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The Delhi high court on Tuesday asked the centre to consider deferring phase III of FM radio auctions and inform the court by Wednesday, as it heard a plea by Digital Radio Broadcasting Ltd against the government’s decision to deny its radio channel Red FM permission to participate in the auctions on security grounds.

The high court termed as “vague" the security clearance process for FM radio auctions, which had been expected to start on 27 July and close by end-September.

The information and broadcasting (I&B) ministry has rejected applications by Red FM, a part of the Sun TV group, to participate in the auctions on grounds that it did not have a security clearance from the home ministry.

Red FM is among the prime bidders in the phase III of FM auctions covering 135 radio channels in 69 cities.

In June, the home ministry rejected a proposal by the I&B ministry for providing security clearance to 33 television channels of Chennai-based Sun TV Network Ltd, controlled by Kalanithi Maran.

The home ministry refused clearance on the ground that their continued airing would have an “adverse impact on economic security" of the country, in view of a pending probe against the company’s promoters by the Central Bureau of Investigation (CBI) and the Enforcement Directorate (ED).

A bench comprising justice Badar Durrez Ahmed and justice Sanjeev Sachdeva on Tuesday heard the arguments on the eligibility criteria for participation in the FM radio auction process and said the concept of security clearance was vague and ill-structured.

“We are an entertainment channel and have been a running unit since 2000. Our content does not have an impact on national security," said Kapil Sibal, counsel for Digital Radio Broadcasting.

The court will continue to hear the matter on Wednesday.

Interestingly, Entertainment Network India Ltd (ENIL), the Times Group company that operates radio stations under the Radio Mirchi brand, intervened in the matter in the Delhi high court, worried that the court may conditionally allow Red FM to participate in the auctions.

“Although we back Red FM, we made a limited intervention so that Red FM was not allowed conditional participation as that would have damaged the whole auction process," said Prashant Panday, chief executive officer, Radio Mirchi.

Conditional participation by Red FM would have increased competition and led to higher bids. “As it is an ascending auction, their mere presence would have ensured that prices go up. It was okay if they were to stay in the business, but if they were later asked to move out, it would have adversely affected the rest of the bidders," Panday said.

The company’s intention behind the intervention was to get a clear verdict on the matter. “We are glad that the court understands the urgency of the matter and has asked the government to consider deferring the auction just for a few days," Panday said.

Red FM’s chief operating officer Nisha Narayanan declined to comment on the issue as the matter is under judicial consideration.

ENIL had similarly intervened in the matter when on Monday the Sun group moved the Madras high court challenging the refusal of security clearance by the home ministry and the government’s decision not to allow it to participate in the FM radio auctions.

Five Sun group companies were denied permission to participate in the auctions, while 21 other operators were granted approval. Permission to Sun, which runs 45 radio stations across the country, was denied despite repeated efforts by the ministry of information and broadcasting to influence the home ministry to give its clearance to the company.

Anurradha Prasad, chairman and managing director of BAG Films and Media Ltd and president of the Association of Radio Operators of India (AROI), said the FM radio auctions were in a mess.

“While the industry supports Red FM, it does not want the auction to be postponed either. Whatever the honourable court decides, it should sort out the matter urgently," she said. BAG Films runs 10 radio stations under the Dhamaal 24 brand.

“The entire radio industry is in a state of flux as the companies have to migrate to the new licence regime of phase III. If the matter is not resolved and licences are not renewed, there will be a question mark on the status of the industry," she said.

Rahul Gupta, director of Music Broadcast Pvt. Ltd that operates Radio Mantra and Radio City channels, said: “Our only wish is that the hearing is expedited and the auctions concluded. The future of this industry is in jeopardy."

The government, it is estimated, will make 1,500 crore from migration fee and the e-auction of the radio frequencies.

The FM radio brand Fever 104 run by HT Media Ltd, publisher of Mint and the Hindustan Times, competes with other radio stations in Delhi, Mumbai, Bengaluru and Kolkata and will bid for frequencies in the upcoming e-auction.

Fever chief executive officer Harshad Jain refused to disclose how many frequencies the company is eyeing. He said the radio station was prepared for the mock auctions on Wednesday and Thursday and the auction beginning on 27 July.

“That is the notification we got from the ministry of information and broadcasting, and we have not heard anything contrary since," Jain added.

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