The Supreme Court dealt a blow to the country's biggest listed media firm, Zee Telefilms Ltd., on Wednesday, saying that last year's cancellation of TV rights by the Board of Control for Cricket in India was outside its control.

The Supreme Court dismissed Zee's argument that the BCCI be treated like a government organisation and said the state could only intervene in the affairs of the cricket board for regulatory issues.

"The petitioner has failed to establish that the BCCI is a state body," the court said, adding that the board fell outside its authority.

Zee plans to relaunch its legal battle, but analysts said the court decision represented a big setback for the broadcaster, which would have a tough time luring viewers in cricket-mad India.

Zee's shares fell as much as 4 per cent to 148 rupees, though they recovered and were down just 0.8 percent by 0730 GMT. Its shares have fallen nearly 11 percent this year, while the broader market has been flat.

Last September, the BCCI abandoned a $308 million four-year deal with Zee, which won the conditional rights in an auction. The deal had been challenged in court by unsuccessful bidder and rival ESPN Star Sports, owned by Walt Disney [Images] Co. and News Corp..

A Zee official said it would renew its legal fight with the board in a lower court.

"Zee is free to approach a state high court, and that is what we are going to do," said Ashish Kaul, a vice president of brand development at Essel Group, which partly owns Zee Telefilms.

"This is not over yet."

Zee plans to launch a dedicated sports channel in the second quarter of 2005, and cricket would represent a lucrative property to build on.

"Zee has to start from scratch now... the cricket rights were supposed to be a big strategic advantage for Zee, now they have a gaping hole," said Apurva Shah, an analyst at ASK-Raymond James.

"This is a big blow strategically."

Zee had also challenged the cricket board's decision to grant the Indian unit of Sony Corp. the right to broadcast a four-match Test series between India and Australia in October and November.