India court rejects bail pleas in telecoms trial

NEW DELHI (Reuters) - A court Wednesday rejected bail applications of five business executives involved 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 UAE's Etisalat may go to jail over the sale of telecoms licences at below-market prices.

Former Indian telecoms minister Andimuthu Raja and the executives have been charged with manipulating the grant of telecoms licences and radio airwaves in 2007-08 that a state auditor said could have caused a revenue loss of $39 billion (23 billion pounds) to the government.

The case is the latest chapter in corruption scandals that have embarrassed the Congress party-led government, which faces a test of strength in major state elections this year that could redraw India's political landscape.

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.

"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 O.P. Saini said in a court order.

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

The executives have appealed to the court for an interim bail to avoid being jailed immediately.

Shares in Unitech and DB Realty, the Indian joint ventures of Norway's Telenor and the UAE's Etisalat, fell 7.3 percent and 7 percent. Reliance Communications shares were down 5.6 percent while the main stock index was up 0.6 percent at 1:05 p.m. (8:35 a.m. British time).

Former telecoms minister Raja was forced to resign last year and was arrested, along with his personal aide, and a former top civil servant in the telecoms ministry. Police have also arrested Shahid Balwa, the vice chairman of Etisalat's India operations.

Police say bribes were paid to Raja and undue favours were granted to the two firms which are now the Indian partners of Telenor and Etisalat.

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 were not eligible for those licences.

Foreign investors are keenly watching whether the telecoms ministry cancels several of the contentious licences.

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

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 billionaire Anil Ambani, as well as Ratan Tata, the head of the $70 billion Tata conglomerate, for questioning.

The scandal is the biggest of the several that have emerged during Prime Minister Manmohan Singh's second term.

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.

(Reporting by Devidutta Tripathy; editing by Malini Menon and Alistair Scrutton)