Indian court cancels graft-tainted telecoms licences

Feb 2, 2012, 8:25 GMT

New Delhi - India's Supreme Court on Thursday cancelled telecoms licences granted to mobile network companies in alleged fraudulent sales in 2008 and ordered a fresh auction.

The licences were issued by former telecoms minister Andimuthu Raja without following proper bidding procedures, the court ruled, in what has been dubbed India's biggest corruption scandal.

Government auditors said the illegal sales caused the national exchequer an estimated loss of up to 40 billion dollars.

In their order, judges GS Singhvi and AK Ganguly ruled that the licences issued after January 2008 were granted in an 'arbitrary and unconstitutional' manner.

The judges said the affected licences would remain valid for four months during which time the country's telecom regulator was to make recommendations for a fresh auction, petitioner Prashant Bhushan told reporters.

A total of 122 licences held by nine companies, including several Indian joint ventures between Norway's Telenor ASA and United Arab Emirates' Etisalat Co, stand cancelled, broadcaster CNN-IBN said.

India's mobile telephone networks are grouped into 22 regions, serving an estimated total of 865 million subscribers. Several licences are issued to companies within each region.

Bhushan described Thursday's judgement as 'historic.'

'It will change the manner in which corruption is investigated and dealt with in the country.'

The ruling came during the court's handling of a petition seeking cancellation of licences granted during Raja's tenure. Raja, on trial for fraud sine November, has denied any wrongdoing.

The judges also heard another petition seeking an investigation into the alleged role of Home Minister Palaniappan Chidambaram - who was finance minister when these licences were issued - and ordered another court to decide where the minister should be probed.

Leading national media said the verdict came as a setback to the Indian National Congress party-led coalition and would impact the world's fastest-growing telecommunications market.

The United Progressive Alliance has been mired in a slew of corruption scandals including the organization of the Commonwealth Games in October 2010.