India court rejects bail pleas in telecom trial

A court on Wednesday rejected bail applications of five business executives in one of India's biggest corruption scandals, pushing forward a case that has undermined the government and business sentiment in Asia's third-largest economy.

Executives from Reliance Anil Dhirubhai Ambani (ADA) Group and the Indian joint ventures of Norway's Telenor and the etisalat will be held in jail pending the trial over the sale of telecoms licences at below-market prices.

Shares in the Indian companies fell sharply after the ruling in a case that is one of several corruption scandals to batter the Congress party-led government, which is in the midst of a round of state elections.

The fallout from the telecoms scandal, which may have deprived the public purse of up to $39 billion, has seen some of country's richest men, viewed as symbols of India's growing self-confidence on the world stage, called in for questioning.

"The CBI (federal police) has also expressed its apprehension that accused persons may tamper with the evidence by trying to win over witnesses and that they may also flee from justice in view of the magnitude of the offence," Judge OP Saini said in a court order.

"Hence, in my considered opinion, it is not a fit case for bail."

After chaotic proceedings marred the trial last week, the courtroom was once again packed on Wednesday, prompting one man to shout out from the crowd that the throng of reporters covering the trial be removed from the room.

Former Indian telecoms minister Andimuthu Raja and the executives were charged with manipulating the grant of telecoms licences and radio airwaves.

SHARES UNDER PRESSURE

The bail pleas involved three officials of billionaire Anil Ambani's Reliance ADA Group, including a group managing director, Gautam Doshi.

Sanjay Chandra, managing director of Unitech , and Vinod Goenka, a director of etisalat's India partner, were also pleading bail.

Unitech's partner, Norwegian telecoms company Telenor, issued a statement after Wednesday's court ruling, saying it had asked Chandra to step down.

The five executives applied for interim bail for seven days to avoid being jailed immediately after their first plea was rejected. However, the court also rejected that request.

"Now they are in judicial custody. They will be produced from the jail on each and every date of hearing," AK Singh, a lawyer for the Central Bureau of Investigation, told reporters.

A lawyer for Reliance ADA told Reuters that the group's three officials subsequently appealed to a higher court for bail.

Shares in Unitech and DB Realty, whose parent DB Group is etisalat's India partner, fell as much as 8 per cent and 11.5 per cent respectively after the bail was rejected. Shares of Reliance Communications fell as much as 5.8 per cent. The shares later pared some of their losses.

All of the accused deny any wrongdoing. Telenor and etisalat have said the events described in the police charges predate their investments in India.

The fate of dozens of telecoms licences - including those held by the Telenor and etisalat arms - hang in balance after the state auditor said they had wrongly won those concessions.

The new telecoms minister, Kapil Sibal, could cancel several of the contentious licences issued under Raja, although that would likely feed investor uncertainty about the stability of government contracts and regulations in India.

While corruption has long plagued India, the scale of recent scandals has fuelled widespread outrage and forced Prime Minister Manmohan Singh, once seen as India's most honest politician, to defend his leadership and scramble to keep the ruling coalition intact.

Norway's prime minister has written to Singh seeking "fair treatment" for Telenor, saying the firm should not be penalised for "errors others have committed in India."

Two parliamentary panels are also investigating the scandal and one of them summoned Ambani, as well as Ratan Tata, the head of the $70 billion Tata conglomerate, for questioning.
Under fire from a resurgent opposition, the case has sapped the government's strength to push an agenda of economic reforms such as simplifying the tax code or opening the supermarket sector to foreign players.

Wall-to-wall media coverage of what has been dubbed the "season of scams" intensified this month when a social activist went on a fast to press the government to tackle corruption.

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