Shahid U Balwa (in pictture), one of the promoters of the leading real estate company, DB Realty, as well as the controversial Swan Telecom (now Etilisat DB Telecom), has been questioned by officers of the Central Bureau of Investigation over Wednesday and Thursday in New Delhi, reliable sources told this correspondent.
Balwa, who is among the richest builders in India, was quizzed about this week's 'kickbacks for loans' controversy involving leading bankers and also the telecommunications spectrum scandal that has paralysed Parliament for ten days.
Of late, Swan Telecom has been in the news for the wrong reasons. In January 2008, the company was among the privileged firms that jumped the queue for licences with spectrum that were allotted by the Department of Telecommunications, DoT, which was then headed by Union Minister for Communications and Information Technology Andimuthu Raja.
According to the report of the Comptroller & Auditor General of India presented in Parliament on November 16, Swan was among the firms that were not eligible to receive licences in the first place because it had 'suppressed' the fact that it had altered its memorandum and articles of association increasing its share capital on May 1, 2007, a day before it applied for a licence.
The CAG found other discrepancies in the company's statements to DoT relating to deposit of stamp duties and alleged that Swan had submitted a 'false' certificate from its company secretary.
The CAG also came down hard on the company for its association with Reliance Telecom which had a 10.71 per cent stake in Swan (including holdings of preference shares) since the latter was operating in the service areas for which Swan had applied for a licence which was against DoT's guidelines.
Government auditors also found that the e-mail ID of the registered office of Swan Telecom was shown as email@example.com
Hari Nair was a company secretary of one of the companies linked with the RelianceAnil Dhirubhai Ambani Group.
Nair had given a certificate stating in January 2007 that a company called Tiger Traders held the shares of Swan (then called Swan Capital) as trustees of India Telecom Infrastructure Fund and that these corporate beneficiaries were not part of ADAG.
The CAG, however, raised doubts about the intention of Reliance Telecom to exercise control over a company incorporate a few months earlier.
Swan Telecom was renamed Etisalat DB in September 2008 after Etisalat, based in the United Arab Emirates, picked up a 45 per cent stake in the company $900 million.
The CAG pointed out that DoT did not have any mechanism to verify the correctness of the shareholding pattern of Swan and should have hence referred it to the ministry of corporate affairs as advised by DoT's finance wing.
However, no reference was made to the ministry of corporate affairs and, instead, Swan was given an opportunity to resubmit a revised shareholding pattern in December 2007, nine months after its application for a licence, by which time the company declared that Reliance Telecom had divested its entire stake in the firm.
'This was accepted by the DoT and Swan was given the benefit of seniority from the date of their initial application, that is, March 2007,' the CAG said.
As Swan Telecom did not meet the eligibility criteria on the date of application, its application should have been rejected by DoT and the company should have been directed to apply afresh.
Even if it was to be considered eligible on the basis of its earlier application, the date of priority based on first-come-first-served basis should have been revised from March 2007 to December 2007 to ensure fairness.
'Had it been so, the company would have been out of the race as the DoT processed only those applications which were received up to September 25, 2007,' the CAG noted.
The family of Balwa, one of the promoters of Swan Telecom, has been in the real estate business for nearly a century. The family moved from Gujarat to Mumbai and set up restaurants before becoming major property developers.
The Balwa family teamed up with the Goenka family, including Vivek Goenka, to set up the Dynamix Balwas (DB) real estate group.
Forbes magazine estimated Balwa's net worth to be $1 billion (Rs 50 billion) placing him among the 50 richest persons in India.