2G Spectrum Scam

The article discusses the most significant financial scam i.e. 2G Spectrum scam in detail. It highlights the fact that money can make people do anything. The greed for money is eventually a loss of money. Bribery is a serious offense which exists everywhere, despite having a variety of laws. In a country like India, which is the world’s largest democracy, private companies play a crucial role in the offense of bribery. They are only concerned about making their profit. This is why India follows socialism partially and partially capitalism.
Estimated Reading Time: 8 minutes

Introduction

The Greek philosopher, Aristotle, once said, “Man is a social animal.” No man can live without communication. With the evolving technology, year to year, the means of communication have been advanced. Telecommunication, which means the exchange of information or message, of any form, by the electromagnetic system, has emerged as the most prominent technology in recent times.
This article is aimed towards discussing the scam which took place in the telecommunication sector in India, which is commonly known as the ‘2G Spectrum Scam’. The article covers the strategy used in the scam, how the fraud was exposed, and who all were accused of it, the socio-legal impacts caused, the regulatory actions taken against the scam, and the brief analysis of the Supreme Court’s judgment.

Background

Just like we are surrounded by air, so are we with ‘spectrum,’[1] which is a range of electromagnetic waves emitted by a device or object, which is used as a carrier of communication. In other words, the Spectrum is the airwaves that carry data. Since it is not an invention of human beings; it has always been in its existence, it is considered as a natural resource. Humans have only discovered that it could be used for their benefits. Moreover, it is also a natural resource because of its limited availability.

According to the government of India, as the Spectrum is a natural resource of the country, nobody can freely own it. If anyone wants to make use of it, they will first have to buy it. In other words, the Spectrum is like invisible roads that are used to transfer information. If anyone wants to make use of it, they will have to buy it privately; otherwise, the data which is transmitted will not be clear. To illustrate, if a person wants to have a radio station like Big FM 92.7, he would, firstly, purchase a studio and set up. Secondly, to spread his audio across the country, he would be required to send signals through wavelengths. Different wavelengths vary with frequencies. Lastly, to send his audio to any radio, which is a thousand miles away from his studio without making the use of wires, he would require Spectrum. Accordingly, he would then have to purchase the ‘bandwidth,’[2] which is the range of frequencies upon which his data would be transmitted to all the radios across the country. The frequency is measured in hertz.

However, to make sure that a person uses his Spectrum, a central authority was required to keep a check. Otherwise, it would not be possible, for instance, to see one T.V. program at a time. Hence, the Department of Telecommunication (DoT) was established.

Also Read about Fall of Vijay Malya, the Kingfisher Scam

The facts of the 2G Spectrum Scam

In 1992, Second Generation (2G) services, which involve text messages, picture messages and multimedia messages (MMS), was launched in India at a frequency of 900 MHz. This was later increased to 1800 MHz. Different companies, depending upon their use and capacity, purchased the bandwidths.

India has 22 telecommunication zones with 281 licenses. The government of India in 2007 found that there were many 2G spectrums available. They wanted to sell it to the different companies so that they would get funds for government services. They decided to grant 122 new 2G Spectrum licenses. Accordingly, on 25th September 2007, the then Union Telecom Minister, Shri Andimuthu Raja of Dravida Munnetra Kazhagam political party, issued a press note for the applications with the deadline of 1st October 2007. Later, the cut-off date was reduced to 25th September 2007. The Department of Telecommunication (DoT) received a total of 575 applications by 46 firms.[3]

It was decided by the DoT that the license of 2G Spectrum would be sold to the companies on the ‘First Come First Serve’ (FCFS) basis instead of carrying out a free and fair auction. Moreover, the cost of these licenses was decided based on the market rates of 2001. This was very less as compared to the current market rate, i.e., of the year 2007. On 2nd November 2007, the then Prime Minister of India, Shri Manmohan Singh, wrote a letter to A. Raja to ensure fair license allocation and proper revision of fee as per the current market rates of the 2G Spectrum. Following this, on 2nd November 2007, another letter was sent to the DoT by the Finance Ministry about the same concern. However, A. Raja allegedly ignored the letters.[4]

On 10th January 2008, between 3:30 pm to 4:30 pm, the DoT sold the licenses to the companies on the first-come, first basis.

Exposure of the 2G Spectrum scam

The scam was exposed by a report made by the Comptroller and Auditor General of India (CAG) in 2010. In the report, the following points were highlighted;[5]

  1. India suffered a total loss of Rs. 1,76,000 crores due to the scam.
  2. The selling of a 2G license in 2007-08 at the market rate of 2001 was an utterly vague decision because there was a rapid growth of the telecom sector in India. Therefore, there was an increase in its demand, which resulted in the market rate to become higher as compared to 2001.
  3. Most of the private companies were informed in advance about the preponing of cut-off dates and the method of first come first serve. They were already prepared with all the paperwork so that they get the benefit. It was also found that the demand drafts were previously made by individual private companies.
  4. Companies like Swan Telecom, Unitech, and Tata Teleservices bought the license from DoT and later, at a very high rate, sold it to Etisalat, Telenor, and DoCoMo, respectively.
  5. Out of 122 licenses of 2G Spectrum, it was found that 85 of them were sold to such companies whose paperwork and other documents were incomplete. Most of them also submitted fake documents so that they could not miss their chance in the first come first serve.
  6. Moreover, certain companies purchased the 2G license without even having any relation to the telecom sector. For instance, the Swan Telecom promoters, Shahid Balwaand Asif Balwa, who originally had a business in real estate, purchased the 2G license because of its low rate.

Investigation

After the exposition of 2G scam by the CAG report, the Central Vigilance Commission (CVC) of India directed the CBI to investigate into the matter. On 10th January 2010, recordings of telephonic conversation between Niira Radia, who was a political lobbyist, and A. Raja were exposed, which was tapped by Income Tax Department. Through that, it was found that she influenced the then government for the appointment of A. Raja as Telecom Minister. This came out as a controversy that raised even more suspicion against A. Raja, and hence, he had to resign from his post.

There were 17 accused found behind his scam, including several corporate companies such as the Unitech Wireless, Reliance Telecom, Swan Telecom, etc.[6] The primary two accused were as follows;

  1. Shri A. Raja, the then Telecom Minister of India, was one of the main accused. He had the allegation of taking bribes of about Rs. Three thousand three hundred twenty-seven crores for preponing the cut-off date for the applications. This way, few companies were favoured as most of the companies got eliminated due to the shift of the deadline. He was charged with the ‘offense of criminal breach of trust by a public servant’ under section 409, IPC. Besides, he was also charged under sections 120B, 420, and 468 of IPC for the offenses of criminal conspiracy, cheating, and forgery, respectively. Lastly, he was booked under the Prevention of Corruption Act (PCA), 1988, for receiving bribery.
  2. Kanimozhi Karunanidhi, who was the daughter of the then Chief Minister of Tamil Nadu, Shri Muthuvel Karunanidhi, was another prime accused of the 2G scam. She was also charged under the same offenses as of A. Raja.

Legal actions

In February 2011, the Central Bureau of Investigation (CBI) arrested the accused persons. Later in 2012, the Supreme Court of India banned all the 122 new 2G licenses issued by the DoT. It also imposed a fine of Rs. 5 crores each on the accused companies, namely, Swan Telecom, Unitech Wireless, and Tata Teleservices.

A 1,552 page-judgment was made by the apex court. It was observed that A. Raja did fraud by favouring few companies at the cost of public interest and stated that the method used for the distribution of the licenses was unconstitutional and arbitrary.

However, on 21st December 2017, all the accused behind the scam were acquitted by the apex court due to the ‘benefit of the doubt.’ The Special CBI judge said, “I have absolutely no hesitation in holding that prosecution has miserably failed to prove any charge against any of the accused, made in its well-choreographed charge sheet.” Also, it was observed by Justice Saini, “…some people created a scam by artfully arranging a few selected facts and exaggerating things beyond recognition to astronomical levels.”[7]

Furthermore, the 2G scam was also compared to the Noida double-murder case of Aarushi Talwar and Hemraj. Where the court had to acquit the accused persons. The ratio of the judge, in that case, was that it is not deniable that the victims were brutally murdered, but due to lack of ‘sufficient evidence,’ the accused persons have to be released.[8] Similarly, in the case at hand, it was a fact that the scam had taken place, but there was no sufficient evidence to prove that, hence, the accused persons were entitled to the benefit of the doubt. 

The aftermath

After the Radia tape recording controversy, Shri A. Raja was succeeded by Kapil Sibal. Since the prosecution could not prove the accused persons guilty, he came up with a theory called ‘zero loss.’ According to this theory, he explained that there was no such loss of revenue to the government as even if the 2G licenses were distributed by auction, there were no set principles to decide the rate.

There were mixed reactions from the general public. People were mostly confused that when the prosecution failed to prove the accused persons guilty of scam, then on what basis the Supreme Court cancelled all the 122 new licenses. Due to the scam, the Indian National Congress lost faith from the people, which was evident in the 2014 elections. Subramaniam Swamy, who is an Indian politician and economist, said, “This is not a final verdict. Congress’s happiness is short-lived.”

Conclusion

The 2G Spectrum scam, which was one of the biggest financial scandals, shook the entire nation with the amount of loss it caused. It is also known as a ‘blind scam’ or a ‘scam which never happened’ as there was a lack of sufficient evidence against it. However, with a history of overruling of judgments in India, there remains a high possibility that in the future, the nation will get justice.


[1]Spectrum, Cambridge Dictionary, 2020, https://dictionary.cambridge.org/dictionary/english/spectrum

[2]Bandwidth, Cambridge Dictionary, 2020, https://dictionary.cambridge.org/dictionary/english/bandwidth

[3]Subhajti Sengupta &Suhas Munshi, 2g Scam Explained, News 18, September 2017,  https://www.news18.com/news/immersive/2g-scam-explained.html

[4]Shreya Singh, 2G spectrum scam, Scroll In, June 2020, https://scroll.in/latest/862236/2g-spectrum-scam-special-court-acquits-all-accused-in-the-case-including-kanimozhi-a-raja

[5]Bhatia, J. (2019). Crime in the air: Spectrum markets and the telecommunications sector in India. In Harriss-White B. &Michelutti L. (Eds.), The Wild East: Criminal Political Economies in South Asia (pp. 140-167).

[6] Suresh Prabhu, SC to consider bench to deal with 2G scam case pleas, D.H., December 2019, https://www.deccanherald.com/national/sc-to-consider-bench-to-deal-with-2g-scam-case-pleas-782751.html

[7]Abhinav Sekhri, India’s 2G Spectrum Case: The Scam That Wasn’t?, G. A. Blog, March 2018, https://globalanticorruptionblog.com/2018/03/02/indias-2g-spectrum-case-the-scam-that-wasnt/

[8] Akanksha Robert, Case Study- 2008 Noida Double Murder Case (Overview), LinkedIn, May 2016, https://www.linkedin.com/pulse/case-study-2008-noida-double-murder-overview-akanksha-roberts/

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