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Circumventing Institutions: Did Chidambaram Subvertthe Foreign Investment Promotion Board?JAI BHATIA, ADVAIT RAO PALEPU

Vol. 52, Issue No. 24, 17 Jun, 2017

Jai Bhatia (jai_bhatia@soas.ac.uk) is a PhD student at the School of Oriental and AfricanStudies, University of London. Advait Rao Palepu (advait.palepu@gmail.com) is anindependent researcher.

The raids on premises connected to former Union Finance Minister PalaniappanChidambaram and his son Karti Chidambaram have attracted attention because of theallegations by the Central Bureau of Investigation, the Enforcement Directorate andBharatiya Janata Party Member of Parliament Subramanian Swamy that the functioning ofthe soon-to-be defunct Foreign Investment Promotion Board was sought to be subverted.One major accusation against Chidambaram is that he manipulated the working of the FIPBto help the former Communications Minister Dayanidhi Maran in the Aircel–Maxis case. TheEPW presents for the first time how this unusual deal was structured in a convolutedmanner using preference shares.

By World Economic Forum [CC BY-SA 2.0], via Wikimedia Commons

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On 16 May, the Central Bureau of Investigation (CBI) conducted search and seizure raids infour cities on the homes and offices of former Finance Minister Palaniappan Chidambaram’sson Karti Chidambaram. These raids were related to a probe by the CBI on a foreigninvestment approval granted to the Peter and Indrani Mukherjee owned INX Media by theForeign Investment Promotion Board (FIPB). This clearance, it has been alleged by the CBIand others, was illegally obtained by the company. Comparable allegations have also beenmade about the clearance that was given by the FIPB for the acquisition of India’s Aircel byMalaysia’s Maxis in 2006. In both cases the principal allegation is that Chidambarammisused the power of his office as union finance minister while granting FIPB approvals forforeign investments in Indian companies. It has further been alleged that Chidamabaram’sson Karti benefited from these companies, allegedly for his ability to facilitate the grants ofFIPB clearances. An unpublished report drafted in the office of the Comptroller and AuditorGeneral, (CAG) available with the EPW, traces the corporate structure of Maxis’ acquisitionof Aircel in 2006, and details how existing rules and procedures were allegedly violated bythe finance ministry while approving that investment. Chidambaram has repeatedly deniedthese allegations in the media.

In 2006, the Malaysia-based Maxis Group acquired a 99.3% financial stake in Aircel Limitedin violation of the 74% upper limit on foreign direct investment (FDI) applicable to thetelecommunications sector at the time. The investment amounted to a total of ₹3,514.45crore. Under the then prevailing foreign investment rules, for investments in excess of ₹600crore a review was to be conducted by the FIPB and its recommendations were to beforwarded to the Cabinet Committee on Economic Affairs (CCEA) for a final decision.However, in this case, the Ministry of Finance, headed by Chidambaram, received theFIPB’s recommendations and approved the investment. The file never went to the CCEA.The approval was also delayed for an unusual length of time, on the basis of which theBharatiya Janata Party (BJP) raised a ruckus in Parliament in May 2012. Its Member ofParliament Subramanian Swamy alleged that the Aircel–Maxis deal received the requisiteFIPB approvals only after Chidambaram’s son Karti’s company received a 5% equity stake inAircel Ltd. That is, the clearance for the foreign investment was allegedly delayed byChidambaram so that his son stood to gain from an investment deal as an Aircelshareholder.

A comparable but technically different caseis that of INX Media—a company formerly ownedby Peter and Indrani Mukherjea. The company had sought the approval of the governmentto receive a tranche of foreign investment to the tune of ₹4.62 crore, and a further amountto the tune of 26% of the company’s issued and outstanding equity share capital in order tomake a “downstream” financial investment in subsidiary companies. However, the FIPBapproved only the ₹4.62 crore, turning down the proposed downstream investment.However, as per the first information report (FIR) that forms the basis of the CBI’sinvestigation, INX in fact received foreign investment in excess of ₹305 crore violating the

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FIPB’s order. It went on to make the downstream investments.

The CBI’s FIR also alleges that Karti’s firm Chess Management Services was hired by INX to“resolve” the issues before the FIPB and received ₹3.5 crore for its services. Subsequently,another FIPB approval was granted, which regularised the entire amount that INX Mediahad received as foreign investment. According to the FIR, INX Media reached out to Karti inorder to resolve the problem by “influencing the public servants of the FIPB unit of (the)Ministry of Finance by virtue of his relationship with the Finance Minister.”

How is it that in the case of both companies, INX Media and Aircel–Maxis, the total foreigninvestment received was in excess of the quantum of investment approved? How did thecompanies receive foreign investment in excess of the approved quantum? Did thecompanies have special ways and methods to bypass procedures or subvert the existingsystem?

An unpublished report of the CAG sheds light on this area of foreign investment regulationsand transparency norms. The CAG report looks specifically at the Aircel–Maxis case, andillustrates the detailed corporate structure of Aircel Ltd prior to its acquisition by the MaxisGroup. The report also highlights how a loophole in the regulations enabled the MaxisGroup to get away with acquiring a financial stake to the extent of 99.3% in Aircel, whilehaving received FIPB approval only for an equity investment worth 74% of Aircel. Thereport states that the Finance Ministry, the Department of Telecommunications (DoT), andthe Department of Industrial Policy and Promotion (DIPP) repeatedly failed to enforce theprevalent FDI and telecom licensing rules, despite being well-aware of the regulationsrelating to foreign investment approvals.

Aircel–Maxis: A Legal History

The CBI filed a charge-sheet on 9 December 2016 against Dayanidhi Maran, his brotherKalanithi Maran, Ralph Marshall, T Ananda Krishnan, Sun Direct TV Pvt Ltd, Astro All AsiaNetworks Plc, UK, Maxis Communications Berhad, Malaysia, South Asia EntertainmentHoldings Ltd, Malaysia, and against the then Additional Secretary (Telecom), the late J SSarma. They were charge-sheeted for alleged offences punishable under section 120-B(criminal conspiracy) of the Indian Penal Code (IPC) and under relevant provisions of thePrevention of Corruption Act. The Maran brothers were accused of accepting kickbacks tothe tune of ₹740 crore through the Aircel–Maxis deal by allegedly “arm-twisting” Aircel’sformer chairman C Sivasankaran to sell the company.

In a separate but related money laundering case, the Enforcement Directorate (ED) charge-sheeted the Maran brothers, Kalanithi Maran’s wife Kavery, the Managing Director of SouthAsia FM Ltd (SAFL), K Shanmugam and Sun Direct TV Pvt Ltd (SDTPL), as the accusedunder provisions of the Prevention of Money Laundering Act (PMLA). The ED’s SpecialProsecutor N K Matta stated that the total proceeds of the crime amounting to ₹549.03crore and ₹93.55 crorewere received by SDTPL and SAFL respectively—companies

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allegedly controlled by Kalanithi Maran, through a slew of Mauritius based entities(Business Standard 2017).

What is of interest in the proceedings of the case so far is the absence of T AnandaKrishnan—Chairman of Maxis Communications Berhad, Malaysia—and Augustus RalphMarshall, a senior Maxis executive, before the special CBI court set up to handle casesrelated to the 2G (second generation telecom spectrum) scam. Noting their absence, theSupreme Court on 6 January 2017 reprimanded both and issued summons tothem—ordering their appearance before the special court on 3 February 2017—failingwhich, the court was ready to consider the cancellation of Aircel’s 2G licences. The twoforeign nationals did not appear in court that day. The Chief Justice of India J S Khehar saidthat the company (Maxis Berhad) “cannot use the national resources of the country andevade the process of law” (Soni 2017). As the case progressed over the following months,neither did the prosecution provide any definite evidence that convinced the court ofwrongdoing allegedly committed by the accused nor have Krishnan and Marshall deposedbefore the court in India.

The Supreme Court has not acted on its threat. Instead, on 3 Februrary, the Court agreed tohear the plea of a consortium of 12 banks led by the State Bank of India (SBI), all of whomhave lent money to Aircel. Members of the consortium included SBI, Punjab National Bank,Bank of Baroda and Canara Bank. SBI, in its plea to the Supreme Court, stated that it wouldbe “severely” affected if the Court restrained its revenue stream by cancelling Aircel’s 2Glicense. The Attorney General of India Mukul Rohatgi, representing the banks, told theCourt that the financial exposure of the banks was in excess of ₹20,000 crore and that, “anyorder on 2G airwaves could have an impact on the creditors.” The banks assuaged concernsof the Court that “there [was] no occasion for any benefit being passed on to (majorityMalaysian stakeholder) Maxis or any persons as all amounts are to be deposited with SBI forbenefit of lenders.” The banks added that “no payments by way of dividends, profits orotherwise can be made to any of the shareholders of Aircel or Maxis unless all debtservicing obligations are met.”

Aircel–Maxis owes banks like SBI ₹12,627 crore and has foreign currency debts worth ₹595crore, and bank guarantees and letters of credit worth ₹3,232 crore. Any revenue generatedby Aircel through the use of its 2G licenses is the creditor’s “principal security,” whichmeans that Aircel–Maxis’ 2G licenses are the primary means by which SBI and other banks,as well as foreign lenders, can have their investments or debts serviced. Although the Courthas subsequently barred the transfer, or sale, of Aircel–Maxis’ 2G airwaves to a third-party,it has sent instructions to the DoT, to firstly ask Aircel to notify its 40 million customers toprovisionally switch to another telecom operator, and secondly asked the DoT to prepare fora re-auction of the same spectrum in case an adverse order such as one recommending thecancellation of Aircel–Maxis’ 2G licenses is issued. Given that the case has not concludedand a final order is awaited, it is difficult to anticipate how the court is likely to act withregard to its earlier threat of cancelling licenses.

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However, on the day that the Supreme Court was hearing the arguments of the consortiumof banks, the special court hearing the two cases pertaining to the Aircel–Maxisinvestment—one filed by the CBI in 2011 and another filed by the ED in 2012—dropped allthe charges against the accused in both cases. The Special CBI Judge O P Saini, stated thatthere was no concrete evidence to prove the allegations of wrongdoing against the Marans,and that “contradictory oral statements” given by witnesses in the case were not acceptablelegally. He said in his order: “This is a dangerous trend. If such practice is followed,anybody and everybody in government can be made to face prosecution” (Economic Times2017).

The ED subsequently moved the Supreme Court, challenging the order of the special courtthat dropped all the charges levied against both Kalanithi and Dayanidhi Maran. However,the ED chose not to file a proper appeal with the apex court. Instead, the Special PublicProsecutor (SPP) Anand Grover moved the Court hoping that the bail bonds for the Maranbrothers would not be executed and that the attached properties of the accused would notbe released. A procedurial issue was raised by the court. The bench asked the SPP why hedid not approach the Delhi High Court with a revision petition. But Grover contended thatbased on earlier orders of the apex court, his understanding was that only after the finalorder in the 2G cases was passed could either of the litigating parties approach the highcourt. Until the final court order, all the interim orders pending completion of the trialwould have to be dealt with by the Supreme Court, according to Grover (Press Trust of India2017a). However, the Court refuted Grover’s argument stating that “this is the final orderand it can be said trial is closed.” The bench headed by Chief Justice Khehar was not inagreement with the SPP, stating that the discharge of the accused meant that this case wasnot related to money laundering as alleged by the ED. The court stated that “the simplelogic is that this money (₹742.58 crore), considered to be that of laundering, is not found tobe that of the proceeds of the crime.” A questionnaire was sent by the EPW to the SPP in theAircel–Maxis case. Anand Grover, in his response, chose not to comment, stating“unfortunately as I am in the matter and the matter is sub-judice I am not at liberty todiscuss these issues with the press.”

On 8 February 2017, SPP Grover withdrew his plea challenging the special 2G court’s orderdischarging the Maran brothers and others in the Aircel–Maxis case. Two days later, on 10February, BJP MP Swamy moved the Supreme Court seeking a probe into the role allegedlyplayed by Chidambaram in the Aircel–Maxis deal. When the application was brought beforethe chief justice, he gave Swamy two weeks to furnish concrete material. Justice Kheharsaid “show us material indicating that the then finance minister was privy to the newinvestment rule. We are ready to issue notice to the smallest and also the biggest person,but there must be material to support such claims.” (Mittal 2017)

In his application to the Court, Swamy submitted that FDI of over ₹600 crore into Aircel byMaxis, was approved of by the then Finance Minister Chidambaram, through clearance fromthe FIPB. However, since any FDI investment of over ₹600 crore required approval from

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CCEA and not the FIPB, he argued that there is prima facie evidence of wrongdoing.Further, Swamy contended that no foreign company could hold more than 74% equity stakein an Indian (telecom) company at the time the deal took place in 2006. “A non-telecomcompany was created to get the remaining 26% stake in Aircel so that Maxis coulddirectly/indirectly get 100% equity in Aircel,” Swamy told the Court (Mittal 2017).

The total transaction in the Aircel–Maxis deal, Swamy stated, was about ₹3,500 crore or$800 million. Justice Khehar then asked “was he [the former finance minister] aware of thefact that the deal was over ₹600 crore and he had to send it to the CCEA?” Swamy retortedsaying that the “fact of the matter is no minister can claim he did not know ... The matter isbefore the CBI, they have examined and had filed sealed cover reports before this court in2015. The CBI should now tell this court what progress has been made” (Rajagopal 2017).

In an email response to a questionnaire sent by the EPW, Chidambaram stated, “FIPBconsists of five secretaries to the Government of India. There are rules and guidelines.Every case of FDI that requires approval is scrutinised by the FIPB and recommended forapproval or rejection to the competent authority. Applying the rules and guidelines, it is theFIPB that decides whether the competent authority in a given case is the Finance Ministeror the CCEA.” Further, with regards the Aircel–Maxis case, the former finance ministerstated that the “FIPB decided to submit the case for approval to the Finance Minister as thecompetent authority. The file indicated that the competent authority to grant approval in thecase was the Finance Minister. Accordingly, I granted approval in the normal course.”

It is important to understand here that although the laid-down procedures stated that onlythe CCEA could, at the time, approve of foreign investments worth over ₹600 crore, theFIPB appeared to have on its own volition decided that the finance minister was the finaland competent authority with regard to approving Maxis’ investment in Aircel. However, itis unclear how many investment proposals worth over ₹600 crore were treated in the samemanner—that is, the FIPB declaring that the finance minister’s approval was sufficient andthat there was no need to refer the proposal to the CCEA.

On 18 February 2017, the CBI and ED announced their intention to move the Delhi HighCourt challenging the order of the special court discharging the Maran brothers and theirassociates in the case pertaining to alleged bribery and money laundering in theAircel–Maxis deal.

Corporate Structuring

The unpublished CAG report, with the EPW, illustrates how financial transactions wereundertaken by the Maxis Group so as to achieve a complex corporate structure that wouldactually acquire 99.3% of Aircel—even though FDI in telecom was capped at 75%. Thereport compares the Aircel group’s corporate structure between December 2005 and March2006 in order to highlight the substantial changes to the group’s structure post acquisition(see Figure 1).

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Before December 2005, the Aircel Group consisted of Aircel Televentures Ltd (ATVL), whichhad three wholly owned subsidiaries: Aircel Ltd, Aircel Cellular Ltd (ACL) and DishnetWireless Limited (DWL). On 29 and 30 December 2005, Aircel procured all the issued andpaid-up equity of ACL and DWL respectively from ATVL—making ACL and DWL wholly-owned subsidiaries of Aircel. The paid-up capital of Aircel in December 2005 was ₹180crore.

On 6 January 2006, Global Communication Services Holdings (GCSH), a Mauritius-basedcompany that is a wholly-owned subsidiary of the Maxis Group, bought 26% of Aircel for₹1,261.4 crore, which raised the total paid-up capital of Aircel to ₹243.4 crore. On 20 March2006, the FIPB approved of GCSH’s intentioin to increase its shareholding in Aircel from26% to 73.99%. GCSH, at this point, directly owned 65% of Aircel and indirectly held an8.99% stake in the company through Deccan Digital Networks Private Limited—an Indiancompany incorporated on 16 January 2006. Deccan Digital had a paid-up capital of ₹46crore and redeemable preference shares worth ₹1,634.4 crore adding up ₹1,680.46 crore.

GCSH set up a wholly-owned investment company in India called South AsiaCommunications Private Ltd (SACPL), which subscribed to Deccan Digital’s cumulative,non-convertible and redeemable preference shares of ₹1,634.4 crore. Deccan Digital is ajoint venture between GCSH (Mauritius) and Sindya Securities and Investment Private Ltd(India) (SSIPL). Out of Deccan Digital’s paid-up equity of ₹46 crore, ₹11.9 crore (25.7%) wascontributed by GCSH, and ₹34.2 crore (74.3%) by SSIPL.

The draft report of the CAG points out that although the total foreign equity holding stood at73.99%, the total financial stake of the Maxis Group through its subsidiaries in Aircel was at99.3%.

To recap, on 21 March 2016 GCSH bought 39% equity of Aircel for ₹1,868.19 crore raisingits holdings in the company to 65%; the remaining 35% equity was procured by DeccanDigital for ₹1,673.41 crore on the same day. As SACPL subscribed to Deccan Digital’spreference shares for ₹1,634 crore, GCSH’s actual investment in Deccan Digital stood at₹1646.26 crore. This made GCSH’s total investment in Aircel ₹3,514.45 crore on 21 March2006—effectively owning 99.3% of Aircel while Sindya, the Indian partner, only had a 0.7%holding.

Certain newspapers have reported that as per its application to the FIPB, the Maxis Groupon 25 January 2006 wished to only invest around ₹3,600 crore in Aircel. However, the draftCAG report found that the actual money that flowed into India from Maxis owned companieswas ₹4,769 crore. This raises the question as to where the balance ₹1,100 crore went?While 74% of Aircel was valued at ₹3,600 crore, the remaining 26% was valued only ataround ₹30 crore. The Pioneer has reported that, as per the CAG findings, in 2015 out of thetotal ₹4,769 crore that came from Maxis into Aircel, around ₹1,200 crore returned Indiaallegedly in the form of “kickbacks” for the deal.

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The Loophole: Preference Shares

At the heart of the Aircel–Maxis corporate structure lies a legal loophole that many foreigncompanies can use to circumvent FDI norms, while attempting to stay within the legal limitsof FDI regulations. The status and the treatment of preference shares held by foreigninvestors is the loophole that the Maxis Group was able to exploit. Preference shares andpreference shareholders are those who receive a fixed dividend and have a priority inreceiving dividends over equity and/or other shareholders. Preference shares can be ofvarious types: (i) either irredeemable or redeemable in the future or on a fixed future date;(ii) either non-convertible or convertible into equity shares at some point of time in thefuture or on an exact future date; and (iii) the dividend on these preference shares can becumulative or non-cumulative. According to the Foreign Exchange Management Act(FEMA), 1999, preference shares are only considered to be equity instruments if they arefully and mandatorily convertible preference shares. Only the purchase of fully andmandatorily convertible preference shares by a foreign buyer would then be count as FDI,and its quantum would then be governed by the FDI limits for the sector.

Preference shares of all other kinds are treated as debt and have to comply with theExternal Commercial Borrowing (ECB) guidelines under the Foreign Exchange Management(Borrowing and Lending in Foreign Exchange) Regulations, 2000 (AZB & Partners,Advocates & Solicitors 2007). In 2007, the Reserve Bank of India (RBI) issued a circular(RBI/2006-2007/434) dated 8 June that reaffirmed the status of preference shares as debtunless they were fully and mandatorily convertible.

In the Aircel–Maxis case, the Maxis Group used this very loophole to secure a 99.3%financial interest in Aircel, while still abiding by the 74% FDI sector limit. The MaxisGroup’s wholly-owned subsidiary, GCSH, procured Deccan Digital’s preference shares thatwere cumulative, non-convertible and redeemable to the tune of ₹1,634.4 crore. DeccanDigital then had the means to buy a 35% equity stake in Aircel for ₹1,673.41 crore. Giventhat GCSH invested in Deccan Digital by purchasing preference shares, this investment wastreated as debt; therefore the FDI limit of 74% in the telecom sector was apparently notviolated by Maxis. However, if the substance over form principle is applied, it can be arguedthat the Maxis Group deliberately circumvented the 74% FDI limits by using such acomplicated and convoluted corporate structure that allowed it to ultimately have a 99.3%financial interest in Aircel.

Weakness in the System

The draft CAG report states that the DoT did not conduct any due diligence on Aircel toascertain whether the prescribed eligibility criteria for obtaining Unified Access Service(UAS) licences (the type of license which Aircel held which enabled it to bid for the 2Gspectrum) were complied with. The Maxis Group’s filings with the Malaysian StockExchange clearly specified that it owned 99.3% of Aircel—the CAG report notes this

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disclosure by Maxis to the Malaysian financial authorities and wonders why the DoT neverquestioned this discrepancy. In addition, the report also indicates that the DoT was aware ofthe quantum of investment (₹3,514.45 crore) proposed by GCSH and had evenrecommended the proposal to the finance ministry for FIBP approval, on 7 March 2006.

Did the finance ministry under Chidambaram overstep its bounds by approving Maxis’investment of ₹3,514.45 crore, given the fact that requests for approval of foreigninvestments greater than ₹600 crore fell under the purview of, and had to be referred to,the CCEA? Furthermore, the letter provided by the finance ministry, dated 20 March 2006,that granted the FIPB approval, did not specify the total quantum of investment the MaxisGroup would be permitted to invest in Aircel. The draft CAG report also states that in the 74meetings of the FIPB between 2007 and 2014, the Aircel–Maxis investment deal stands outas the sole exception. The report claims that the finance ministry’s approval for thisinvestment was not a result of lack of oversight or due to errors, but that the investmentapproval was given in spite of knowledge that Maxis would be acting through its Mauritius-based subsidiary, GCSH.

The question of Chidambaram’s role in the violation of FIPB rules was raised in the RajyaSabha in May 2012 by BJP MPs, to which he responded that the discrepancies in thevaluation of shares needed to be addressed within the purview of the law. The Hindu on 7January 2017 reported that the Supreme Court gave an assurance that it would look intoChidambaram’s role in allegedly violating the FIPB rules with regard to the Aircel–Maxisinvestment. (Hindu 2017)

As per the draft CAG report, following the initial failure of the finance ministry and the DoTto verify that Aircel met the eligibility criteria prescribed for UAS licenses in 2006, theyfailed again when Aircel was permitted to participate in the auction for 3G (thirdgeneration) and Broadband Wireless Access (BWA) spectrum in May–June 2010—despitesubmitting an Ownership Compliance Certificate bearing the same ownership details (equityshares) as it had submitted in 2006. In September 2013, the report states, the FinanceMinistry defended itself by pointing out that FDI was a subject matter of the DIPP andcompanies were required to comply with its directions.

India Today reported on 22 May that CBI is investigating the imvolvement of KartiChidambaram in the INX Media case. It hopes to start questioning the former financeminister as well as those secretaries who are alleged to have abused their position at theFIPB (Khan 2017). CBI sources say that some FIPB officials may have entered into acriminal conspiracy with Karti. It is alleged that Karti’s companies Chess ManagementServices and Advantage Strategic Consulting were paid “consultancy” fees by INX Media inexchange for him influencing the FIPB approvals. A similar modus operandi is noticed in theAircel–Maxis case, where some have alleged that these very same companies receivedkickbacks or “consultancy” fees from Maxis in exchange for FIPB approval. CBI, accordingto the Times of India, has enough documentary evidence to show that Karti received large

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sums of money to facilitate the FIPB approval (Chauhani 2017). Responding to theseallegations in the social media after a to London, Karti said that in this “corruption case,there are no details about which government official was bribed, they have just mentionedsome unknown officials. I know how to handle this legally.” Further, he denied allegations ofconspiracy levelled against him in the INX Media case by stating that his only connection tothe company was that his friend was its auditor (Press Trust of India 2017b). “A friend ofmine is the auditor of that television company and it is the only connection I have with thatfirm,” Karti claimed.

The next hearing in the Aircel–Maxis case is scheduled for 29 August. When the Maranbrothers and their associates will have to respond to the CBI’s plea before the Delhi HighCourt. The court’s Justice S P Garg issued notices to the accused in the Aircel–Maxis caseafter the trial court found that “no prima facie case warranting framing of charges againstany of the accused is made out” on the basis of the materials placed on record before it. TheCBI challenged the order of the trial court, dated 2 February, that dropped all the chargesbrought forth by the CBI and ED. The Delhi High Court had sought responses from theMaran brothers and their associates earlier, on a separate plea filed by the ED challengingtheir discharge in a Aircel–Maxis deal related money laundering case (IANS 2017b).

It is worth noting that the ₹675 crore investment of the Maxis Group in the Maran family’sSun TV Group, after being cleared by the FIPB was sent to the CCEA in January 2007(Gopikrishnan 2017). As we have noted, in the complex corporate ownership structure ofAircel-Maxis, the total investment in Aircel was ₹4,769 crore, while there was an FIPBapproval for a foreign investment of only 3,600 crore.

The Aircel–Maxis and INX Media cases are a reminder of the existence of crony capitalismin India. The manner in which the Aircel–Maxis case has played itself out, its abrupt andmore likely than not, temporary end, and the fumbling ways of the prosecution andinvestigation agencies, exposes the way the country’s justice delivery system works, or doesnot work.

Conclusions

While it is not known what the CBI found in its search and seizure raids in the INX Mediacase conducted in May 2017 at the homes and offices of Karti and his father whileinvestigating Karti’s role in the Aircel–Maxis case the ED claims it found incriminatingevidence. A joint raid conducted by the ED and the Income Tax department in August 2014found money flows worth around $200,000 from Maxis’ three subsidiary companies toKarti’s company, Chess Management. The raid also allegedly found information about 21“secret” foreign bank accounts belonging to the younger Chidambaram as well ascompanies with assets such as hotels, vineyards and farm houses in 14 countries. Further,Swamy has claimed that “Karti has got 21 illegal bank accounts abroad and he has builtmany houses in several countries. He has got financial activities undeclared in 18 countries.

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So, money laundering has to be there” (Times of India 2017). After the raids conducted bythe CBI, Chidambaram addressed the media saying that “the government, using the CBI andother agencies, is targeting my son and his friends ... the government’s aim is to silence myvoice and stop me from writing, as it has tried to do in the cases of leaders of oppositionparties, journalists, columnists, NGOs and civil society organisations.” What the truth is willhave to be determined by courts of law.

The prosecution needs to prove culpability and corruption beyond a reasonabledoubt—which it has not been able to do so far. The CBI, according to various news reports,fell silent after it filed a charge-sheet and did not provide ample evidence against theaccused. The special court’s judgment is based on the fact that the CBI apparenly failed toprove the alleged “arm-twisting” of Aircel’s promoter C Sivasankaran by the Marans.Further, to establish allegations of corruption, that is, receiving kickbacks in lieu ofregulatory and ministerial approval for foreign investments, a money trail needs to beunearthed. Further, documentary proof needs to be provided to establish biased and outside“influence” in a court of law. Whether the prosecution will be able to conclusively prove thecharges against the accused persons, remains to be seen.

References

Aulakh, Guvleen (2017): “CBI opposes Plea in Supreme Court seeking Attachment of AircelShares, Assets,” Economic Times, 9 January,http://economictimes.indiatimes.com/news/economy/policy/cbi-opposes-plea-in-supreme-court-seeking-attachment-of-aircel-shares-assets/articleshow/56409356.cms.

AZB & Partners, Advocates & Solicitors (2017): “Preference Shares: Capital or Debt? AnIndian Perspective,” Mint, 18 June,http://www.livemint.com/Money/t1gkPobMJOxtkOWoPY8kTK/Preference-shares-capital-or-debt-An-Indian-perspective.html.

Business Standard (2017): “Aircel-Maxis Cases: All Charges Dropped against Maranbrothers,” Business Standard, 3 February,http://www.business-standard.com/article/companies/aircel-maxis-cases-all-charges-dropped-against-maran-brothers-117020300047_1.html.

Chauhani, Neeraj (2017): “CBI has Enough Proof to nail Karti: Sources,” Times of India, 22May,http://timesofindia.indiatimes.com/india/cbi-has-enough-proof-to-nail-karti-sources/articleshow/58780861.cms.

Economic Times (2017): “2G Case Verdict: Urgent need for Government Decision-Making to

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Become Digital,” 5 February,http://blogs.economictimes.indiatimes.com/et-editorials/2g-scam-case-verdict-urgent-need-for-government-decision-making-to-become-digital/.

Ghoshal, Arkadev (2017): “Aircel-Maxis Deal Scam: ED moves SC after Special Courtdropped Charges against Brothers Dayanidhi and Kalanithi Maran,” International BusinessTimes, 3 February,http://www.ibtimes.co.in/aircel-maxis-deal-scam-court-drops-charges-against-brothers-dayanidhi-kalanithi-maran-heres-why-714666.

Gopikrishnan, J (2017): “Caged Parrot Refuses to Speak,” Pioneer, 14 February,http://www.dailypioneer.com/columnists/oped/caged-parrot-refuses-to-speak.html.

Hindu (2017): “Aircel-Maxis deal: Will look into Chidambaram’s Role, Says Court,” Hindu, 9January,http://www.thehindu.com/news/national/aircel-maxis-deal-will-look-into-chidambarams-role-says-court/article17001162.ece.

IANS (2017a): “SBI, other PSU banks to Intervene in Aircel-Maxis case,” Financial Express,24 January, http://www.financialexpress.com/industry/aircel-maxis-case-sbi-other-psu....

— (2017b): “Aircel-Maxis Case: Delhi HC Seeks Response from Maran Brothers on CBIPlea,” The News Minute, 22 May,http://www.thenewsminute.com/article/aircel-maxis-case-delhi-hc-seeks-response-maran-brothers-cbi-plea-62432.

Khan, Atir (2017): “CBI to Quiz Finance Ministry Officials in Karti Chidambaram–INX MediaLtd case,” IndiaToday, 22 May,http://indiatoday.intoday.in/story/karti-chidambaram-cbi-finance-ministry-inx-media-fipb/1/960152.html.

Kumar, Ashna (2017): “Karti leaves for London while under CBI Scanner, father PChidambaram says he’ll Return Soon,” IndiaToday, 19 May,http://indiatoday.intoday.in/story/karti-chidambaram-corruption-inx-media-london-cbi-scanner-p-chidambaram/1/957585.html.

Mittal, Priyanka (2017): “Aircel-Maxis Deal: Swamy Moves SC Seeking Probe intoChidambaram’s Role,” Mint, 10 February,http://www.livemint.com/Politics/HG6wWhlgLslZ8Pg38YchgN/AircelMaxis-deal-Swamy-moves-SC-seeking-probe-into-Chidamb.html.

Press Trust of India (2017a): “Aircel-Maxis: SC Questions SSP’s Attempt to Restrain 2GCourt Ruling,” Business Standard, 3 Februaryhttp://www.business-standard.com/article/pti-stories/aircel-maxis-sc-puts-probing-questions-

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to-ssp-on-his-move-117020300977_1.html.

— (2017b): “Karti Chidambaram Claims Sole Link to INX Media Was Auditor Friend,” Mint,20 May,http://www.livemint.com/Politics/oSJXU8OcHEVYE8DJIn1OaP/Karti-Chidambaram-claims-sole-link-to-INX-Media-was-auditor.html.

Rajagopal, Krishnadas (2017): “Aircel-Maxis deal nod: Swamy to ‘Prove’ in 2 weeksChidambaram’s role,” Hindu, 10 February,http://www.thehindu.com/news/national/Aircel-Maxis-deal-nod-Swamy-to-prove-in-2-weeks-Chidambarams-role/article17282736.ece.

Rautray, Samanwaya (2017): “Cloud over Aircel-RCom Deal as Maxis’ Founder AnandaKrishnan’s Absence Irks SC,” Economic Times, 4 February 2017,http://economictimes.indiatimes.com/news/economy/policy/cloud-over-aircel-rcom-deal-as-maxis-founder-t-ananda-krishnans-absence-irks-sc/articleshow/56962131.cms.

Soni, Anusha (2017): “2G scam: Aircel-Maxis Spectrum to be Seized if Accused Don’tAppear in Person, Says Supreme Court,” India Today, 6 January,http://indiatoday.intoday.in/story/2g-scam-aircel-maxis-spectrum-supreme-court/1/850900.html.

Times of India (2017): “Chidambaram’s Illegal Clearances Helped Karti, Says SubramanianSwamy Post CBI Raid,” 16 May,http://timesofindia.indiatimes.com/india/chidambnarams-illegal-clearance....