A week ago, the Supreme Court issued notices to the government and its various investigation and vigilance agencies to probe Pramod Mahajan’s allegedly dubious permission to Reliance Infocomm to launch its Wireless in Local Loop (WLL) without paying the appropriate license fee. Mahajan, of course, has denied the charge, but income-tax officials are intrigued that nobody asked them for details, although it is they who investigated Ashish Deora, allegedly a partner of Mahajan’s relatives in a company called IOL Broadband Limited. Deora owns several other companies that actually received one crore shares of Reliance Infocomm at a nominal one rupee per share.
Ashish Deora vanished from the media spotlight when the battle between the Ambani brothers ended in a settlement. It was assumed that the issue had died a quiet death until the Supreme Court’s surprise notice. But IT officials had got onto the investigation in the wake of the finance minister’s Rajya Sabha promise to investigate the issue.
The story of Ashish Deora’s allotment of Reliance Infocomm shares is nothing short of a fairy tale. Deora’s company pitched for a contract with Reliance Infocomm to roll out its broadband services in Mumbai. Although Deora asked for a rate of Rs 15,000 per building, Reliance Infocomm had bargained it down to a mere Rs 3,000, payable in one lump sum after 50,000 buildings were covered. Curiously, none of this was documented through a proper agreement.
He still took the deal and worked out a way to be compensated for the work through an indirect route. Reliance Infocomm owns a trust called the Ganesh Infrastructure Capital Fund (created on 30.03.2001), which is meant exclusively to benefit persons having a business, contractual and professional relationship with the Reliance group. Ganesh Infrastructure Fund decided that Ashish Deora and his project was a fit case to benefit from its largesse and agreed to compensate Deora for the difference between his quoted price and the Reliance offer price. Why Reliance should find a convoluted way to make the same payment is a mystery that the IT department did not go into.
However, its act of compensation was to sell Deora (through three companies) one crore shares of Reliance Infocomm at one rupee each. This was out of a kitty of 31.5 crore shares that had been allotted to the Ganesh Trust at one rupee per share. The transfer of Reliance Infocomm shares happened in September 2002. The extent of this generosity is evident when you consider that just two months later, in November 2002, Reliance Infocomm allotted 32 crore shares to Reliance Communication Infrastructure Ltd., at a premium of Rs 52.71.
• IT dept has probed Deora after the FM promised the Rajya Sabha an inquiry
• IT dept says Deora’s 2003-04 returns do not mention his lucrative Reliance deal
• Though Deora returned the shares, the dept wants him to cough up tax on it
More interestingly, Reliance Infocomm decided to compensate Deora without even waiting for his firm to complete the broadband rollout only because he requested an immediate transfer. The purchase was funded through borrowings from 10 finance companies through 10% redeemable preference shares. An IT report, available with this writer, notes that since Ashish Deora was dealing with the Reliance Group for the first time, it was evident that there was an unseen hand guiding every move.
The Reliance Infocomm shares allotted to Mr Deora were divided between a set of four inter-linked companies—Prerna Auto, Fairever Traders and Consultants, Anrose and Softnet Traders and Consultants, whose shareholding is neatly interlinked with one another. Later, when in February 2005 the war between the Ambani brothers had heated considerably, Ashish Deora admitted his failure to complete the job and good naturedly returned the valuable Reliance Infocomm shares to the company. Unfortunately, this has not let Deora off the hook. For one, the IT department has discovered that his tax returns for 2003-04 make no mention of his lucrative deal with Reliance. And although he returned the one crore shares that were virtually gifted to him, the tax authorities have decided to treat it as deemed income and want him to cough up tax on it.
The problem with this story is that it ends with Ashish Deora and even the IT has not been able to establish a political connection. The public interest suit would have a better chance of success if it can produce evidence of undue gratification in return for policy favours.