The Ministry of Corporate Affairs (MCA) has informed the Department of Telecommunications (DoT) that Loop Telecom was not an associate of the Essar Group, contradicting its 2009 report.
The MCA in a communication dated April 2011, said a probe by its regional directorate, the Registrar of Companies in Mumbai, had found that the Essar Group held only 2.15 per cent stake in Loop Telecom in September 2007 when the latter applied for a pan-India mobile permit.
The regional directorate’s report states that documents of the companies examined does not substantiate allegations that Khaitan Group, which owns Loop Telecom, had become associates of the Essar Group when it obtained mobile permits in 2007.
It also adds that Essar was a net borrower from the Khaitan group and therefore complaints that Ruias had given huge loans to Loop appeared unreasonable.
The federal investigating agency is probing if the Ruias of the Essar Group through its associates held substantial equity in Loop Telecom in violation of existing rules. Indian laws prohibit a single group, which already has more than 10 per cent stake in one mobile operator, from owning more than 10 per cent in another. Essar is a 33 per cent shareholder in Vodafone Essar.
It was only in 2008 that Essar revealed the Khaitans were the majority owners of Loop Telecom. Until then, Essar had always maintained that unspecified overseas investors controlled Loop.
The latest communication from the MCA sharply contradicts its 2009 report, where it said there were significant links and benefits arising to Santa Trading (STPL), a company that owns Loop telecom, from financial transactions, direct and indirect with the Essar Group. The MCA had then concluded that there was significant financial control (by Essar) over STPL that in turn owns 76.7 per cent of the equity of Loop Telecom. Besides, it had also pointed out that the Essar Group has invested 15.92 billion in the unsecured, non-convertible debentures of STPL.
The CBI is also probing if Essar’s investments in Loop’s controlling companies were used to bankroll its application for mobile permits in 2007.
