HC sets aside MHA order denying security nod to Sun Group

The Madras High Court today set aside the Union Home Ministry's last July order denying security clearance to the Sun Group on the basis of which the Information and Broadcasting Ministry did not allow the group companies to participate in the Phase-III auction process of FM radio.
In his 132-page judgment, Justice M Duraiswamy directed the Union Secretary, Ministry of Information and Broadcasting, and the Deputy Director (FM) of the same Ministry to announce the name of the successful bidders subject to the other conditions being fulfilled.
The judgement was delivered on a batch of petitions filed by Sun TV Net Work Limited, Kal Radio Limited, M/s. South Asia FM Limited and Udaya FM Private Limited.

The Group and its companies sought quashing of the July 15 order of the I&B Ministry refusing permission to them to participate in the phase III FM auctions on the basis of non-security clearance from the Union Home Ministry.
The Group had been denied security clearance on the ground it faced Aircel-Maxis case linked to 2G spectrum allocation, money laundering charges and alleged illegal telephone exchange case (in which former Telecom Minister Dayanidhi Maran and his brother and Sun Group owner Kalanidhi Maran are accused).
Setting aside the denial of security clearance, the judge said, "The petitioner companies which were incorporated have been functioning since 2005 without there being any allegation regarding their functioning resulting in any security concerns."

"They were incorporated more than 10 years ago even before the alleged offences were committed and till date have not come to any adverse remarks by any authority; the question of piercing the corporate veil will not arise."

In fact the petitioner companies have been operating their licences under Phase I and Phase II for more than 10 years.
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"In the absence of any evidence to show that the operation of radio channels by the petitioner companies would create security concerns, the denial of security clearance by the Ministry of Information and Broadcasting cannot be accepted. The ownership and control of the company were not enough to justify piercing the corporate veil," the court said.

"The court cannot pierce the corporate veil, even in the absence of third-party interests in the company, merely because it is thought to be necessary in the interest of justice."
"The corporate veil can be pierced only if there is some impropriety. To justify piercing the corporate veil there must be both control of the company by the wrongdoers and impropriety, that is, use or misuse of the company by them as a device or facade to conceal their wrongdoing."
Citing these reasons, the court said the impugned orders dated July 15, 2015 "denying the security clearance of the petitioner are liable to be set aside."

The judge further said, "The petitioner companies are entitled to move to Phase III policy for the FM Radio Stations at Chennai, Coimbatore, Tirunelveli and Vishakapatinam by entering into Grant of Permission Agreement (GOPA)."
"Since this court is setting aside the impugned orders, the details of bids made by the applicants which were produced in the sealed cover is returned back. The authorities are directed to announce the name of the successful bidders subject to the other conditions being fulfilled by the participants."
Earlier, the high court had passed interim orders on the petitions challenging denial of security clearance to resubmit the bank guarantee and to participate in the FM Radio Stations Phase III auction and to keep the result of the bid in a sealed cover and to produce it before the court.

The court had also made it clear while passing the interim orders that the participation of these companies in the e-auction is subject to the result of the writ petitions.