Delhi HC observes Marans don't have controlling stake in Digital Radio

While Kalanithi Maran indirectly holds 21% share in the two companies, 51.1% shares are with Rao-Reddy group, it was observed

The Delhi High Court has allowed Red FM, part of Sun Group, to participate in phase III e-auction, after it came to conclusion that Kalanithi Maran and his brother Dayanidhi Maran don't have controlling interest in the FM company, which vests with the Rao-Reddy Group against whom there are no allegations.

It may be noted, Sun Group FM channels were not allowed to participate in the auction since Ministry of Home Affairs did not give clearance to the Sun Group's FM companies, which collectively own 45 stations across the country.

While three companies, including Sun TV, KAL Radio and South Asia FM, have moved to Madras High Court, another company Digital Radio (Mumbai) Broadcasting Ltd, which owns Red FM brand, have filed a petition at Delhi High Court.

After hearing Senior Counsels, including former Union Minister and Senior Advocate Kapil Sibal and Tushar Mehta, ASG representing Union of India, the Delhi Bench consisting of Justice Badar Durrez

Ahmed and Justice Sanjeev Sachdeva passed the Order on Sunday.

In the Order it was stated that though Kalanithi Maran has an indirect interest in the shareholding of the two companies to the extent of 21.6 per cent. It is not alleged that Dayanidhi Maran has any interest (direct or indirect) in the shares (ownership) of the two petitioner companies.

"None of these two individuals is a director in the petitioner companies. In fact, as per the shareholding pattern indicated (in Annexure 10.8) of the petitioners applications as also the counter affidavit submitted on behalf of the respondent, the interest of the Rao-Reddy group in the petitioner companies is to the extent of 51.11% in each company. Clearly, though Kalanithi Maran may have an indirect interest in the shareholding of the two companies to the extent of 21.6% (in each), the controlling interest vests with the Rao-Reddy group against whom there are no allegations. As such, the pre-conditions for piercing the corporate veil are not satisfied," said in the Order.

"We also note that the petitioner companies themselves have not been alleged to be vehicles of any transgression of law. They have been functioning since 2002 / 2003 without there being any allegation regarding their functioning resulting in any security concerns," said in the Order.

"We quash the decision communicated by letter dated July 15, 2015, denying security clearance to the petitioner companies. The said petitioner companies (Digital Radio Broadcasting Ltd of Delhi and Mumbai) shall be entitled to participate in the e-auction subject to other conditions being fulfilled," according to the Bench.

Last Thursday Madras High Court allowed three companies to participate in the auction, pending main petition against the issue of security clearance, which is to be heard on a later date. On Sunday the Delhi Bench, in a special sitting, not only allowed Red FM to participate, but also quashed the Ministry's Order rejecting security clearance for the company.

The Ministry's decision was in the backdrop of the CBI filing charge-sheet against former Union Telecom Minister Dayanidhi Maran and his elder brother Kalanithi Maran, chairman of Sun TV, in the Aircel-Maxis case; and that the ED has levelled charges under the PMLA against the said two individuals and also that the CBI is investigating the case against them with respect to the alleged 300 illegal telephone lines.