Government may cancel licence if the company does not furnish satisfactory answers to its clarifications
Music Broadcast Private Limited (MBPL), the company which owns Radio City FM channel, has moved the Mumbai High Court seeking an anticipatory stay on the government cancelling its licence and invoking the bank guarantee.
This MBPL move follows the government issuing a show cause notice on why its licence should not be cancelled as it finds the operations of the company in complete violation of the FM radio licence norms. The the showcase notice was issued on September 3.
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The P K Mittal promoted- MBPL has also given its reply to a set of questions raised by the government on its funding structure and relationship with other companies. The government is still examining MBPL's replies.
To a clarification on the debt equity ratio of the company, MBPL has told the government that such a debt equity ratio is normal in a greenfield venture. According to sources, the debt equity ratio of the company is 10,000:1.
In its notice, the government has told the company that it was not clear about the ownership and share holding pattern of Digiwave, the company that provides funds as well as programming software to Radio City.
The company has however, not provided adequate information on the shareholding structure of Digiwave.
The sources also said the government wanted to obtain complete information on Digiwave before deciding the future course of action on the company.
The government had also sought more clarification on MBPL's relationship with companies such as Digiwave, which provides programming content as well as loans for funding the operations of MBPL.
MBPL has told the government that its outsourcing relationship with other companies are not against the guidelines as there are no provisions in the licence agreement preventing such a deal.
But, government has clarified that under the licence agreement, subcontracting of programming and personnel are not permitted.
Sources also said MBPL has sought a meeting with the information and broadcasting ministry officials to clarify its stand.
Information and broadcasting ministry officials said the government would give sufficient time to the company before cancelling its licence and invoking the bank guarantee.
The official also said the government would cancel the licence of the company if it did not furnish satisfactory answers to its clarifications.