The I&B ministry shot off a letter to Space TV Tuesday evening, pointing out that its DTH venture violated the spirit of company law clauses, according to government sources. Earlier, the I&B ministry had examined the Space TV application only from the perspective of DTH guidelines, a ministry official said.
It is learnt that DCA had pointed out that a clause on affirmative rights (to say yes or no to a board decision) of the minority shareholder in the Space TV joint venture could be contentious. Tatas hold 80% in Space TV, while Rupert Murdochs Star is a minority partner with 20% stake. As per the Space TV application, the Star Group has affirmative rights, to the extent of having veto power in relation to board decisions of Space TV. While this was questioned by the DCA, now the same issue has been raised by the I&B ministry in its letter to Space TV.
A shareholder must have at least 26% holding in a joint venture to have veto rights on board decisions. But in the case of Space TV, Star has the right even with 20% holding.
The Space TV application was submitted to the government early 2004, a few months after Subhash Chandra-promoted Dish TVs pilot launch. In the meantime, public broadcaster Prasar Bharatis DTH has been able to capture a good market, with around 2 million users. Chennai-based Sun Network is also awaiting government nod to start its DTH service. The DCA input on Sun DTH has not come to the I&B ministry yet.