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BW Businessworld

2G: DoT Approaches Law Ministry

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The Department of Telecom has sought the opinion of Law Ministry on whether Loop and Swan are associate companies of Essar and Reliance Communication respectively in the wake of the controversy over cross holding shares in telecom companies.

The DoT, which is examining complaints against Loop Telecom Pvt Limited and Swan Telecom Pvt Limited relating to the alleged violations of guidelines in grant of Spectrum, said the term "associates" was not explained while granting the Spectrum in 2008.

Besides the Law Ministry, the DoT was also planning to approach the Competition Commission of India in connection with the matter, according to official documents.

The CBI has been contesting the claims of Essar and Reliance saying that both the companies held more than 10 per cent of shares in Loop and Swan when the spectrum was allocated to them, a charge rebutted by both the companies.

In its letter, the DoT asked the Ministry of Law and Justice to kindly arrange or advice the meaning or definition of the term "associate" to enable the department to take further action in the matter.

CBI is also seeking opinion of the Law Ministry on a recent report by the Ministry of Corporate Affairs which said that Loop was not an associate of Essar group at the time of grant of 2G licences to it, officials in the agency said.

In a 2009 report, the MCA had said that Essar has 9.9 per cent stake, while in its recent communication it said Essar's stake was just 2.15 per cent. According to licence norms, cross-holding of less than 10 per cent is permisible.

The CBI, in its status report filed in the Supreme Court, had questioned MCA's two different versions. The CBI is investigating whether Essar used Loop as a front company to corner spectrum in violation of the guidelines.