2G scam: Sibal begins clean up drive

NEW DELHI, INDIA: The Department of Telecom may cancel the licenses of the errant companies that got licenses in 2008 and also companies that have failed to meet the roll-out obligation even during 2006 and 2007.

Union Minister for IT and Communications, Kapil Sibal, said on Monday that the government would proceed against erring telecom companies for getting licenses by hiding and manipulating eligibility criteria. 

“The Memorandum of Association (MoA) eligibility condition and paid-up equity capital eligibility may not have been fulfilled by the applicant. Therefore on each of these counts we are issuing them show cause notices asking as to why their licenses should not be cancelled,” said Sibal.

Eligibility condition

Sibal pointed out any company applying for Unified Access Service License (UASL) should have mentioned telecom as the business area of the MoA of company.

“The requirement of any applicant must ensure that its MoA states the objective of the company to do business in the area of telecom. Those companies who did not have telecom business as part of MoA were entitled to alter the MoA,” said the minister.

“Alteration of MoA happens in two steps. First, by passing two-third resolution; this is called special resolution of the company and then getting it registered with the Registrar of the Companies and the date from the memorandum becomes effective is the date when the registrar registers it under Section 18 of the Company Act and finality of which is set-out under Section 19 of the Company Act,” he added.

The minister said that the DoT is of the belief that many companies at the time of applying for the licenses through a self certification process may not have disclosed all the facts.

“They might have special resolution passed but may have applied to Registrar much later,” said Sibal.

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Transparency issues

The minister further explained that it has very serious implication on transparency of the process as it allows some companies to get ahead of the queue on the basis of the first-come-first-serve policy.

“Those who came later may have actually complied with the requirement but were not considered for the reason that those who came earlier gave self certification that they comply with the law. This had repercussions on the process and therefore we have decided to send notice to each of these companies that why their licenses should not be cancelled,” said Sibal.

Sibal cited that there are in all 85 such cases and the DoT will look into each case separately and issue a notice in each case separately under the term of license. DoT will give telecom companies 60 days to respond.

Sibal pointed out on another aspect of paid-up share capital within MoA. According to this condition a company should have a paid-up share capital of certain amount depending on the category of the license.

Sibal mentioned that Comptroller and Auditor General (CAG) report is an opinion and that opinion will have to be demonstrated to be correct in the light of the notices and in the light of the responses of the licensee.

The minister pointed out another separate issue of the telecom companies failing to meet the roll-out obligations which can lead to the cancellation of license of the errant telecom companies.

“We want to make sure that the licensee is committed to achieve certain objective in the terms of license condition. The roll out obligation is an important part of the license condition and there we have found 119 instances where companies have failed to meet out the roll out obligation. This is not limited to 2008 license and but also goes back to year 2006. We have found 81 licenses are common with respect to the eligibility condition and 38 are over this condition,” said Sibal.

Sibal mentioned that along with notices to the companies for failing to meet the roll-out obligation, the DoT will soon issue notices to licensee for not honoring their roll out condition.

“Liquidated damages clause will be imposed. In the event the licensee's roll out obligations have not been met within certain number of weeks under the license condition then in such event they are liable for cancellation as well,” said Sibal.

According to license conditions, a licensee has to roll out services in at least 10 per cent of District Head Quarters (DHQs) within one year and 50 per cent of DHQs within three years from the date of allocation of the start-up spectrum.

Roll-out testing by TERM (Telecom , enforcement , resource and monitoring) cells of DoT is in progress.

When asked about the companies that are likely to get showcause notice R.Chandrashekhar, Secretary, Department of Telecom mentioned to CIOL that these are the same companies that have been mentioned in the CAG report.

“We are yet to study each case and then we will be in a position to know the exact companies that will get notice,” said Chandrashekhar.

On the issue of spectrum pricing on which the CAG has made the estimate of Rs 1.76 lakh crore loss to the national exchequer, Sibal expressed that he would love to have a debate in parliament on this issue with the opposition.

Sibal also mentioned that the DoT has referred the matter to the Ministry of Corporate Affairs to find out and investigate if there was any front company involved in getting license with undue advantage.

It was tragic day for Union Minister Sibal as his mother Kailash Rani Sibal passed away in the same morning. Despite all odds, the minister did not cancel the press meet to make the announcements on the action being taken at his ministry.