-Report by Ojas Bhatnagar
The International Chamber of Commerce had directed Antrix Corporation Limited to pay US$ 560 Million with interest to Devas Multimedia Private Limited. The Delhi High Court has set aside this arbitral award in the case of Antrix Corporation Ltd. vs Devas Multimedia Pvt. Ltd. saying that it suffered from patent illegalities and fraud. It is not in accordance with the public policy of India.
Antrix Corporation Ltd was incorporated on 28 September 1992 under the Companies Act, 1956. Antrix provides commercial help to ISRO, it helps provide a host of products and services. On 17 December 2004 Devas was incorporated as a private company under the 1956 Act purportedly to pursue digital multimedia services. Antrix and Devas entered into a written agreement on 28 January 2005. Devas were developing a platform capable of delivering multimedia and information services via satellite and terrestrial systems to mobile receivers. Antrix had agreed to build, operate and launch two satellites and lease spectrum capacity on those satellites to Devas.
Devas promised to use such satellites and spectrum to offer multimedia broadband services across India. The Agreement was terminated by the force majeure clause on 25 February 2011 by Antrix due to revised
policy decisions of the Central Government. Devas invoked the arbitration clause contained in the Agreement. Ultimately, the International Chamber of Commerce on 14 September 2015 awarded Devas USD 562.5 million with
interest for the damages caused by Antrix’s non-performance of the Agreement.
Devas was also suspected of committing various fraudulent activities. Accordingly, the CBI and the ED investigated the matter. The CBI filed an FIR against Devas as well as its officers for offences under Section 420 read with Section 120B of the IPC, and Sections 13(1)(d) read with Section 13(2) of the Prevention of Corruption Act, 1988. The ED filed a report as well. Antrix initiated proceedings for the winding up of Devas. Antrix arrived before the National Company Law Tribunal, Bengaluru Bench praying for Devas to be wound up on account of committing fraud under Section 271(e) of the Companies Act, 2013.
On 19 January 2021, after hearing the parties, the NCLT passed a reasoned order admitting the petition and appointing an official liquidator attached to the High Court of Bangalore as the provisional liquidator. The final order was passed by NCLT dated 25 May 2021 which directed the winding up of Devas. Aggrieved by the order of winding up, Devas filed an appeal before the NCLAT. The appeal before NCLAT was dismissed vide an order dated 08 September 2021. Against the NCLAT order, an ex-director of Devas along with a shareholder filed an appeal before the Hon’ble Supreme Court.
The Supreme Court, in its January 2022 judgment, had ordered the winding up of the company.
The grounds for setting aside an arbitral award are limited. If the award does not comply with the fundamental policy of Indian law or the patent is illegal, the award can be set aside. The Arbitral Tribunal has incorrectly excluded the evidence which pertained to pre-contractual negotiations. It committed patent illegality in giving the award in this regard. Some issues are contradicted by the findings on other issues and are also contradicted by the reasoning given to reach the said conclusions. The award also contravenes the fundamental policy of Indian law as it conflicts with
various basic notions of justice. It has violated the FIPB policies as well.
“It has held that a product of fraud is in conflict with the public policy of any country including India. The basic notions of morality and justice are always in conflict with fraud and that allowing Devas and its shareholders to reap the benefits of their fraudulent action, would send another wrong message namely that by adopting fraudulent means and by bringing into India an investment in a sum of INR 579 crores, the investors can hope to get tens of thousands of
crores of rupees, even after siphoning off INR 488 crores.”
The objections filed by the petitioner are allowed and the arbitral award is set aside.