The government has asked Sunil Mittal's Bharti group to explain 'violation' of foreign direct investment and other guidelines in its direct-to-home services, licence for which was issued some time back.

In a show-cause notice, the information and broadcasting ministry asked Bharti Telemedia to furnish explanation failing which the government could consider suspending the licence till such time the company obtains necessary approvals from FIPB and meet the eligibility conditions.

A Bharti spokesperson said the company has complied to all licence conditions in its DTH venture and the same has been communicated to the government.

"We are in complete compliance of all necessary regulatory guidelines, including FDI and foreign equity component as laid down in DTH licence conditions and requirements," the spokesperson said.

"All these particulars were duly submitted to the ministry of information and broadcasting and licence was granted by Ministry after consideration of all the details," the spokesperson added.

Bharti Telemedia, the DTH arm of Bharti Enterprises, was issued the show cause notice last month for alleged violation of FDI guidelines as well as well eligibility conditions of the licence agreement.

According to guidelines, any foreign investment in cable and broadcasting services is through the FIPB route and prior approval is required for such investment in any company.

"It has been found that Bharti Telemedia does not have FIPB approval for foreign investment coming into it on a pro-rata basis through investing companies. This has resulted in violation of existing FDI policy and in turn the eligibility criteria of the guideline," the notice said.

The bone of contention appears to be Bharti Airtel [Get Quote], the group's mobile telephony arm holding 40 per cent stake in Bharti Telemedia, as well as having a cable operator's licence, owning more than the permitted stake in the DTH arm.

"Bharti Airtel, which has a 40 per cent share in the DTH licensee company, is registered as a cable operator. The eligibility under the guidelines and licence agreement for the DTH service has provided that the licensee shall not allow broadcasting and/or cable network companies to collective hold or own more than 20 per cent of the total paid up equity in the DTH venture," the notice said.

With respect to the FDI in the DTH arm, the ministry has found to be well above the permitted limit.

In the notice, the ministry asked the company to clarify on the shareholding of Bharti Enterprises, which holds 60 per cent in Bharti Telemedia.

"On further examination, it has been found that in case of Bharti Enterprises it is a partnership firm of seven individuals but it is not clear whether these individuals are Indians, NRI or foreigners. Therefore, this may be clarified urgently," it said.

The shareholding pattern of another company Bharti Airtel, which has 40 per cent stake in the DTH arm, shows a total foreign investment of 21.6 per cent in the form of FDI. 

The eligibility criteria in respect of a foreign investment in a DTH company is FDI component of the foreign equity should not exceed 20 per cent. The total foreign equity holding, including FDI/NRI/OCBs/FIIs in the applicant cannot exceed 49 per cent.