Kal Cables is one of 17 companies whose licences have been cancelled by the government. This follows a denial of security clearance from the Union home ministry. Other companies which were denied a licence, are: Kashmir-based Arshad Cable Network Private Limited, IB Communications in Andhra Pradesh, Maharashtra-based Intermedia Cable Communication Private Limited, New Delhi-based Eminent Cable Networks, Digicable Communication Services in Kolkata and Tamil Nadu-based Kavery Digital Networks Private Limited.
Kal Cables has challenged the government order at the high court. The company also claimed that it was not given an opportunity to present its case before the ministry.
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The government order said, "In view of denial of security clearance by the ministry of home affairs, regular registration cannot be granted to Kal Cables Private Limited in terms of provisions contained in Rule 11C and accordingly the permanent registration granted to Kal Cables stands cancelled with immediate effect."
The ministry has given 15 days to wind up the company's operations. The company is one of the major MSOs operating in Chennai. The city has a subscriber base of about four million households, of which about one million are DTH subscribers, said P Shakilan, founder of Tamizhaga Cable Operators Association.
Kal Cables has about 1.3 million subscribers. The I&B ministry has asked the company to run a continuous scroll on the screen informing local cable operators/consumers that the services would not be available after 15 days. This way, subscribers can opt for an alternative operator.
While company officials were not available for comment, its affidavit, a copy of which was reviewed by Business Standard, said since 2006 the company has been operating as MSO with due permission granted in accordance with the Act after fulfilling all eligibility criteria in the Chennai area.
After the rules were amended in 2012, the company was granted permission to operate as an MSO and has been continuing to do so in the Chennai area and from March 2013 in Phase-II cities based on the provisional registration granted by the Ministry. "There has been no change in business activities and no change in any circumstances for the second respondent (the ministry of home affairs) suddenly refusing to grant security clearance," said the affidavit.
The company also said it was not called to showcause why security clearance be denied and was not at all, at any point of time, put on notice of the same.
"...All of sudden the permission is cancelled by the first respondent (I&B ministry) without providing an opportunity which is against the principle of natural justice. The said act of the respondents has virtually robbed the petitioner of its business without giving it an opportunity to be heard and without furnishing reasons, which is against the right to carry on any occupation guaranteed under the Indian constitution."
The company also claimed that it got the intimation from the ministry through an email only on August 26.
"The balance of convenience is also in favour of the petitioner (Kal Cables) since there is no showcause notice issued to the petitioner," the affidavit said.
On the implications of the order, PhillipCapital said Kal Cables runs Sumangali Cable Vision (SCV), which is largely based out of Chennai. Sun TV doesn't collect any cable subscription revenue in Chennai as the market is free to air CAS. Thus, even if a stay isn't obtained, the financial impact on SunTV will be negligible.
However, one could extrapolate this event to a potential licence cancelation of Sun Direct, which will have a significant negative bearing on Sun TV's DTH subscription revenue.