Did Anil Dhirubhai Ambani's (ADA) Reliance Communications [Get Quote] own Swan Telecom at the time Swan applied for a GSM mobile phone licence? This question has assumed centrestage with some MPs writing to the Prime Minister who has, in turn, asked the telecom ministry to look into the matter.

If Reliance Communications or other Reliance ADA Group firms owned more than 10 per cent of Swan Telecom when the latter applied for a (GSM-based) mobile telephone licence in March 2007, this was against the law which said no shareholder can hold more than 10 per cent of the equity in two telecom firms in the same licence area - Reliance Communications already operates a CDMA-mobile phone service.

In which case, Swan's licence - Swan is one of the firms which got a licence at bargain-basement prices thanks to telecom minister A Raja -  could well come under a cloud, as will the deal Swan entered into with Dubai-based Etisalat to sell part of its equity at a huge premium.

Also under the scanner is how the state-owned BSNL entered into a roaming agreement with Swan - BSNL does not have such an arrangement with any private telecom firm, so why did it sign up with a firm which doesn't even have one subscriber? Since this means Swan can offer mobile phone services across the country without having much of its own network, the deal is a winner for it; it offers little to BSNL since Swan's subscribers will be minuscule for a long time to come.

The Reliance Communications' story is an interesting one. And the company's explanation for the events is so beyond the realm of normal expectations, it can only be classified as a Black Swan event, to use Nassim Taleb's classification - an event so rare, it happens once in a millennium.

In March last year, when Swan applied for a GSM mobile licence, Reliance Telecom (a Reliance ADA subsidiary) owned 9.9 per cent of it - this was permissible within the law. The rest was owned by Tiger Traders.

The problem, however, was that Tiger's directors were Reliance ADA Group employees and their address was also that of a Reliance ADA Group firm. Also, Reliance Communications' annual report showed the firm had, in 2007, given Swan Rs 992 crore by way of 99.2 lakh 8 per cent redeemable preference shares with a coupon value of one rupee - that is, Reliance subscribed to these at a premium of Rs 999 each. In other words, everything about Swan smelt Reliance Communications at this point in time.

Reliance ADA, for the record, has a different explanation for things, an explanation that is also quite worrying. According to Reliance ADA, a very large group of builders (Dynamix Balwas own the Meridien Hotel in Mumbai and the Hyatt in Goa) approached it to say there was a possibility of getting a telecom licence; but since the builders had no telecom experience, it was decided Reliance ADA employees would be directors of Swan, the firm chosen to apply for the spectrum.

According to Reliance ADA, since it was in the telecom business and felt it could do business with Swan if it got a licence (Swan could, for instance, rent out its telecom towers), it didn't mind doing this.

Presumably, this is also why it put in Rs 992 crore (Rs 9.92 billion) with Swan. According to Reliance ADA, redeemable preference shares are not equity but are debt - so it never owned more than 9.9 per cent of Swan's share at any point in time. (In India, by the way, redeemable preference shares are considered as equity, though under the International Financial Reporting Standards they are considered as debt.)

Reliance ADA adds that its directors stepped down from Swan on October 10 - that is, long before Swan got its licence in January 2008 and a few days before Raja took his decision to award Reliance Communications' GSM spectrum under the dual-technology umbrella on October 18, 2007. Talk about timing! Swan also returned Reliance Communications' money before it got the licence.

This explanation of Reliance ADA's dealings, of course, is what the telecom ministry has to examine. It is, of course, curious that the ADA Group should be willing to put so much money into a firm that had little to offer by way of collateral.

And since the 8 per cent return Swan was offering by way of interest on the preference shares could only be on the Re 1 coupon value (Reliance Communications paid Rs 1,000 for each share), in effect, it virtually gave the money to Swan for free. And, when the Reliance ADA directors stepped down and Swan gave it its money back, Reliance Communications didn't get any premium either.

Whether the help Anil Ambani and A Raja extended to Swan was a black swan event or something else is what needs to be established.