The channel has been asked to show cause for its actions within five days, failing which it will be taken off the air.
"It has been brought to the notice of the Ministry of Information and Broadcasting that certain parts of the reality show 'Bigg Boss 3' telecast and re-telecast on Colors channel offend against good taste and decency and are not suitable for unrestricted public exhibition," says the show-cause notice.
The notice says the language used by some participants is abusive and the show contains visuals which appear to be obscene and violative of the government's programme code.
It also points out that recently in one of the visuals, one participant has been shown pulling down the shorts of another participant. "This has offended the sensibilities of many viewers," says the notice.
The ministry has asked Colors not to carry content on the show that "constitutes a violation of the programme code as enshrined in the Cable TV Networks (Regulation) Act 1995," failing which it will be taken off the air.
Recently, one of the participants in the show, actor-director Kamal R. Khan, was thrown out for violent behaviour.
The reality show is based on the international show "Big Brother" in which 13 celebrities are locked in a house for 84 days and monitored round-the-clock by 40 cameras.