The Hindu Business Line : Ministry finds gaps in Tata-Murdoch DTH shareholders pact

THE stars are yet to shine on the direct-to-home (DTH) venture between Tata Sons and the Rupert Murdoch-promoted Network Digital Distribution Services (NDDS).

The Ministry of Company Affairs is of the opinion that the current shareholders agreement is not in line with the existing DTH guidelines and the Company Law.

Official sources told Business Line that the Company Affairs Minister, Mr Prem Chand Gupta, has endorsed the views expressed by his Ministry, which had found inadequacies relating to the shareholders agreement between Tata Sons and NDDS.

The views of the Ministry have been forwarded to the Ministry of Information & Broadcasting (I&B).

The opinion of the Company Affairs Ministry is significant since this would have set precedence for future proposals in the sector.

The I&B Ministry had clearly stated that the licence would be given only after the Ministry of Company Affairs gives its nod to the joint venture proposal.

The Ministry of Company Affairs is of the opinion that the issues raised by the I&B Ministry are valid.

The nodal Ministry (I&B) had sought its views on whether the minority foreign partner (with a holding of 20 per cent) could enjoy powers equal to that of the majority stakeholder.

As per the Space TV (the joint venture) application, the Indian partners would have 80 per cent stake in the company.

Further, the agreement submitted to the Government stipulated that any major decision by the board would require the approval of at least one nominee director of the minority stakeholder.

It also provided for the board to appoint key officials and delegate powers.

According to official sources, these clauses in the agreement could be interpreted as giving the minority shareholders considerable powers in the management of the venture, which goes against the DTH guidelines.

The DTH guidelines issued by the I&B Ministry have clearly laid out that the applicant company must have Indian management control with majority representatives on the board as well as the chief executive of the company being a resident Indian. It also states that a broadcasting/cable company can own 20 per cent in a DTH venture.

The cap on FDI is also 20 per cent.

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