The Delhi High Court on Friday upheld an order setting aside an arbitral award directing ISRO’s Antrix Corporation to pay damages of USD 562.2 million with interest to Devas for terminating a deal in 2011.
A bench headed by Chief Justice Satish Chandra Sharma dismissed an appeal by Devas Employees Mauritius Pvt Ltd, a shareholder of Devas Multimedia Pvt Ltd, against the order passed by a single judge of the high court and said there was no error in the earlier finding that award suffered on the grounds of “fraud” and “being in conflict with the public policy of India”.
The court noted that the Supreme Court has, while dealing with a case related to the entity, itself held that Devas was incorporated for fraudulent purposes and its affairs were conducted in a fraudulent manner, and therefore, the agreement, from which the present arbitration arose, was a product of fraud.
“Such is the extent of the fraud that it permeates through every agreement, transaction or award entered into by Devas. The fraud propagated by Devas is not only against Respondent No. 1 (Antrix), but against the State as a whole, inasmuch as it attempts to obtain monetary benefits from the State itself, by attempting to enforce an arbitral award, which itself is arising out of fraud. A fraud of such scale would certainly render the award to be in conflict with the public policy of India,” said the bench, also comprising Justice Subramonium Prasad.
The court opined there was no perversity in the decision of single judge when it set aside award and thus the challenge to his conclusion should fail and giving relief to Devas would further perpetuate the fraud.
“The facts of the present case are nothing short of peculiar. Devas has an arbitral award amounting to USD 562.5 million along with interest and costs, in its favour. While the arbitral award was published on 14.09.2015, there have been two charge sheets filed by the CBI against Devas and other individuals alleging criminal conspiracy, fraud and other corrupt practices on 11.08.2016 and 08.01.2019 and the investigation regarding the same is ongoing,” observed the court.
“It would be against the principles of justice, equity and good conscience to permit Devas to reap the benefits of the ICC Award, and permitting Devas to do so would amount to this court perpetuating the fraud,” it added.
In August last year, Justice Sanjeev Sachdeva had allowed the petition filed by Antrix under the Arbitration and Conciliation Act seeking setting aside of the arbitral award passed on September 14, 2005 by the Arbitral Tribunal constituted by the International Chamber of Commerce (ICC) which had allowed the claim of Devas Multimedia Private Limited.
The single judge had held that the impugned award suffered from “patent illegalities and fraud and is in conflict with the Public Policy of India”.
Antrix is a central public sector enterprise and is engaged in the business of marketing and sale of products and services of the Indian Space Research Organisation (ISRO) to national and international customers.
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Devas is a limited liability company incorporated in December 2004.
Antrix and Devas had entered into a contract on January 28, 2005 for the lease of Space Segment Capacity on ISRO/ Antrix S-band Spacecraft. It provided for the lease to Devas of transponders on satellite GSAT-6, referred to in the contract as Primary Satellite 1 or PS1.
It also contained an option for Devas to lease transponders on a second satellite, GSAT-6A, referred to in the contract as Primary Satellite 2 or PS2. 13. The contract was executed between Antrix and Devas only and neither the Department of Space nor ISRO or any other government agency was a party to the contract.
Antrix had notified Devas in February 2011 that the contract was terminated, which the latter refused to accept and claimed damages by initiating arbitration proceedings.
The arbitral tribunal, while passing the award in 2015, had held that the termination of the contract on the part of Antrix amounted to wrongful repudiation of the contract and accordingly Article 7(b) of the contract did not limit Devas’ entitlement to alleged damages that it suffered due to Antrix’s repudiation of the agreement.
The tribunal had directed Antrix to pay USD 562.2 million to Devas besides interest.
The single judge had said the findings on fraud returned by the Supreme Court in its January 2022 judgement clearly establish that “award contravenes the fundamental policy of Indian law being in conflict with the most basic notions of justice and is also contrary to the national economic interest having also violated the ‘FIPB Policies’ and the provisions of ‘FEMA’ and ‘PMLA’ and thus antithetical to the fundamental policy of Indian law”.
Antrix had earlier sought winding up of Devas before the National Company Law Tribunal (NCLT) alleging that Devas was formed for a fraudulent and unlawful purpose and its affairs had been conducted in a fraudulent manner. The NCLT had allowed winding up of Devas which was then challenged by the company and Devas Employees Mauritius Pvt Ltd before the National Company Law Appellate Tribunal (NCLAT).
In September, 2021, NCLAT dismissed both the appeals and the orders were then challenged before the Supreme Court which also dismissed the appeals on January 17 this year.
Since the order of winding up of Devas has been upheld until the Supreme Court, Devas was represented in the high court proceedings by the official liquidator.