The Devas-Antrix Satellite Deal: ‘Fraud of a Huge Magnitude’

STORIES, ANALYSES, EXPERT VIEWS

The Devas-Antrix Satellite Deal:  ‘Fraud of a Huge Magnitude’

The Supreme Court Monday upheld the National Company Law Tribunal’s order to wind up Devas Multimedia, noting that “it is a case of fraud of a huge magnitude”.

A 2005 satellite deal between Antrix Corporation — the commercial arm of the Indian Space Research Organisation (ISRO) – and Devas Multimedia Pvt Ltd, a start-up headquartered in Bengaluru, writes journalist T A Johnson “is at the heart of a global legal tussle between the Indian government and foreign investors in Devas. The tussle is a fallout of the cancellation of the deal in 2011 by the then UPA government citing requirement of satellite spectrum allotted to Devas for security purposes.”

The Supreme Court order came even as three Mauritius-based investors and a German telecom major have approached federal courts in the United States to seize assets linked to the Indian government such as those of Air India. The investors have won separate compensation awards in international tribunals, including $1.2 billion awarded by an International Chamber of Commerce (ICC) tribunal on September 14, 2015. The Supreme Court has kept the $1.2 billion award in abeyance.

 

Signal to investors should be positive

The government could use the Court’s ruling to argue against the seizure of its properties internationally by Devas and its investors who are trying to enforce the awards by international tribunals. But every time the Indian government chooses not to accept international arbitration awards, or questions their validity, or challenges them in hope of a reversal, the Indian Express writes “the country’s reputation as an attractive investment destination takes a beating. If the rationale for international arbitration and investment treaties is to provide safety and certainty to investors, then repeatedly seeking to contest arbitration awards — the government has in the past questioned the arbitration awards in favour of Cairn Energy and Vodafone — will only send the wrong signal to the global investor community. For a capital deficit country that is actively trying to woo foreign capital, moves such these are best avoided.”

Although it was the then UPA government’s failure to conduct adequate due diligence on the deal, the paper says “it is also true that the current government has been left to face the consequences of the manner in which natural resources were distributed by the previous government. But, keeping aside the political posturing meant for a domestic audience, the government should also be mindful of the implications of not abiding by international norms. Not honouring global awards will have consequences. After all, foreign investors look for predictability in policies. Any policy or regulatory uncertainty creates apprehensions…..”

 

The Devas-Antrix deal

The two entities signed an “Agreement for the Lease of Space Segment Capacity on ISRO/Antrix S-band spacecraft by Devas Multimedia Pvt Ltd” on January 28, 2005, a month after Devas was incorporated in Bengaluru in December 2004 by two former ISRO employees. Under the deal, ISRO would lease to Devas two communication satellites (GSAT-6 and 6A) for 12 years for Rs 167 crore. Devas would provide multimedia services to mobile platforms in India using S-band transponders on the satellites, with ISRO leasing 70 MHz of S-band spectrum.

The deal progressed smoothly for six years before it was annulled by the UPA government on February 25, 2011, following a Cabinet Committee on Security decision of February 17 to terminate the agreement to use the S-band for security purposes.

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