Allowed

M/s.Kal Cables Pvt.Ltd., v. The Secretary

Madras HC5 Sept 2014WP/23444/2014

Case brief

AI extract

What is this about?

Cancellation of a Multi System Operator's registrations following denial of security clearance was challenged. The court allowed both petitions and set aside the cancellations, holding that the statutory opportunity of hearing applied even to security-related conditions. Fresh action in accordance with law remained open.

What did the court decide?

Both orders cancelling the Multi System Operator's registrations were set aside.

M/s.Kal Cables Pvt.Ltd., Vs The Secretary — Writ and Judicial Review | Madras HC (2014)

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IN THE HIGH COURT OF JUDICATURE AT MADRAS

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DATED: 05-09-2014

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CORAM:

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THE HON'BLE MR.JUSTICE V.RAMASUBRAMANIAN

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W.P.Nos. 23444 and 23445 of 2014

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and M.P.Nos. 1 and 1, 2 and 2 of 2014

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M/s Kal Cables Pvt. Ltd. rep. by its Managing Director Mr.Vittal Sampathkumaran, No.229, Kutchery Road, Mylapore, Chennai-600 004.

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.. Petitioner in both Petitions

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Versus

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The Secretary,

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Ministry of Information and Broadcasting, Room No.116, "A"Wing,

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Shastri Bhavan, New Delhi.

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The Secretary, Ministry of Home Affairs, North Block, Central Secretariat, New Delhi - 110 001. .. Respondents in both WPs' Orders Reserved on: 02.09.2014 Orders Pronounced on: 05.09.2014

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Petitions filed under Article 226 of the Constitution of India. Prayer in W.P.No.23444 of 2014 is, to issue a Writ of Certiorari to call for the records pertaining to the letter dated 20.08.2014 in No.9/128/2012-BP & L. issued by the 1st respondent and quash the same.

¶15

Prayer in W.P.No.23445 of 2014 is, to issue a Writ of Certiorarified Mandamus to call for the records pertaining to the letter dated 20.08.2014 in No.9/128/2012-BP & L. , issued by the 1st respondent quash the same and direct the respondent to grant permanent registration to the petitioner to operate as Multi System Operator pursuant to the provisional registration granted by the first respondent dated 07.03.2013 in letter No.F.No.9/1282012-BP&L.

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https://hcservices.ecourts.gov.in/hcservices/

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For petitioner in W.P.23444/14 .. Mr.P.S.Raman, Sr.Counsel for Ms.M.Sneha For petitioner in W.P.23445/14 .. Mr.AR.L.Sundaresan, Sr.Counsel for Ms.M.Sneha For Respondents .. Mr.G.Rajagopalan, Addl.Solicitor General for Mr.N.Ramesh, CGSC.

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COMMON ORDER

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The petitioner is a Multi System Operator, within the meaning of Rule 2(c) of the Cable Television Networks Rules, 1994. They are engaged in the business of securing signals from Television Channels and distributing them through Cable Operators, to the end users. The petitioner was granted permission to operate as Multi System Operator, first in the city of Chennai, in the area notified under Section 4-A of Cable Television Networks (Regulation) Act, 1995 read with Rule 11(2) of the Cable Television Networks Rules, 1994, by an order dated 30.09.2006 issued by the Ministry of Information and Broadcasting of the Government of India. The permission was, as seen from the order dated 30.09.2006, granted provisionally and was made subject to security clearance by the Ministry of Home Affairs. The permission was also subject to adherence to certain terms and conditions stipulated in the order itself. The order granting permission also made it clear that the Ministry was entitled to revoke or suspend or terminate/cancel the permission granted forthwith and without any advance notice, if it was found that the petitioner had provided wrong/misleading/incorrect information in the application form or found to be violating the provisions of the Act.

¶20

After the switching over to the Digital Addressable System from Cable Access System, the 1995 Act underwent sweeping changes and the Central Government became entitled to make it obligatory for every Cable Operator to transmit or retransmit programmes to any channel in an encrypted form through a Digital Addressable System, if the Government was satisfied that it was necessary so to do in public interest.

¶21

As a consequence of the amendment, the Central Government also amended the Cable Television Networks Rules, 1994 under SO 940(E) dated 28.04.2012. By this amendment, Rule 11 as it originally stood under the 1994 Rules, was replaced by Rules 11-A to 11-F.

¶22

Rule 11-A, inserted with effect from 28.04.2012, made it mandatory for every person desiring to provide the service of Digital Addressable System, to make an application for registration as Multi System Operator in Form-6. Rule 11-C(1) empowers the Central Government to issue a Certificate of Registration, if it is satisfied

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that the applicant fulfilled the eligibility criteria specified in Rule 11-B and a security clearance had also been obtained.

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Rule 11-F barred every existing Multi System Operator from continuing to provide the Cable Television Network Services, unless such operator is granted registration under Rule 11-C.

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But, since the new Rule came into existence only with effect from 28.04.2012, the first proviso to Rule 11-F provided for a deemed registration in favour of Multi System Operators, who had already obtained permission before the Amendment Act 21 of 2011. But this deemed registration is to be valid only for the remaining period (unexpired period) of validity of the original permission.

¶27

In accordance with Rule 11-A, the petitioner submitted an application in Form-6 along with necessary processing fee and a declaration in Form-2, on 18.05.2012. Since the petitioner had already obtained permission under the un-amended Act and the Rules, with effect from 30.09.2006, for a period of 10 years, the first respondent granted a permission vide letter dated 19.06.2012, for the unexpired portion of the initial permission, in terms of the first proviso to Rule 11-F. This permission was in respect of the Chennai Metropolitan area.

¶28

After the city of Coimbatore was also brought within the Digital Addressable System under Phase-II, the petitioner submitted an application on 26.11.2012, for operating Cable Television Network Services in the city of Coimbatore. The first respondent granted a provisional registration to the petitioner, for operating in the city of Coimbatore, under Rule 11-E, vide a letter dated 7-3-2013. This provisional registration was also made subject to security clearance from the Ministry of Home Affairs.

¶29

Therefore, in essence, the petitioner is operating as a Multi System Operator in the area of Chennai Metropolitan City with effect from 30.09.2006, in pursuance of a permission granted before the Amendment Act and by virtue of the deemed registration granted under the first proviso to Rule 11-F after the amendment. In addition, the petitioner is also operating as Multi System Operator in the area of Coimbatore city by virtue of a provisional registration granted on 07.03.2013 under Rule 11-E.

¶30

While so, all of a sudden, the first respondent issued two communications dated 20.08.2014. By one communication, the deemed registration granted on 19.06.2012 in respect of Chennai Metropolitan area was cancelled with immediate effect. By the other communication, the provisional registration granted in respect of the city of Coimbatore was also cancelled. The main ground on which both cancellations have been ordered is that the Ministry of Home Affairs

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have now denied security clearance to the petitioner for registration as a Multi System Operator. Therefore, the first respondent has directed the petitioner to wind up their operations and switch off signals within a period of 15 days from the date of receipt of those two communications with a further condition that the petitioners should run a continuous scroll on the screen, informing the consumers that the services would not be available after 15 days. Aggrieved by these two communications of the same date, the petitioner has come up with the above two writ petitions.

¶33

On 28.08.2014, both writ petitions came up for orders as to admission. Mr.N.Ramesh, learned Senior Panel Counsel took notice for the respondents at that time and I heard the submissions of Messrs. P.S.Raman, and AR.L.Sundaresan, learned Senior counsels appearing for the petitioners and Mr.G.Rajagopalan, learned Additional Solicitor General, for the respondents. After finding that even as per the impugned communications, the petitioners had time atleast up to 05.09.2014, I directed the learned Additional Solicitor General to get instructions. In the meantime, I passed a limited interim order staying the operation of one particular portion of the impugned orders which directed the petitioners to run a scroll continuously for the benefit of the consumers.

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Thereafter, the writ petitions came up for hearing on 02.09.2014. Mr.G.Rajagopalan, learned Additional Solicitor General, produced the relevant file from the Ministry of Home Affairs for my perusal. In view of the shortage of time, the respondents could not file a counter.

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I have heard Messrs.P.S.Raman and AR.L.Sundaresan, learned Senior counsel appearing for the petitioners and Mr.G.Rajagopalan, learned Additional Solicitor General appearing for the respondents.

¶36

In view of the limited scope of the enquiry that this Court can hold in matters of this nature, where the respondents plead security of the State, the learned Additional Solicitor General submitted that the arguments advanced by him could be treated as arguments in the main writ petitions themselves. He submitted that even if a counter affidavit is to be filed, the same cannot disclose the information that is available in the confidential file and that the writ petitions raise pure and simple questions of law, which can be dealt with, without a counter affidavit. Therefore, the writ petitions are disposed of on the basis of the file produced by the second respondent and the arguments advanced on both sides.

¶37

Before getting into the factual details, it is necessary to take note of a few provisions of the Act and the Rules. Section 4 of the Cable Television Networks (Regulation) Act, 1995, as it originally stood, made it mandatory for any person desirous of

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operating a Cable Television Network, to apply for registration. There were only three sub-sections to Section 4 as it originally stood. While sub-section (1) of Section 4 required a person operating a Cable Television Network to apply for registration, sub-section (2) merely stipulated that the application should be in such form and accompanied by such fee. Sub-section (3) enabled the registering authority to issue a Certificate of Registration upon being satisfied that the applicant had furnished required information. Thus, Section 4, as it was originally enacted in 1995, did not stipulate any eligibility criteria or terms and conditions for the grant of permission.

¶40

By Amendment Act 2 of 2003, Section 4A was inserted, enabling the Central Government to make it obligatory by notification in the official gazette, for every Cable Operator to transmit or retransmit the programmes of any pay channel through an Addressable System. This Section 4A also did not make any improvements to Section 4 as it originally stood in the 1995 Act.

¶41

But, by Amendment Act 21 of 2011, sweeping changes were made with effect from 25.10.2011. Section 4 itself was amended, indicating for the first time under the amended sub-section (2) that the Government may prescribe eligibility criteria to be fulfilled by a Cable Operator. More importantly, sub-section (6) was inserted under section 4, empowering the Government to prescribe additional criteria or conditions to be fulfilled by a Cable Operator. The amendments made to Section 4, by the Amendment Act 21 of 2011, are of great significance for the purpose of this case and hence I present in a tabular form, Section 4, as it originally stood under the 1995 Act and as it now stands after the 2011 Amendment.

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Section 4 of the Act as it Section 4 of the Act after its originally stood under 1995 Act amendment in 2011

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(1) Any person who is operating or (1) Any person who is desirous of is desirous of operating a cable operating or is operating a cable television network may apply for television network may apply for registration as a cable operator registration or renewal of to the registering authority. registration, as a cable operator to the registering authority.

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(2) An application under sub(2) The cable operator shall section (1) shall be made in such fulfil such eligibility criteria form and be accompanied by such and conditions as may be fee as may be prescribed. prescribed and different eligibility criteria may be prescribed for different categorities of cable operators.

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Section 4 of the Act as it Section 4 of the Act after its originally stood under 1995 Act amendment in 2011 (3) On receipt of the application, (3) On and from the date of issue the registering authority shall of notification under Section 4A, satisfy itself that the applicant no new registration in a State, has furnished all the required City, Town or area notified under information and on being so that section shall be granted to satisfied, register the applicant any cable operator who does not as a cable operator and grant to undertake to transmit or him a certificate of such retransmit channels in an registration. encrypted form through a digital Provided that the registering addressable system. authority may, for reasons to be recorded in writing and communicated to the applicant, refuse to grant registration to him if it is satisfied that he does not fulfil the conditions specified in Clause (e) of Section 2. (4) An application under subsection (1) shall be made in such form and be accompanied by such documents and fees as may be prescribed.

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Section 4 of the Act as it originally stood under 1995 Act

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Section 4 of the Act after its amendment in 2011

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(5) On receipt of the application, the registering authority shall satisfy itself that the applicant has furnished all the required information prescribed under subsection (4) and on being so satisfied, register the applicant as a Cable Operator and grant him a certificate of registration or renew its registration, as the case may be, subject to such terms and conditions as may be prescribed under sub-section (6) Provided that the registering authority may, if it is satisfied that the applicant does not fulfil the eligibility criteria and conditions prescribed under subsection (2) or the application is not accompanied by necessary documents or fees as prescribed under sub-section (4) and for reasons to be recorded in writing, by order, refuse to grant its registration or renewal, as the case may be and communicate the same to the applicant. Provided further that the applicant may prefer an appeal against the order of the registering authority refusing grant or renewal of registration to the Central Government.

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Section 4 of the Act as it Section 4 of the Act after its originally stood under 1995 Act amendment in 2011 (6) Without prejudice to the compliance of eligibility criteria for registration of cable operators, the Central Government may prescribe, having regard to the interests of the sovereignty and integrity of India, the security of State, friendly relations with foreign States, public order, decency or morality, foreign relation or contempt of Court, defamation or incitement to an offence, such terms and conditions of registration including additional criteria or conditions to be fulfilled by the cable operator. (7) The Central Government may suspend or revoke the registration granted under sub-section (5) if the cable operator violates one or more of the terms and conditions of such registration.

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Provided that no such order or suspension or revocation shall be made without giving a reasonable opportunity of being heard to the cable operator.

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Though the prescriptions regarding sovereignty and integrity of India, the security of the State, friendly relations with foreign States, public order, decency or morality etc., were inserted in subsection(6) of Section 4, only by Amendment Act 21 of 2011, a reference to all of them was already made in Section 20 of the Act, by the Amendment Act 36 of 2000. Section 20 as it originally stood before the year 2000, merely empowered the Central Government to prohibit the operation of any cable television network, if it thought it necessary to do so in public interest. But, by Amendment Act 36 of 2000, the original Section 20 was numbered as sub-section (1) of Section 20. By the same Amendment Act, an additional provision was inserted as sub-section (2) of Section 20. This sub-section (2) of Section 20, inserted with effect from 01.09.2000, reads as follows:-

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"(2) Where the Central Government thinks it necessary or expedient so to do in the interest of the(i) sovereignty or integrity of India; or

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(ii) security of India; or

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(iii) friendly relations of India with foreign State; or

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(iv) public order, decency or morality,

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it may by order, regulate or prohibit the transmission or retransmission of any channel or programme".

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Therefore, what was brought in as sub-section (6) to Section 4 under Amendment Act 21 of 2011, was not something new, but had already been inserted as sub-section (2) of Section 20 under Amendment Act 36 of 2000. Keeping this aspect in mind, let me now move on to the Rule making power and to the Rules.

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Section 22 (1) of the Act, empowers the Central Government to make Rules, to carry out the provisions of the Act. Sub-section (2) of Section 22 lists out the matters in respect of which, provision may be made in the Rules. The matters enlisted in sub-section (2) of Section 22 include "the terms and conditions of registration under sub-section (6) of Section 4." In other words, the additional criteria or conditions that could be prescribed by the Government in excise of the power conferred by Section 4 (6), could also be stipulated in the Rules, by virtue of Section 22(2)(aaa).

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In exercise of the powers conferred by Section 22 (1) of the Act, the Central Government issued, for the first time, a set of Rules known as "The Cable Television Networks Rules, 1994". Though the Act does not define the expression "Multi System Operator", Rule 2(ee) inserted for the first time, by way of amendment issued with effect from 31.07.2006 defined the expression "Multi System Operator". But this definition was fine-tuned by another amendment issued with effect from 28.04.2012. After the said amendment, this expression is defined in Rule 2(c) as follows:-

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"2(c): Multi-System Operator (MSO)” means a cable operator who has been granted registration under rule 11-C and who receives a programming service from a broadcaster or its authorised agencies and retransmits the same or transmits his own programming service for simultaneous reception either by multiple subscribers directly or through one or more local cable operators (LCOs), and includes his authorised distribution agencies by whatever name called.”

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Rule 11 of the Rules as it originally stood under the 1994 Rules, contained provisions for the grant of permission to Multi System Operators to provide cable services with Addressable Systems in the notified areas. This Rule 11, in its original form, contained 7 sub-Rules with one proviso under sub-Rule (7). In brief, the scheme of Rule 11 in its original form, was as follows:-

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(1) No Multiple System Operator can provide cable television network

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services without a valid permission issued by the Central Government under Rule 11 (3).

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(2) Every Multi System Operator should apply for permission in Form 6, to the Central Government within 30 days of issue of the notification under Section 4-A.

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(3) The Ministry of Information and Broadcasting shall grant or refuse permission within 30 days of receipt of the application, after considering various parameters.

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(4) The Central Government may lay down the terms and conditions of permission.

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(5) No Multi System Operator can continue to provide cable television network services without obtaining prior permission from the Central Government in the notified areas, after the date notified.

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(6) The Telecom Regulatory Authority can take interim measures to ensure supply of signals, whenever a Multi System Operator fails to enter into an inter connection agreement with a Broadcaster of pay channels or adequate number of local cable operators for the notified area.

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(7) The Central Government may suspend or revoke the permission granted to a Multi System Operator, in the event of violation of one or more terms and conditions of the permission.

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(8) No suspension or revocation can be ordered without giving a reasonable opportunity to the Multi System Operator.

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But, Rule 11 in entirety, was completely scrapped and it was replaced by a set of Rules namely, 11A, 11B, 11C, 11D, 11E and 11F, by S.O.1940(E) dated 28.04.2012. The scheme of Rules 11-A to 11-F can be summarised as follows:-

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(1) A person desirous of providing cable television network services should apply for registration as Multi System Operator in Form 6, along with a processing fee of Rs.1,00,000/- and a declaration in Form 2.

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(2) The applicant should fulfil certain eligibility criteria laid down in clauses (a) to (f) of Rule 11-B.

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(3) The Registering Authority can issue a Certificate of Registration to a Multi System Operator who fulfils the eligibility criteria and for whom security clearance is obtained from the Central Government. (4) A person who is granted a certificate of Registration should comply with the terms and conditions stipulated in Rule 11-D.

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(5) The Registering Authority is entitled to grant provisional registration pending the final registration.

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(6)If a person has already obtained permission before the Amendment Act 21 of 2011, he shall be deemed to have been registered in respect of the areas, for the remaining period of the validity of registration.

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For the purpose of our case, a comparison of the language employed in Rule 11(3) before the 2012 amendment and the language employed in Rule 11-B and 11-C after the 2012 amendment is essential. Therefore, they are presented in a tabular form.

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Rule 11 (3) of the Rules before Rules 11-B and 11-C of the Rules amendment on 28.04.2012 after its amendment in 2012 (3) The Ministry of Information & 11B. Eligibility criteria for Broadcasting in the Government of Multi-System Operator.The India shall, within thirty days of Following criteria shall be the receipt of the application, fulfilled by an applicant who grant, or refuse, permission to makes an the applicant to provide application under rule 11A, namely addressable systems in the :- notified areas after considering (a)where the applicant is a its suitability or otherwise on person, he shall be a citizen of the basis of information given in India and not less than eighteen respect of its existing years of age ; operational area, actual number of (b)where the applicant is an subscribers and addresses of its association of individuals or body local cable operators in each of of individuals, whether the notified areas, commercial incorporated or not, the members arrangements with the broadcasters of and local cable operators, if any, such an association or body shall financial strength, management be citizens of India and not less capability, security clearance and than eighteen years of age; preparedness to supply and (c)where the applicant is a maintain adequate number of set company, such company shall be a top boxes for its subscribers, company registered under the installation of its subscriber Companies Act, 1956 and shall management system and compliance be subject to such conditions with all other quality of service relating to foreign direct standards as may be specified by investment as may be decided by the Authority. the Central Government; (d)the applicant shall not be an un-discharged insolvent ; (e)the applicant shall not be a person of unsound mind as declared by a competent court ; (f)the applicant shall not be convicted of any criminal offence. 11C. Registration as MultiSystems Operator.-(1) On being satisfied that the applicant fulfils the eligibility criteria specified under rule 11B and the requirements of rule 11A, the registering authority shall, subject to the terms and conditions specified in rule 11D and the security clearance from the Central Government, issue certificate of registration.

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Rule 11 (3) of the Rules before	Rules	11-B and	11-C of the	Rules
amendment on 28.04.2012	after	its amendm	ent in 2012
	(2)	Where	the regis	tering
	author	ity is	satisfied	that
	regist	ration can	not be grante	d, it
	shall	inform	the applican	t in
	writin refusa	g giving l	reasons for	such

¶87

Though a set of eligibility criteria was laid down in Rule 11-B, for the first time by the amendment that came into effect on 28.04.2012, the requirement of security clearance, has always formed part of the Rules. This can be seen from a careful reading of old Rule 11(3) and the new Rule 11-C(1).

¶88

We have already seen that before the Amendment Act 21 of 2011, Section 4 which spoke about registration, did not make any reference to the security concerns of the State. In other words, security clearance was not indicated as a pre condition for registration under Section 4 as it stood before the amendment of the year 2011. But, Section 20(2) which was inserted under Amendment Act 36 of 2000 empowered the Government to regulate or prohibit the transmission or retransmission of any channel or programme, in the interest of the security of India. In other words, the Act never linked a Multi System Operator with the security concerns of the State, till the year 2011 and the Act did not provide either for refusal of registration (under section 4) or for cancellation of registration (under section 20) of a Multi System Operator on that basis. What was provided under section 20 (2) with effect from 1-92000 was only a power to regulate or prohibit the transmission of a channel or programme and not the cancellation of registration of a Multi System Operator.

¶89

To put it differently, the Act has gone through three different regimes/phases. They are:

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(1) Period from 1994 to 2000: During this period, the concern relating to the security of the State did not form part, either of the stage of registration of a cable operator or for the cancellation of registration of a Multi System Operator. However, Rule 11(3) spoke about security clearance for permission to operate as Multi System Operator.

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(2) Period from 1.9.2000 to 25.10.2011: Even during this period, security clearance was not mandated under Section 4 for registration of a Cable Operator. But, the Government was empowered under Section 20(2), by way of amendment with effect from 1-9-2000, to regulate or prohibit the transmission of a channel or programme (but not the cancellation of registration of a Multi System Operator) in the

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interest of the security of India.

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(3) Period from 25.10.2011 onwards: After 25-10-2011, security clearance forms part of the requirement relating to registration as a cable operator, in view of the insertion of sub-section (6) under Section 4, which empowers the Central Government to prescribe additional conditions or criteria to be fulfilled by a cable operator, in the interests of the sovereignty and integrity of the India, the security of the State etc. Section 20(2) is also retained as such.

¶95

Therefore, it is clear that it is only after the Amendment Act 36 of 2000 that the very word "security" came to be used for the first time in the Act, under section 20 (2) and that too only for the purpose of regulating or prohibiting the transmission of a channel or programme. But under Amendment Act 21 of 2011, the expression "security" came to be inserted in section 4 specifically for the purpose of registration, by the insertion of sub-section (6). Now the position is that while Section 4 (6) uses the expression "Security of the State" in relation to registration of a Multi System Operator, Section 20(2)(ii) uses the expression "security of India", for enabling the Government to regulate or prohibit the transmission of any channel or programme.

¶96

But despite the fact that the Act did not use the expression "security", Rule 11(3) even as it stood originally from 1994, used the expression "security clearance". Therefore, the very same expression "security clearance" is adopted in the amended Rule 11-C also with effect from 28.04.2012.

¶97

I have been compelled to have a look at this brief history of this legislation, spread over a period of 20 years, in view of the fact that the very survival of the case of the petitioner depends upon how we understand the expression "security". A careful look at the language of Act, the different amendments made to the Act, the scheme of the Rules and the amendments made to the Rules would show that-

¶98

(1) Section 4(6) uses the expression "security of the State" with effect from 25.10.2011.

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(2) Section 20(2)(ii) uses the expression "security of India" with effect from 1.9.2000, and

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(3) Rule 11(3) as it stood up to 28.04.2012 and Rule 11-C with effect from 28.04.2012 use the expression "security clearance".

¶101

Since the expression "security clearance" is used only in the subordinate Legislation and also since no definition of the expression "security" is provided either in the Act or in the Rule, the meaning to be assigned to the expression "security clearance", should have a nexus only with the two expressions found in the Act namely (i) "security of the State" and (ii) "security of India". In

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other words, the expression "security clearance" appearing in Rule 11-C(1) should be construed in such a manner that it is in tune with the meaning to be assigned to the expressions "security of the State" appearing in section 4 (6) and "security of India" appearing in section 20 (2) (ii) of the Act.

¶104

As per the orders impugned in the writ petitions, the Ministry of Information and Broadcasting, has cancelled the permanent registration of the petitioner for Chennai and the provisional registration of the petitioner for Coimbatore, due to the denial of security clearance by the Ministry of Home Affairs. Therefore, in view of the usage of the expression in the Act in a particular manner and context, one would expect that upon materials available with the Ministry of Home Affairs, they were satisfied that it is not in the interest of the security of the country to give clearance to the petitioner.

¶105

It is settled law that if there is a perspective in the thinking of the Government that it is not in the interest of the security of the country to give clearance for a project, the power of judicial review over the said decision, is almost equivalent to nothing. In this connection, a useful reference could be made to a recent decision of the Supreme Court, cited by the learned Additional Solicitor General, in Ex.Armymen's Protection Services Private Limited vs. Union of India, 2014 (2) SCALE 676. In the said case, the Supreme Court pointed out that "it is difficult to define in exact terms as to what National Security is". But, at the same time, the Supreme Court indicated in general terms that National Security would include - (1) Socio Political Stability; (2) Territorial Integrity; (3) Economic Solidarity and Strength; (4) Ecological balance (5) Cultural Cohesiveness and (6) External peace etc.

¶106

In Union of India vs. Tulsiram Patel the Constitution Bench of the Supreme court pointed out that the expressions "law and order", "public order" and "security of the State" have been used in different Acts. The court opined that situations which affect "public order" are graver than those which affect "law and order" and situations which affect "security of the State" are graver than those which affect "public order". In the words of the Supreme court, danger to the security of the State may arise from without or within the State. The expression "security of the State" does not mean security of the entire country or a whole State. It includes security of a part of the State. It cannot also be confined to an armed rebellion or revolt. There are various ways in which the security of the State can be affected. It can be affected by State secrets or information relating to defence production or similar matters being passed on to other countries, whether inimical or not to our country, or by secret links with terrorists. It is difficult to enumerate the various ways in which security of the State can be affected. The way

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in which security of the State is affected may be either open or clandestine.

¶109

In Ex.Armymen's Protection Services Private Limited the Supreme Court went on to state in paragraph 16 that what is in the interest of National Security is not a question of law, but a matter of policy. It is not for the Court to decide whether something is in the interest of State or not. Quoting with approval Lord Hoffman, in Secretary of State vs. Rehman (2003 (1) AC 153), the Supreme Court held that decisions as to whether something is or is not in the interest of National Security are not a matter for judicial decision. However, the Supreme Court pointed out in para 17, the elbow space available to the Court in such cases, by holding that the court can satisfy itself whether there are justifiable facts and in that regard, the Court is entitled to call for the files and see whether it is a case where the interest of National Security is involved. However, the Court is obliged not to disclose the reasons to the affected party, if the State takes a stand that the issue involves National Security.

¶110

Therefore, keeping in mind the narrow scope of the enquiry that is available to this Court, as per the opinion rendered by the Supreme Court in para 17 of the above decision, I called for the file from the Ministry of Home Affairs. The file can be said to contain 2 parts, one relating to factual details and another relating to the conclusions drawn by concerned Officers on the basis of those facts. Though I would not disclose the factual details contained in the file, I can indicate the conclusions drawn, in the form of Notings, by the Officers concerned on the basis of the materials on record. Broadly, the conclusions reached by the Officers concerned, are:-

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(a) that there are no adverse reports against the Directors/Key Executives of the petitioner company, from the security point of view; and

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(b) that several investigations/enquires are under progress against two individuals namely the Maran brothers, who promoted a group of companies including the petitioner herein, and one of whom was also a Union Minister for Communications and Information Technology.

¶113

Though I have decided not to disclose the factual contents of the file produced before me, I should point out that the information contained therein is already there in the public domain in the form of Press Reports. The information available in the file is also available in Wikipedia upto this moment. The entire information contained in the file, revolve around allegations of gross abuse of official position, adoption of corrupt practices of incomprehensible nature to make unlawful pecuniary gains of unprecedented proportions, amassing of wealth of unimaginable scales and the registration of regular criminal cases against the promoters of the company. May be a time has come to hold that the abuse of official position by a person

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in power and the amassing of wealth of unimaginable proportions, is also an assault on the Security of the State. Economic aggression may soon become more dangerous than military aggression. But as pointed out by the Supreme court, what constitutes "security" is a matter of policy for the Government to decide and not for the court to define. Therefore, the Government should spell out clearly whether such acts as revealed in the file would constitute security and if so, the same yardstick would apply at all levels, not only against Multi System Operators but also against the Television channels. There cannot be two different security standards, one for Multi System Operators and another for TV Channels.

¶116

In A.K.Sharma vs. Director General of Civil Aviation AIR 2002 Delhi 357, relied upon by Mr.P.S.Raman, learned Senior Counsel for the petitioner, a Division Bench of the Delhi High Court held that misdemeanours, irregular financial transactions and Criminal Cases, without anything more, cannot lead to the denial of security clearance. It is true that the promoters of the petitioner (and not the petitioner company) have come to adverse notice for abuse of official position and large scale corrupt practices. But, at the same time, the Central Government should have applied its mind to the question whether such abuses and corrupt practices constitute an affront to the security of the State or not, to enable the second respondent to deny security clearance.

¶117

As I have pointed out earlier, Multi System Operator is a cable operator who receives programming services from broadcasters and retransmits the same to Multiple subscribers directly or through one or more local cable operators. A Multi System Operator, by the very nature of his business, as rightly contended by Mr.P.S.Raman, learned Senior counsel for the petitioner, is almost at the last but one stage of the supply chain, which takes the channels to the end users. In simplified terms, a Multi System Operator can be equated to the local agent of several newspapers, who distributes every morning, two or more newspapers to every household in the neighbourhood. He has nothing to do with the contents of the newspapers. By stopping such a local agent from distributing newspapers in the neighbourhood on the ground of denial of security clearance, no purpose will be served, especially if the very same agents also happen to publish Newspapers and those Newspapers are not banned on the same ground. This example befits the case on hand very well. According to the respondents, the promoters of the petitioner-company are also the promoters of a group of several Satellite Commercial Television Channels known as the SUN TV group. If security clearance cannot be given to the petitioner, on account of the adverse information available with the 2nd respondent against the promoters of the petitioner, the same logic would extend to those Television Channels, whose role and importance in society is much more than that of a mere Multi System Operator. But no action has been taken against those TV

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channels, in terms of Section 20 (2) (ii) of the Act on the ground that due to the acts of omission and commission on the part of the very same duo, who are the promoters, the security of India is threatened.

¶120

On the basis of the information provided in Form-6, it is contended by Mr.P.S.Raman, learned Senior counsel that the two brothers who promoted the company originally, have nothing to do with the petitioner. According to the learned Senior counsel, the mother of the two promoters holds 75% of the paid up share capital and the remaining 25% share capital is held by another company in which those two promoters who have now come under scanner, hold a small amount of shares. Therefore, the learned Senior counsel contended that so long as the petitioner company or its Directors/Key Executives have not come to any adverse notice from the point of view of security, the second respondent cannot deny security clearance.

¶121

But it is hard to buy the said argument especially in view of the position of power that one of the promoters occupied. To be precise, the petitioner was incorporated as a Private Limited Company on 25.04.2003. The first subscribers to the Memorandum and Articles of Association were (1) Kalanithi Maran and (2) Dhayanithi Maran. Under clause 6 of the Articles of Association, those two persons were also the first Directors of the company. Under clause 7A, Mr.Kalanithi Maran was appointed as the Chairman of the Company to hold the office for life. However, it appears that both the brothers transferred 75% of the paid up capital of the company in favour of their mother and 25% in favour of another private limited company.

¶122

The sequence of events that unfolded from the beginning of the year 2004, appears to have changed the destiny of the petitioner company. As per the affidavit filed by the petitioner, Mr.Dhayanithi Maran resigned from the Directorship of the petitioner company on 16.01.2004. In the Elections to the Lok Sabha, held in May 2004, he got elected and was appointed as the Union Minister of Communications and Information Technology. Till the year 2007, he held the said post. In or about May 2007, he resigned. But again in 2009, he was appointed as Union Minister of Textiles. He continued to hold the post till 2011.

¶123

I need not have recorded the above details, but for two reasons. The first reason is that I have to test the sustainability of the argument of the learned Senior Counsel for the petitioner that the two brothers have nothing to do with the petitioner company. The second reason is an important argument advanced by the learned Additional Solicitor General.

¶124

According to Mr.G.Rajagopalan, learned Additional Solicitor General, the petitioner obtained permission from the Ministry of

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Information and Broadcasting for operating in Chennai Metropolitan Area, on 30.09.2006, when one of the promoters of the petitioner was the Union Minister for Communications and Information Technology. In addition, it is contended by the learned Additional Solicitor General that despite the fact that permission was granted subject to security clearance by the Ministry of Home Affairs, the file was never forwarded to the Ministry of Home Affairs, for a full period of seven years, from September 2006 up to the year 2013. According to the learned Additional Solicitor General, the reasons are too obvious to state.

¶127

In other words, it is the contention of the learned Additional Solicitor General (1) that the petitioner got permission from the Ministry of Information and Broadcasting, when one of the promoters of the petitioner company was the Union Minister of Communications and (2) that somehow it was managed that the file was not sent for security clearance to the Ministry of Home Affairs from 2006 to 2013. Even according to the additional affidavit filed before me, by the petitioner, Mr.Kalanithi Maran resigned from the Directorship only on 28.09.2010.

¶128

Therefore in the light of the above facts, I would certainly not buy the argument of the learned Senior Counsel for the petitioner that even if one of the former Directors of the company had come to adverse notice, the same cannot be a ground for denial of security clearance. Cases of this nature are the ones where the Corporate Veil has to be necessarily lifted. Therefore if actually, the acts of the former Founder/Promoter/Director of the petitioner company are perceived by the Government to have been harmful to the security of the State, it is no defence to say that today he does not continue to be a Director, though his mother is the holder of 75% of the paid up share capital.

¶129

But as I have pointed out earlier, security clearance was not placed as one of the pre-conditions for the grant of permission to operate as a Multi System Operator, under the Act, in its original form. But Rule 11(3) as it originally stood, made a reference to the same. However, by an Amendment Act 36 of 2000, a power was conferred upon the Central Government, for the first time, under Section 20(2), to regulate or prohibit the transmission or retransmission of any channel or programme. But such a prescription was not included in the Act, for the registration of a cable operator or a Multi System Operator, until the advent of the Amendment Act 21 of 2011, by which sub-section (6) was inserted under Section 4. Even this sub-section (6) of Section 4 merely empowered the Central Government, to prescribe additional criteria to be fulfilled by the operator, having regard to several things including the security of the State. It was only thereafter that by the Amendment to the Rules with effect from 28.04.2012, security clearance became mandatory under the Amended

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Rule 11-C (1) of the Rules {though it was there in rule 11 (3) of the old rules}.

¶132

The effect of the aforesaid course that the Act and the Rules took in the past 20 years is (1) that the emphasis on the security of the State, was there from the year 2000, only in relation to the transmission/retransmission of any channel or programme and (2) that the requirement of a security clearance for the registration of a cable operator or a Multi System Operator, which formed part of the Subordinate Legislation, got transported to the main Act only in the year 2011.

¶133

The above distinction is of significance, at least to the case on hand. The petitioner is denied security clearance because of the fact that its promoters have come to adverse notice, in the perception of the Ministry of Home Affairs. If that perception is actually genuine and bonafide, the first thing that they would have done is to take recourse to Section 20(2) against the television channels promoted by the very same persons, as their role in society is much larger than the role of a mere Multi System Operator.

¶134

Alternatively, the first respondent should have initiated action in terms of Section 4(7) for the suspension or revocation of registration of the petitioner, on the ground that the petitioner violated one or more conditions of the registration. In such an event, the petitioner would have become entitled to a reasonable opportunity of hearing under the proviso to sub-section (7) of Section 4.

¶135

I have already extracted Section 4 in entirety. At the cost of repetition, it should be pointed out here that apart from the eligibility criteria stipulated in terms of Section 4(2) read with the Rules, a cable operator should also fulfil the additional criteria or conditions, if any, prescribed by the Central Government in exercise of the power under Section 4(6). The consequence of violation of any one or more of the terms and conditions of such registration, is the suspension or revocation of registration under sub-section (7) of Section 4. Sub-section (7) does not distinguish between the eligibility criteria referred to in Section 4(2) and the additional criteria such as sovereignty and integrity of India, the security of the State etc. referred to in Section 4(6). Consequently, the provision for a reasonable opportunity of being heard, prescribed in the proviso to sub-section (7), applies equally to the eligibility criteria under Section 4(2) and the additional criteria under Section 4(6).

¶136

It is true that the principles of natural justice have only a restricted application, when it comes to the security of the State. Normally, three categories of cases come up. They are (1) where a

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statute expressly excludes the application of the principles of natural justice (2) where a statute expressly makes applicable, the principles of natural justice and (3) where a statute is silent.

¶139

It is only in cases falling under the third category, that the Courts are compelled to undertake a journey, sometimes domestic and sometimes international, to find out whether or not, the principles of natural justice are to be read into a statute which is silent. But in cases where a statute expressly makes applicable, the principles of natural justice, it is not for the Courts to obliterate the same.

¶140

In this case, the proviso to Section 4(7) specifically provides for a reasonable opportunity of being heard. The power to suspend or revoke a registration in terms of Section 4(7) is not restricted to the violation of the general terms and conditions stipulated in Section 4(2) but it extends to even the additional criteria referred to in Section 4(6). In other words, the power to suspend or revoke the registration prescribed under Section 4(7) and the procedure prescribed to order such suspension or revocation, prescribed in the proviso to Section 4(7), is kept in common, both for the violation of the general conditions and for the violation of additional criteria such as security of the State etc.

¶141

Referring to Old Rule 11(7) and the New Rules 11-A to 11-F, it is contended by Mr.G.Rajagopalan, learned Additional Solicitor General, that the opportunity of being heard, as originally provided under the proviso to Rule 11(7), is no more there. Therefore, he contended that once the Government thought fit to remove the prescription regarding reasonable opportunity, from the Rules, the Court cannot reintroduce the same, by way of interpretation.

¶142

But the above contention cannot stand in the light of Amended Section 4. Section 4 as it originally stood, did not contain any provision for an opportunity of being heard. It did not even contain a prescription for suspension or revocation of the certificate of registration. But the Amended Section 4 contains a provision for both.

¶143

I am conscious of the fact that Section 4, in its original form as well as the Amended form speaks only about a cable operator. But there is no separate provision in the Act, dealing with the permission or registration of Multi System Operator. It is only Rule 2(ee) of the 1994 Rules {Rule 2(c) of the Amended Rules} that speaks about a Multi System Operator. A Multi System Operator, by the very definition of the term, is a cable operator. Therefore Section 4 would automatically come into operation. Consequently, the proviso to sub-section (7) of section 4 would also apply.

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Another argument advanced by Mr.G.Rajagopalan, learned Additional Solicitor General is that the question of the Ministry of Information and Broadcasting providing an opportunity of hearing does not arise in view of two things namely: (a) that security clearance from the Ministry of Home Affairs is a condition subject to which permission was granted and hence, the moment the petitioner failed to fulfil the condition, the consequence of losing the registration is automatic and inevitable and (b) that in view of the fact that the issue of security clearance is not within the control of the Ministry of Information and Broadcasting, any opportunity of hearing, even if granted, would only be an empty formality.

¶146

But the above contention loses sight of the prescriptions contained in Sections 4(6), 4(7) and 20(2). Section 4(6), empowers the Central Government to prescribe an additional condition for the grant of registration, having due regard to the security of the State. Despite the fact that the fulfilment of such an additional criteria would depend upon the views of a department other than the Ministry of Home Affairs, the proviso to Section 4(7) mandates an opportunity of hearing. Therefore the theory of useless formality is not applicable to cases where there is a statutory prescription.

¶147

Therefore, to summarise --

¶148

(i) the noting made by the concerned Officials, in the File produced before me by the Ministry of Home Affairs, conclude that there are no adverse reports against the Directors/Key Executives of the petitioner company, from the security point of view:

¶149

(ii) if the information available in the file about the alleged activities of the promoters of the petitioner company, is not considered to be a ground for invoking section 20(2) against the Television channels promoted by the very same persons, I do not know how the same information would disentitle the petitioner from getting a security clearance just for the continuance of registration as a Multi System Operator, whose role is very very limited and smaller than that of a commercial Television channel; and

¶150

(iii) if for suspending or revoking the registration of a cable operator under section 4(7) of the Act, an opportunity of hearing is to be granted, then the respondent cannot avoid such a liability especially when section 4 (7) does not make a distinction between general conditions imposed under section 4 (2) and additional conditions relating to security of the State imposed under section 4 (6).

¶151

Therefore, I hold that the impugned orders are liable to be set aside. Accordingly the writ petitions are allowed and the impugned orders are set aside. However, this order will not preclude the Central Government from taking any action in accordance with law, if on the basis of information available with them, it is of the opinion that any action is to be initiated either (i) against the

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petitioner and/or (ii) against the Television channels which form part of the same group and/or (iii) about the manner in which permission was granted to the petitioner to be a Multi System Operator on 30-9-2006, when one of the promoters was the Union Minister and/or (iv) about the circumstances under which the file relating to the permission granted to the petitioner was kept back for 7 years from 2006 till 2013 without being forwarded to the Ministry of Home Affairs. There will be no order as to costs. connected Miscellaneous petitions are closed.

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Sd/-

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Assistant Registrar(J) Dated: 05.09.2014 //True Copy// Sub Assistant Registrar 1. The Secretary, Ministry of Information and Broadcasting, Room No.116, "A"Wing, Shastri Bhavan, New Delhi. 2. The Secretary, Ministry of Home Affairs, North Block, Central Secretariat, New Delhi - 110 001. 2 CC to Ms.M.Sneha, Advocate SR.No.41848 & 41849 1 CC to M/s.N.Ramesh, Advocate, SR No.41765 W.P.Nos. 23444 and 23445 of 2014 and M.P.Nos. 1 and 1, 2 and 2 of 2014 ALA(CO) JJM (05.09.2014)

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M/s.Kal Cables Pvt.Ltd., v. The Secretary

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M/s.Kal Cables Pvt.Ltd., v. The Secretary

Case brief

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