Sunil Jain: Meet Infocomm's new lawyer, GoI!

This is probably bad news for my lawyer friends, some of whom managed to buy fancy cars from their fees in the last round of telecom wars, but there may not be such rich pickings any more in the latest round between Reliance Infocomm and the government along with the two telecom PSUs, BSNL and MTNL.

The reason is simple: since the government is doing its best to weaken its own case, Reliance may not need too many top-notch lawyers to defend it against the allegation that it has been illegally routing international calls and avoiding paying hundreds of crore rupees as access deficit charges (ADC) to BSNL and MTNL""under the law, Rs 4.25 has to be paid per minute of any international call that either originates or terminates in the country and this has to be paid to fixed-line operators such as BSNL and MTNL, who own over 95 per cent of all the country's fixed lines.

Take the original notice of October 4 that the department of telecom (DoT) sent to Reliance on its actions.

Apart from the fact that this does not invoke the most important section of Reliance's international long-distance licence (Section 17.7), which says the company has to comply with the telecom regulator's orders on various issues such as ADC, the notice invokes sections that simply do not exist!

It invokes a clause 26.5 of the international long-distance licence, but there is no such clause. Nor, for that matter, is there a clause 26.6 or a clause 26.7.

Given the kind of investigation that was done to nail Reliance, such shoddiness is truly shocking. The DoT's investigators got people to make calls from Reliance's US network to local numbers in India, and established that when the calls came on these numbers, the caller line identification (CLI) was changed to show the calls were from local Reliance numbers.

The DoT's investigation wing then asked Reliance for the names and addresses of the owners of these phones, only to be told that there were no such phone numbers in Reliance's records. After some more investigations of a similar nature, a bigger list of 500 such numbers was given to Reliance at one go.

Reliance then said it was using the series 30390000 to 30399999 (that's 30,000 numbers in Mumbai, Chennai, and Kolkata!) for a home country direct (HCD) service""an equivalent of the old called-party-pays system, in which the person receiving the call pays for it""and so there was no ADC to be made.

The DoT pointed out that ADC had to be paid on all calls, regardless of whether they were incoming or outgoing. And since changing the CLI was illegal, and the DoT has filed criminal cases against over 200 persons for such illegal calls over the past several years, the criminal prosecution of Reliance was recommended by the vigilance department.

Yet, as the file went from one senior official to another, the only issue talked of was a monetary penalty""indeed, when the DoT went in for a legal opinion, it never once asked if any criminal prosecution was called for or whether the company's licence should be cancelled.

And when the file reached Telecom Minister Dayanidhi Maran, he did one better. He recommended a fine of Rs 150 crore, and argued it would be wrong to cancel the company's international long-distance licence as a large number of subscribers would be hurt!

Surely the minister would have known Reliance doesn't need to have an international long-distance licence for its subscribers in India to be able to make/receive international calls""all that would happen, as happens in the case of companies like Hutch which don't have such licences, is that when an international call is made, it gets routed through some other service provider.

Maran was so considerate that he even said huge investments made by the company would get affected if the licence was cancelled! It must be added here, the penalty of Rs 150 crore is based on the maximum permitted under Reliance's mobile phone licence and is not based on the ADC Reliance has evaded paying.

Estimates of this run into around Rs 1,000 crore, though no one really knows since (surprisingly) Reliance has not been asked to make public the accounts of its US subsidiaries/affiliates that have details of the calls made/received"" TRAI, which is the only body that can get Reliance to do this, has washed its hands of the matter (see "Rational Expectations," October 11).

What takes the cake, of course, is what followed subsequently. On December 1, several MPs asked the government about the case. In one reply to former opening batsman Navjot Singh Sidhu we're told it was Rs 350 crore since 1998-99 till date.

Since the ADC avoidance by Reliance during the current financial year cannot possibly be more than this, it is surely curious that BSNL and MTNL have issued notices seeking recoveries of over Rs 550 crore from Reliance's illegal call routing!

In any case, the government's estimate of Rs 350 crore runs contrary to VSNL's estimate (published in its latest annual report signed by government directors on its board) that the grey market is around Rs 2,000 crore annually.

With such shoddy follow-through on the DoT's part, and such contradictory statements by various arms of the government, Reliance's counsel are going to have a field day.

And since it is TRAI and not the DoT that has the statutory powers to conduct investigations into such ADC violations, the case may even have a serious technical lacuna.

suniljain@business-standard.com