Explained: CBI Special Judge O.P.Saini’s Judgment in 2G Spectrum Cases [Part -II]


24 Dec 2017 5:58 AM GMT

  • Explained: CBI Special Judge O.P.Saini’s Judgment in 2G Spectrum Cases [Part -II]

    The December 21 judgment of CBI Special Judge, O.P.Saini, has been a pleasant surprise to the accused.  However, it has shocked many that the Judge found no one guilty for the so-called multi-crore scam, which led to a political upheaval, a Supreme-court monitored investigation and trial, and was a prominent issue in the 2014 general elections, resulting in the change of Government at...

    The December 21 judgment of CBI Special Judge, O.P.Saini, has been a pleasant surprise to the accused.  However, it has shocked many that the Judge found no one guilty for the so-called multi-crore scam, which led to a political upheaval, a Supreme-court monitored investigation and trial, and was a prominent issue in the 2014 general elections, resulting in the change of Government at the Centre.   LiveLaw tries to answer some questions which the judgment may possibly give rise to.

    This is the Second Part of the series. Read the First Part Here

    Q: The Judge is also critical of absence of cross-examination of witnesses on crucial points.  Is the prosecution to be blamed?

    A: The prosecution case is that priority for dual technology applicant was to be fixed from date of payment.    PW, R.J.S.Kushvaha gave up the case of the prosecution, but he was neither re-examined or cross-examined by the prosecution.  The prosecution, therefore, is bound by his deposition.

    The Judge cites a Supreme Court judgment to say that a witness must be cross-examined by his own party, and not necessarily by an opposite party.  It is because it is impossible for the witness to explain or elaborate upon any doubts as regards the same, in the absence of questions put to him with respect to the circumstances which indicate that the version of events provided by him, is not fit to be believed, and the witness himself, is unworthy of credit.  Thus if a party intends to impeach a witness, he must provide adequate opportunity to the witness in the witness box, to give a full and proper explanation.  The same is essential to ensure fair play and fairness in dealing with witnesses, the Judge elaborates further.

    Q: What does the Judge say regarding the role of the accused during the trial?

    A: An accused is not supposed to prove his case beyond reasonable doubt.   He has just to explain his conduct in reasonable and acceptable manner.   Thus, he did not find any merit in the submission of prosecution that the amendment of licence was delayed for any conspiratorial reasons under the pretext of pending dues.

    Q: The Judge seems to have rejected instances of conspiracy, in the absence of legally admissible evidence, right?

    A: In paragraph 1284, he refers to leasing out of his house by R.K.Chandolia to STPL, ShahidBalwa and Vinod Goenka.  Chandolia rented out his residential house C-6/39 2nd Floor, Safdarjung Development Area, New Delhi to Associated Hotels Private Limited, a sister concern of DB Realty Limited on March 3, 2009.   Defence denied that Associated Hotels is a sister concern of DB Realty.

    The judge noted that even if the prosecution claim is correct, merely renting out the property does not show anything more than an ordinary relationship of landlord and tenant between Chandolia and Shahid Balwa.   It is not indicative of any conspiracy by itself, unless supported by some other legally admissible evidence, which is missing in this case, the judge noted.

    Prosecution alleged that after allocation of spectrum, both STPL and Unitech Group of companies offloaded their shares.   Etisalat (Mauritius) Limited subscribed to 11,29,94,228 shares of STPL on December 17, 2008 for a consideration of about Rs.3228 crore.  Genex Exim Venture Private Limited also subscribed to 1,33,17,245 shares of STPL for Rs.380 crore.   The prosecution alleged that Genex Exim Venture Private Limited also subscribed to 1,33,17,245 shares of STPL for Rs.380 crore.   Dynamix Balwa Group promoted by Shahid Balwa and Vinod Goenka earned about Rs.2818 crore, as Tiger Trustees Limited held by them was having 90% equity of STPL.

    Unitech Group companies also offloaded their shares to Telenor Asia Private Limited, which agreed to infuse extra equity in the companies for a 66.5 per cent stake.   By offloading the shares of the companies, the promoters of Unitech earned Rs.2342 crore.

    In Paragraph 1289, the Judge says that at that time, offloading of shares or issue of fresh equity was not prohibited by any rule or guideline.  There was no lock-in period prescribed at that time by any rule or guideline, he adds.

    The Judge thus concluded that there is no merit in the submission of the prosecution that TTSL was wrongly denied dual technology spectrum in Delhi service area and the same was equally wrongly allocated to STPL.

    It is the case of the prosecution that STPL belonged to Reliance ADA group, an existing licensee, on the date of application, that is, on March 2, 2007.  RCL, a company of Reliance ADA Group, was operating on CDMA standard.  It was alleged that STPL filed applications in 13 service areas where Reliance ADAG/RCL had no GSM spectrum, so that it can avail the facility of GSM spectrum also without any permission from DoT.   Therefore, it was in violation of clause 8 of UAS guidelines.   Applications were filed by A.N.Sethuraman, an employee of Reliance ADA group, and PW2.

    Sethuraman deposed that though he was on the payroll of Reliance ADA Group (P) Limited, he signed the applications on the instructions of Anand Bhatt, who introduced himself over phone as one of the directors of M/s Swan Telecom (P) Limited.

    The prosecution case was that on March 2, 2007, when the applications for 13 service areas were filed by STPL, it was an “Associate” company of Reliance Communications Limited/Reliance Telecom Limited (RTL).   Since these companies were already operating telecom licences in the 13 service areas, STPL was not eligible to apply for fresh UAS licences, being an “Associate” of the aforesaid two companies.

    As per clause 8 of Guidelines for Unified Access Service Licence dated December 14, 2005, an “Associate” company of an existing licensee could not apply for another licence in the same service area.   Prosecution also alleged that accused Hari Nair misrepresented to the DoT that Tiger Traders (P) Limited (TTPL) which owns 90.1 per cent equity in STPL was owned by Indian Telecom Infrastructure Fund, held by Ashok Wadhwa Group of Companies.  This was false, as the company was held by Reliance ADA group, and was also funded by it.  Hence STPL was ineligible.

    In response to this, the Judge cites an observation by the SC:  “A party cannot be permitted to “blow hot and cold”, “fast and loose”, or “approbate and reprobate”.   This applies to a witness also, more so, Ashok Wadhwa, he says.

    The judge then cited State of Gujarat v Jayrajbhai Punjabhai Varu,(2016), to hold that the burden of proof in criminal law is beyond all reasonable doubt.  The prosecution has to prove the guilt of the accused beyond all reasonable doubt and it is also the rule of justice in criminal law that if two views are possible on the evidence adduced in the case, one pointing to the guilt of the accused and other towards his innocence, the view which is favourable to the accused should be adopted.

    Facts, according to the judge, falsify the prosecution case that STPL was transferred to DB group after RCL got in-principle approval for dual technology on October 18.  Defence argued that STPL was an independent company, controlled by DB group on the date of filing of applications, that is, on March 2, 2007.   The defence also argued that no one knows as to when and at which stage a company would be deemed to be an “Associate” of another.  It is the case of the defence that in such an uncertain situation, how can people be held responsible and criminally prosecuted for its violation?

    The end result, according to the Judge, is that there is no definite meaning of the word “Associate” and everybody is interpreting it as per his own understanding, imagination and whims.  The situation is further compounded by the fact that DoT officials were deliberately not questioned by the prosecution as to its meaning and ingredients when they were in the witness-box.   However, at the bar, the SPP endeavoured hard to assign it such a meaning with the help of AS-18 and other documents that accused can be held in violation of it.   This is not a fair approach, according to the judge.  The term has no definite meaning.  No one can say when one acquires character  of “Associate” in the context of guidelines dated December 14, 2005, he held.

    The term is so wide and open-ended that it could include any entity by citing any criteria like common equity, debt funding, sharing of personnel etc.  It could lead to a situation where the governing rule would be “Do as you please”.  Clause 8 is a huge quicksand and ill-suited to administrative fairness. It is ruinous of rule of law. Meaning of clause 8 is not clear to anyone.  DoT took no steps to rectify the situation.

    When the SPP asked the Judge to interpret the clause, the Judge said the view taken by the accused was reasonable one as it only restricts equity investment beyond 10 per cent or more and nothing else.  People cannot be held guilty for violating a rule which has no definite meaning and suffers from the vice of vagueness;  Clarity and certainty are essential attributes of law, which include rules and guidelines also.  To give a definite meaning by interpretation to such a vague clause and to hold the accused guilty for its violation would not be fair. There can be no convenient interpretation which may suit a particular party.  The interpretation has to be reasonable, the judge says.

    The conclusion is that it cannot be said that STPL violated clause 8 for being an “Associate” of RCL, an existing licensee.

    Clause 8 is in the Guidelines dated 14.12.2005.   It is logical that a company should be compliant on the date of application.  On  December 10, 2007, the prosecution alleged a letter was written on the direction of Raja, to require that applicant company should be compliant  on the date of application.   The prosecution, when questioned how could Raja be considered as a conspirator with STPL, explained that Raja always endeavoured hard to sound fair, but was never fair and this letter was just a gloss to look fair and law abiding.

    The judge said that the letter spoils the case of the prosecution. If it was written on the asking of Raja then, he could not be faulted as he was directing that the company should be compliant on the date of application. If it was not written as per his direction, it amounts to change of guidelines midway.

    Prosecution alleged that (1479) TTPL and STPL were Reliance companies on the date of applications and that TTPL did not supply the detail of its promoters as on date of application and this issue was ignored by Siddhartha Behura and A Raja in conspiracy with Shahid Balwa and other accused.   “However, there is no material on the file indicating any conspiracy” says the judgment.

    Q: The Judge is not convinced about the relevance of the doctrine of lifting the corporate veil in this case, right?

    A.Yes. It was the case of the prosecution that STPL was a company of Reliance ADA group, and it was owned and controlled by this group.  In order to obtain GSM spectrum, Reliance ADA group filed applications for licences in 13 service areas and for that it used STPL as a tool.    Therefore, the prosecution urged the Judge to lift the corporate veil in order to find out as to who was actually behind STPL in filing the applications.

    Defence argued that on the date of filing of applications, STPL was a company of DB group and, as such, there is no concealment of the actual owners of STPL.   When the reality is as clear as daylight, where is the question of lifting the corporate veil, the defence asked.

    The doctrine of piercing the veil allows the court to disregard the separate legal personality of a company and impose liability upon the persons exercising real control over the said company.  But this principle should be applied in a restrictive manner, only in scenarios wherein it is evident that the company was a mere camouflage or sham deliberately created by the persons exercising control over the company for the purpose of avoiding liability, the Judge opined. The intent must be to seek to remedy a wrong done by the persons controlling the company, he further clarified.

    The judge thus said that corporate veil can be lifted only in case of impropriety by a company with a view to avoid legal liability.  Since there is no evidence on the record that on the date of filing of applications STPL belonged to Reliance ADA group, and that DB  group was in control of the company, there is no need to lift the corporate veil, he reasoned.

    It is the case of the prosecution that despite being asked by the Prime Minister  to revise the entry fee, Raja did not revise it and also avoided making reference to revision of entry fee in his letter dated November 2, 2007 to the PM.  On the other hand, the defence has refuted the argument submitting that TRAI nowhere recommended  revision or indexation of entry fee.  As per Cabinet Note, 31.10.2003, entry fee was to be fixed by DoT as per the recommendations of TRAI.  Raja had stated in the letter dated 2.11.07 that auction of spectrum was not recommended by TRAI.  TRAI is an expert body and DoT has to act as per its recommendations.  The judge concurred with the defence arguments on this issue.

     This argument is also not supported by any evidence, according to the Judge.  “If two members of Parliament, belonging to same party, meet each other, by itself, there is nothing wrong in that. Prosecution has no cogent evidence at all, to link Raja with transfer with transfer of money”, the Judge reasoned.

    Prosecution alleged that for transfer of money from Dynamix Realty to Kusegaon Fruits no formal agreement was executed, and the latter is a shell company with no history of business.

    The amount of Rs.200 crore was transferred immediately after the investment was received in STPL on December 17, 2008 from Etisalat.  Rate of interest was less than the market rate and no proper securities were taken for the loan.

    Money moved at an  unusual speed from one entity to another at a very proximate time.

    In a case of political corruption, hardly any direct evidence would be available, prosecution argued, and the Judge concurred.

    But the Judge was clear that high profile nature of a case could not be used as a ground for holding people guilty without legal evidence.  Lack of commercial prudence in execution of documents cannot be used as a ruse to hold people guilty of corruption, he added.  The transaction was between private entities and in a private entity, rate of interest, execution of securities, due diligence, etc., depend upon risk aversion or risk friendly attitude of the persons concerned.   Objectivity and rationality are not always hallmark of private commerce.  In case of close relations between the parties, risk mitigation procedures can be lowered or even can be given complete go-by.   Lack of these attributes in a transaction may, in a specific circumstance, indicate wrongdoing but for criminalizing them specific evidence is always required, he reasoned.

    Prosecution cannot absolve itself of its burden to prove its case by piggy-riding on the so-called high magnitude of the case and media hype.  At the final stage, legally admissible evidence is required, he suggested.

    There is an additional circumstance against the accused to the effect that the refund of Rs.200 crore had occurred immediately after registration of the instant case and on CBI taking various steps in the investigation including calling Raja for interrogation.  In the absence of any other evidence, this is also in the realm of conjectures and remote possibilities and requires no detailed discussion, he added.

    Imperfect documentation does not indicate payment of illegal gratification. Perfect documentation also would not make a transaction of illegal gratification clean. Everything depends upon the facts of the case.  Link with public servant must be proved by legal evidence, he further reasoned.

    Allocation of spectrum in Delhi service area was approved by Raja on August 26, 2008.  But the first tranche of money of Rs.10 crore moved only on December 23, 2008.  How to link the two is a huge problem, states the Judge. Things remain in the realm of conjectures and surmises, he says.

    Q: Is there a single instance of the Judge supporting the Prosecution version at all anywhere in the judgment?

    A: There is one. In Paragraph 1728, the Judge disagreed with the defence’ contention that the sanction for prosecution of R.K.Chandolia was not properly granted.

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