s position vis-à-vis that of the MoF’s view were highlighted. Immediately on seeing the media coverage, the officer was reprimanded and was forced to withdraw and re-draft the said OM (Annexure A14). The difference between what the original OM stated and what the officer
was directed to re-draft could not have been more stark. The original OM required the entire range of spectrum to be specifically priced. The revised OM, which was prepared on 9th April 2008 but presented with a date of 8th April 2008, specifically sought to exclude start-up spectrum upto 4.4 MHz from being specifically charged, therefore ensuring that the entry fee of 2001 that was fixed by telecom Minister in 2008 was not revised. The contrast is as below:
New OM dated April 8, 2008 4(1) Any allotments to
Original OM dated April 8, 2008
of 4(1) Any Allotments of Spectrum to
access access subscriber licensees under UASL
subscriber licensees under regime may henceforth be specifically UASL regime – beyond the priced and charged for. The charge may initial “start up” allocation of be determined, Circle wise, by adopting 4.4. MHz – may henceforth the Entry Fee, fixed for that circle in be specifically priced and 2003-04, and thereafter inflating it by the charged for. Details in this multiplier, which represents the growth in regard can be worked out. aggregate AGR per MHz between 200304 and 2007-08; hence, for a Pan India operator, the Circle fee fixed in 2003-04 (Rs. 375 Crore per MHz) would be inflated by a multiple of 3.5 (which represents the growth in AGR/MHz between 2003-04 and 2007-08) to yield the new Spectrum price of Rs. 1,312 Crore per MHz (approximately). 4(3) The price determined 4(2) The price determined as above may as above may be made be made applicable to both the new and applicable to both the new existing operators; moreover, the entire and existing operators; range of spectrum allotted may be
such operators who do not charged, for both new and existing intend to pay the new operators; such operators who do not
charges may be given the intend to pay the new charges may be option of surrendering the given the option of surrendering the spectrum allotted to them. Spectrum allotted to them.
On 10th April 2008, not only was the officer who sent the original
OM made to apologize in writing, but in fact seemed to be severely reprimanded and forced to provide a detailed explanation to the FM as to why the original OM, which reflected the views of the MoF officers/note of 11th February 2008, was sent out (Annexure A15). The note also reveals how the OM was personally delivered by the officer to the Wireless Advisor in the DoT, who received it on behalf of the DoT Secretary. The DoT then did not to process the original version of the OM in the DoT file. The Joint Secretary (Infra) in the MoF spoke personally to the DoT Secretary asking for the withdrawal of the original OM and the request was exceeded to by DoT Secretary Shri Behura. While all this occurred on 9th April 2008, the new diluted/modified OM was mysteriously pre-dated one day earlier to 8th April 2008 to give an appearance that DoT’s records and files were in order. On the above note, on 16th April 2008, the FM wrote a 3-para note accepting the apology of the officer but only pointed to ‘nomenclature’ and ‘title’ mistakes in the OM. He wrote: “That apart, the draft note received from DoT was indeed considered by me on 11.3.2008. Thereafter, that file containing the draft note from DoT and the proposed OM was not put up to me. What was considered was only a non-paper given to me by the Minister of Telecommunications on which I had been informed by the FS that the DEA would send a non-paper containing our views. It is in this context that the note for
discussion was prepared: a discussion took place; and I had indicated my views on the margin of that note. Logically this should have been followed by sending a non-paper to DoT. However, if there was an intention to send a formal OM containing our views on the draft note for Cabinet received from DoT, the file should have been put up to me and my signature obtained. I may note that I was in office on 8.4.2008 and 9.4.2008. Such errors should be avoided in future.”
Having forced the officers to replace the original OM and change
the MoF’s position, Mr. Chidambaram on April 21, 2008 forwarded a “non-paper” indicating the views of the Ministry of Finance on spectrum related matters to Mr. A Raja (Annexure A16). This nonpaper was silent about on the issue of entry fee for start-up spectrum for 122 licenses already issued. The discussion conveniently shifted to charging for spectrum beyond 4.4 MHz. In this letter, he proposed a meeting with Mr. Raja before communicating their “conclusion” to the Prime Minister. That means, till then the two ministers had already decided not to charge for spectrum for 122 Licenses already issued. Extracts of Mr. Chidambaram’s letter dated April 21, 2008 to A Raja As you are aware, based on your non-paper on spectrum charges, Finance Secretary has held discussions with Secretary, Ministry of Communications & Information
Technology. Based on those discussions, I enclose a nonpaper containing our views on issues relating to 2G spectrum and issues relating to 3G / WiMax Spectrum. 2. After you have had an opportunity to examine the
same, may we meet and discuss and reach some conclusions? These conclusions could then be presented to the Hon'ble Prime Minister.
Pricing of 2G spectrum DoT is agreeable to pricing of spectrum beyond 4.4 MHz but wants this deferred until auction of 3G and WiMax is completed. An in-principle decision on this issue may be taken at this stage itself, with details to be worked out later. Immediately after the above note, the DoT started allocating start-up spectrum of 4.4 MHz to all the new operators from April 22, 2008.
Thereafter, Mr. Chidambaram instructed the Finance Secretary
to meet the Telecom Secretary to carry forward the discussion. The two met on April 24, 2008. After this meeting, strangely, Finance Ministry took a u-turn and agreed not to charge even for spectrum allocated upto 6.2 MHz. . This meant an additional 1.8 MHz over and above the 4.4 MHz as an additional concession against the explicitly terms between the DoT and the MoF officials in their letters of 8th and 11th February 2008. The Finance Secretary issued an updated note on this on April 29, 2008 (Annexure A17), a copy of which he handed over to Mr. Chidambaram. The same position is reflected in a Brief Note dated May 28, 2008 prepared by the MoF for Mr. Chidambaram before his meeting with Mr. Raja on May 29, 2008. They then met on May 29, 2008 and again on June 12, 2008.
Thereafter, on July 4, 2008, Mr. Chidambaram, Mr. Raja,
Telecom Secretary, and Finance Secretary had a joint meeting with the Prime Minister. This was their first ever meeting on the spectrum issue after the award of 2G scam. By this time, LOIs were already issued (Jan 10, 2008), LoIs were converted into Licenses (Feb 27, 2008 to Mar 7, 2008), and the allocation of start-up spectrum was
already started (from April 22, 2008). In the meeting, a note was submitted to the Prime Minister, which was more in the nature of informing him what was already agreed and done. No further approvals were required, as has become clear from the PM’s statement in the Rajya Sabha on 24th February 2011. The specifics of the discussion are reflected in the Finance Secretary’s note of July 6, 2008 (Annexure A18). Relevant part of the note dated July 6, 2008 states, “It is legally and administratively tenable to impose a two part tariff for Spectrum: a fixed, one-time "upfront" spectrum price for allowing the allottees to use a public resource for private profit; and, a recurring spectrum usage charge, whereby Government shares the profits accruing to the operator. However, due to historical legacy reasons, spectrum allocations upto 6.2 MHz for GSM (5 MHz for CDMA) shall not be charged both from new and existing operators.”
The change in stand by Mr. Chidambaram has also been
adversely commented by the CAG in its report dated November 16, 2010 that states: “The Hon'ble Finance Minister also held the view (15 January 2008) that “Spectrum is a scarce resource. The price for spectrum should be based on its scarcity value and efficiency of usage and the most transparent method of allocating spectrum would be through auction”. However, the Hon'ble Finance Minister after the issue of 121 LOIs by the DoT suggested in January 2008 to treat the previous issue of licences as a closed chapter and recommended that the price of spectrum be discovered through an auction process in future. Relevant extract from the CAG report is annexed as Annexure A19.
On February 16, 2011 (Annexure A20) the Prime Minister held
a briefing with select media persons in which he confirmed that the two ministers were in agreement with each other. The briefing states, “And this was also discussed with the Finance Ministry because in terms of the Cabinet decision of 2003 the pricing and allocation of spectrum was to be settled between the Ministry of Finance and the Telecom Dept. Initially, of course, the Finance Ministry did ask for a high price of spectrum but after many discussions, the two ministries agreed that as far as 2G is concerned, we have to live with the present system particularly with regard to the amount of spectrum that is built and embedded into a license agreement. So this is the background why I did not proceed further with this matter of pricing of spectrum, because if the Ministry of Finance and Ministry of Telecom both agree and they have the obligation of the Cabinet Decision of 2003 to decide on the matter and also since TRAI is an expert body and Telecom Commission has experts, if all of them are of the same view, I did not feel I was in a position to insist that auctions must be insisted.”
Prime Minister also told Rajya Sabha on 24.02.2011 that “The government policy on pricing of spectrum was taken on basis of the Cabinet decision of 2003, which specifically left this issue to be determined by the Ministry of Finance and the Ministry of Telecommunications.” He further added “the two Ministers had agreed because of legacy considerations and I accepted the
Former Finance Secretary in his statement on March 5, 2011
(Annexure A21) to the CBI has confirmed the entire sequence of events and the relevant file notings. Thereafter, on March 25, 2011
(Annexure A22), the finance ministry under its new minister, released an O.M. to the Prime Minister Office titled, “Chronology of basic facts related to pricing and allocation of 2G spectrum.” This paper (that was drafted after inter-ministerial consultations and refers to about 40 documents) indicts the then Finance Minister in clear terms and confirms the events as are documented above in this application, including (in Para 17) the fact that even after licenses had been issued, the 2G scam could have been prevented by invoking Clause 5.1 of the UAS license.
Firstly, the said O.M. notes that Mr. Chidambaram had four
months to stop the scam even after the issuance of 122 Letter of Intents (LoIs) by telecom ministry on January 10, 2008. The LOIs were converted into licenses during February 27 to March 7, 2008, while the spectrum was allocated only from April 2008 onwards. Secondly, in the meeting of Telecom Commission held on January 15, 2008, the representative of the finance ministry did not bring up the revision of the 2001 entry fee for start-up spectrum. Thirdly, simultaneously, in a secret note of January 15, 2008 to the PM, P Chidambaram had stated that this note was not seeking to revise the entry fee, and that in future all spectrum beyond “start-up” should be auctioned, and the spectrum allocated in the past be treated as a closed chapter. Fourthly, Mr. Chidambaram had a meeting with the accused Mr. Raja on January 30, 2008, in which Mr. Chidambaram specifically stated that he was not seeking to revisit the current regime for entry fees and revenue share. Fifthly, in February 2008, the FS informed the Secretary, DoT that auctioning start-up spectrum was legally possible. Sixthly, on
February 11, 2008 the MoF officers rejected the DoT’s proposal of 8th February 2008 and instead proposed to charge the entire range of spectrum for all telecom operators, new or old, by indexing it with the increase in telecom revenues during the period 2003-04 to 2007-08. Seventhly, the FM forced the FS to change the MoF’s position with regard to specific charge/auction of spectrum till 4.4 MHz – based on which the MoF took a u-turn and wrote a modified OM to the DoT on 9th April 2008 (but dated 8th April, 2008), agreeing to specifically price spectrum only beyond 4.4 MHz toeing Mr. Chidambaram’s line. Eightly, on April 21, 2008 Mr. Chidambaram had written to Mr Raja, and in this letter, he mentioned only about pricing of spectrum beyond 4.4 MHz. And finally, even this agreement between the DoT and the MoF was reversed within 3 days, and it was decided to price spectrum only beyond 6.2 MHz, thus placing an additional approximate 500 MHz (280 licenses x 1.8 MHz) outside the pricing range, in spite of this being an offer by the DoT itself vide its letter of 8th February 2008. In that, the MoF was forced to grant concessions even ahead of the DoT’s own proposals.
The Government of India issued a press release on 10.12.2011
(contrary to the PM’s media statement of 16th February 2011, and his statement in the Rajya Sabha on 24th February 2011, and the DoT affidavit of 11th November 2010) strongly defending Mr. Chidambaram by stating: “It will be clear from the foregoing sequence of events that Shri P Chidambaram was in no way responsible for the issue of LoIs on January 10, 2008 or the charging of entry fee of about Rs.1650 crore. In fact, the record will show that the Ministry of Finance had no
knowledge that the LoIs would be issued on January 10, 2008.” A copy of the said official press release is annexed as Annexure A23. The fact that Government took a false defense shows that it has a lot to hide and therefore further investigation becomes imperative.
Allowing sale of equity by Swan and Unitech 28. New documents and evidence show that within three weeks of
the LoIs being issued, the two ministers met and concluded that 14 operators were too many for the Indian market and that several of the new entrants had come in for ‘speculative reasons’. Further, they knew full well that these companies would enter into M&As and make windfall profits because of the premium linked to the spectrum that they had received in 2008 at 2001 prices. They made detailed notings and agreements about how such premium resulting from M&As, being linked almost entirely to the value of spectrum, must be appropriately subjected to a government’s share and after proper and official valuations. No M&A in the telecom sector can take place without the consent of the DoT, as per the license conditions.
On 30th January 2008, in his documented meeting with Shri Raja
20 days after the 2G scam took place and LoIs had been granted, but no licenses or spectrum allocated yet, a detailed discussion on spectrum and M&As occurred. The notes from the meeting between the FM, the MoCIT, and attended by the Finance Secretary and the DoT Secretary concluded on the issue of M&As, speculative operators, and protecting government revenues that:
“2.4. In case of M&A, getting part of the valuation for government as premium for spectrum, to avoid hoarding as well as spectrum trading: In view of very large number of new operators, it is expected that some of these companies might have obtained licenses as ‘speculative’ venture. Hence, some ‘mergers and acquisitions (M&As)’ are likely to take place after some time, which de facto, would amount to spectrum trading, as large part of such company’s valuation may be on account of the spectrum held by them. This spectrum trading is not desirable and needs to be regulated. Besides, the general conditions in service license and other guidelines for M&As, clear detailed ‘Guidelines’ needed to be evolved and announced regarding the M&As, especially the amount of spectrum which the merged entity would be allowed to retain alongwith other criteria such as other details in this regard; company’s valuation by consultants/valuers appointed by govt’s approval/consent/concurrence; and then payment of a part of the valuation to govt. as premium for spectrum, etc.”
The above clearly shows that both ministers were specifically
aware that M&As would lead to windfall gains for these companies. In fact, this Hon'ble Court, in its judgment dated 2nd February 2011 in WPC 423/2010, while cancelling the 2G licenses has held on the issue of sale of stakes by these companies that: “This becomes clear from the fact that soon after obtaining licenses, some of the beneficiaries off-loaded their stakes to
others in the name of transfer of equity or infusion of fresh capital by foreign companies, and thereby made huge profits. We have no doubt that if the method of auction had been adopted for grant of licenses which could have been the only rational transparent method for distribution of national wealth, the nation would have been enriched by many thousand crores.”
In fact, the CBI, in its charge sheet of 2nd April 2011 in the 2G
scam matter, has, in Section C (dual technology approvals and spectrum allocation), clearly specified “a gain of Rs. 2,342 crores to the promoters of Unitech Wireless,” and in the case of Swan-Etisalat, it specifies “a premium of Rs. 275.7178 on each share”. The CBI itself, as a part of the criminal conspiracy, has shown massive profits made by these companies. Further, the same has been accepted by the Learned Special Judge of the CBI Court in the order framing charges of 22nd October 2011, where he has concluded: “...M/s Swan Private Limited and M/s Unitech Limited, and thereby two companies obtained pecuniary advantage to the tune of Rs. 7,105 crore by offloading their shares...”.
On 8th February 2008, the DoT submitted an approach paper in
which it also specifically addressed the issue of M&As, in that: “In view of this we need to have clear guidelines relating to M&A. We also need to consider fees on account of transfer of spectrum to a merged entity. In the event of M&A, the transfer charge to the government has not been considered by TRAI in their recommendation of August 2007. This is a complex issue requiring detailed deliberation and
consultation. Therefore, the issue of quantum of fees that the government would get on account of transfer of spectrum during M&As need to be referred to TRAI. Based on the recommendations of TRAI on the above issue, DoT will take appropriate decisions within a specified period and issue clear and transparent guidelines for M&A including transfer charges for spectrum.”
On 11th February 2008, in the DoT’s internal note prepared
based on the meeting between the FM and the MoCIT on 30th January 2008, three rounds of discussions between the FS and the DoT Secretary as well as the approach paper of the DoT dated 8th February 2008, it was concluded that M&As were expected and that the government must find a way to protect its revenues. It specifically stated that: “One question that arises is whether the government should get premium out of an M&A transaction. Since spectrum has not been auctioned but priced heuristically, it is likely that rent if any, involved in the price of spectrum will form part of the M&A transaction.”
On 28th May 2008, one day before a scheduled meeting between
Shri Chidambaram and Shri Raja, a briefing note was prepared for the FM (Annexure A24) in which, again, on the issue of government revenue from M&As, it was stated that: 10. DoT have issued notification on April 22, 2007 on ‘guidelines for intra circle merger of cellular mobile telephone service (CMTS)/unified access service (UAS) licenses’ (copy attached). The guidelines mandate: a) Spectrum transfer charge’ to be payable as specified by government.
11. DoT may be advised that the fixation of ‘spectrum transfer charges’ shall be in consultation with DEA.” It is a matter of record that Shri Chidambaram and Shri Raja met on 29th May 2008, on 12th June 2008 and finally with the PM jointly on 4th July 2008. However, from the notes of this meeting dated 6th July 2008, it is clear that the entire issue of subjecting M&As to the government’s share of the premium from the sale of spectrum / spectrum transfer charge was specifically left out of the discussion.
On 23rd September 2008, Swan Telecom, which had received
spectrum in only 9 out of the 13 circles in which it had received licenses, entered into an M&A transaction with Etisalat International. Similarly, on 29th October 2008, Unitech entered into an M&A transaction with Telenor even though it had received spectrum in only 13 out of the 22 circles. In the days following these transactions, several press clippings appeared exposing the loss to the exchequer, and questioning the government’s move of allocating spectrum at 2001 prices, including the false promise of doing so under the pretext of affordability and increasing teledensity etc. The articles clearly questioned the loss to the exchequer. A sample of these press clippings is annexed as Annexure A25 (colly).
On 4th November 2008, under pressure from the media, Swan
and Unitech were forced to report about the transactions to the DoT (Annexure A26 and Annexure A27 respectively). The intimation of the two companies showed that the only asset that they possessed at the time of the massive valuations during the M&A was the promise of
spectrum. They did not even have spectrum in all their circles, and consequently, did not have any telecom infrastructure or equipment either. They had no customers and therefore no revenues either. It was clear from their own letters that the entire valuation and the pecuniary advantage was linked to the price of spectrum in 2008. This, in fact, is exactly what had been expected and documented in the conclusions reached between the FM and Shri Raja in their meeting of 30th January 2008 – which were then repeated in the DoT’s and MoF’s notes/letters of 8th February, 11th February, and 28th May 2008.
Under continued pressure from the media, Mr Raja held a
meeting with the FM and the PM. In this meeting, he obviously received the support of the FM. In a complete U-turn of their earlier agreement of 30th January 2008, documents suggest that the FM passed off these transactions as mere infusion of equity under the FDI rules. This free passage for Swan and Unitech became a cause of additional and massive loss to the exchequer. On 5th November 2008, Mr Raja penned down a one-page note (Annexure A28), describing his meeting with the FM and the PM. In face of the media articles pointing to the ‘unlawful enrichment’ and specified that: “In a meeting, the Hon'ble Finance Minister clarified that the dilution of share to attract foreign investment for business expansion did not amount to sale of license and as such these companies did their share dilution as per corporate laws. Nevertheless, I suggest that in order to remove suspicious clouds in the minds of media and people, Telecom Commission may deliberate this issue and restrict outright sale of licenses and selling of stake by promoters to second party for money.”
Thereafter on November 7, 2008 the DoT in a Press Release
(Annexure A29) justified the part-equity sale of Swan and Unitech to Etisalat and Uninor. They claimed “This matter has been discussed and clarified with the Finance Minister.” The same thing is mentioned in a note dated November 7, 2008 (Annexure A30) that was prepared by the DoT for Full Telecom Commission meeting.
On February 4, 2012, in his Order Judge Shri OP Saini, in a
case titled as “Dr. Subramanian Swamy Vs. A. Raja & Ors”, that sought prosecution of P Chidambaram, rejected the plea of the petitioner to make Mr. Chidambaram as a co-accused. Extracts of the said order are annexed as Annexure A31.
On February 16, 2012, an article was published in The Hindu
that pointed out inconsistencies in Hon’ble Judge OP Saini’s Order and also fluctuating stand of Finance Ministry (Annexure A32). The article also hinted at softening of stand on Swan and Unitech sale of shares without charging any fee from them as was suggested by the Finance Ministry earlier all along. The article states, “The Ministry first insisted that all spectrum — including start-up spectrum — can legally be auctioned. It then capitulated to the DoT's arguments, allowing 4.4 MHz of start-up spectrum to be given without any price revision. Not stopping at this, it then went on to concede up to 6.2 MHz of spectrum at the 2001 price.”
The response of Mr. Chidambaram to the above article was
published on February 18, 2012 (Annexure A33). It states, that the
LoIs were issued on 10.1.2008 without the knowledge of the Ministry of Finance. On the contrary, Mr. Chidambaram was micromanaging everything and was keeping a close eye on all developments. In his response to the article, Mr. Chidambaram has also stated that decision was taken in a meeting with the Prime Minister on July 4, 2008. On the contrary, that was the first joint meeting between the Prime Minister, Telecom Minister and Finance Minister on this issue. This meeting took place only to apprise the Prime Minister of all the developments that have already taken place as is also clear from the PM’s own media statement of 16th February 2011 and his statement in the Rajya Sabha on 24th February 2011. In response to his silence/failure to get profit share for the Government in the premium of equity sale by Swan and Unitech to Etisalat and Uninor respectively, Mr. P Chidambaram said that he did not give any permission to them as no permission was required for equity sale below 49 per cent, which is on automatic route. He totally ignores the fact that subjecting such transactions to the government’s share of the premium from the trade in spectrum was independent of whether or not such actions were within the FDI rules or consistent with corporate laws. This is both irrelevant and false. Irrelevant since the transactions should have been subjected to the government’s share of the premium, irrespective of the level of FDI, and false because the MoF under him was insisting that for any merger & acquisition by these 122 companies, the seller should share the profit with the Government till 28th May 2008. The DoT also had consistently taken the stand that these sales were discussed and clarified by the then Finance Minister.
Dr. Swamy, as a private complainant, could have only produced
the documents that were there in his possession. He or the petitioners herein have no power to investigate the entire sequence of circumstances. A thorough investigation can only be done by an official investigation agency like the CBI that can unearth the role of the Finance Minister/Ministry in the 2G scam. The CBI has so far not done any proper investigation into these aspects and has not even questioned the then Finance Minister. Therefore, petitioners request this Hon’ble Court to direct the CBI to investigate / further investigate the role of the Finance Ministry under the then Finance Minister in the 2G spectrum scam as highlighted in this application. There are several unanswered questions that are for the CBI to investigate. (Annexure A34). The above facts clearly demonstrate that the actions of Mr. Chidambaram led to massive loss to the public exchequer and a corresponding gain to a few private companies and individuals, and those decisions were also detrimental to public interest. Therefore, he clearly abused his position to benefit private parties, which is a clear offence under Section 13 (1) (d) of the Prevention of Corruption Act.
The reluctance of the CBI in investigating the role of or even
questioning the then Finance Minister is not surprising because as Home Minister Mr. Chidambaram is a very powerful figure in the Central Government under which CBI functions, and most of the officers of CBI are of IPS cadre whose controlling authority (in charge of appointments, postings, transfers, appraisal reports, promotions) is the Home Ministry itself. Therefore, petitioners submit, that the further investigations in terms of this application would need to be closely
monitored by this Hon’ble Court with the assistance of the Central Vigilance Commissioner and the senior Vigilance Commissioner.
That the present Application is being made bona fide and in the
interest of justice. PRAYER In these circumstances the Petitioners pray that your Lordships may be pleased to: (i) Direct the CBI to conduct a thorough investigation / further investigation into the role of the Finance Ministry under the then Finance Minister in the 2G spectrum scam as is highlighted in this application, under the close supervision of this Hon’ble Court assisted by the Central Vigilance Commissioner and the senior Vigilance Commissioner.
Pass other or further orders as may be deemed fit and proper.
AND FOR THIS ACT OF KINDNESS THE APPLICANTS AS IN DUTY BOUND SHALL EVER PRAY. Petitioners Through:
PRASHANT BHUSHAN Counsel for the petitioners DRAWN BY: Pranav Sachdeva, adv DRAWN ON: 21 February 2012 FILED ON: 24 February 2012 NEW DELHI