The Supreme Court today rejected the plea of the Centre challenging a Delhi High Court order allowing Red FM, partially owned by Sun TV Network Ltd, to take part in stage-III of FM auctions last year.

A Bench headed by Justice J S Khehar said as per the existing rules, a company cannot be barred from taking part in auction proceedings just because some shareholders are facing criminal proceedings.

The court said the rules specifically state that security clearance can be denied only when there are criminal proceedings against the company or its directors.

The Ministry of Information and Broadcasting had appealed against the July 26, 2015 order of the High Court allowing Red FM to participate in stage III of FM auction in July-August last year on the grounds including that it has been operating since 2002 and there has been no allegation that it has indulged in activities which could raise security concerns since then.

The High Court had set aside the Centre’s order that had rejected Red FM’s application to participate in the auction as the company lacked security clearance from the Home Ministry.

It had also said there was no allegation against Digital Radio Broadcasting Ltd, which runs Red FM in Delhi and Mumbai.

Digital Radio was not permitted by the government to take part in the auction on the grounds that it had been denied security clearance due to its association with Sun TV, whose promoter Kalanithi Maran had a 21.6 per cent indirect shareholding in the channel.

The government had denied security clearance to Digital Radio as Kalanithi Maran and former Telecom Minister Dayanidhi Maran were being prosecuted in cases of money laundering.

The High Court had said the auction eligibility criteria has to be given a strict interpretation as it would have “serious ramifications” like putting a “blot on that company” or “a badge of dishonour“.

It had said that on giving a strict interpretation to the criteria, the condition requiring clearance referred only to the company and its directors and does not mention the shareholders.