Devas Shareholders Say Will Continue Pursuit of Indian Assets across the Globe
Moneylife Digital Team 19 January 2022
Despite a winding-up order by the Supreme Court (SC), shareholders of Devas Multimedia Pvt Ltd say they will continue the pursuit of Indian assets across the globe and will not be deterred by the Indian government’s attempts to obstruct justice.
 
In a statement, Matthew D McGill, lead counsel for Devas shareholders, says, “Three separate international arbitration tribunals found that the Antrix unlawfully breached its obligations to Devas. Today’s ruling is a travesty of justice—the sadly predictable result of the bogus allegations fed by the Modi government to servile domestic courts. Our global campaign to enforce Devas’ international arbitration awards will continue without interruption or delay. And we will hold the government of India to account for its confiscation of Devas.”
 
On Monday, a bench of justice Hemant Gupta and justice V Ramasubramanian drew out a comparison between the Companies Act, 1956 and the Companies Act, 2013, to examine fraud as a ground for winding up a company. The bench upheld an order passed by the National Company Law Appellate Tribunal in September last year, directing the winding up of Devas Multimedia on the grounds of fraud. 
 
The bench observed that the mandate of Section 243 (a) of the Companies Act, 1956 to take recourse, in cases of fraud, to just and equitable ground, was a little incongruous. It elaborated that this is due to the reason that under Section 443(2), the court may refuse to make an order of winding up, on just and equitable ground, if some other remedy was available to the persons seeking winding up.
 
“The main departure of the 2013 Act from the statutory regime of the 1956 Act, is the specific inclusion of fraud, directly as one of the circumstances in which a company could be wound up. Section 271 of the 2013 Act lists out the circumstances in which a company may be wound up,” it said.
 
“In other words, fraud has now directly become (under the 2013 regime), one of the circumstances in which a company could be wound up, though it also continues to be a ground indirectly, under section 224(2) read with section 213 (as it was under Section 439(1) (f) read with sections 243 and 237(b) of the 1956 Act),” the SC says. (Read: Devas Multimedia is the first case of winding up a company due to fraud
 
According to Jay Newman, senior adviser to Devas shareholders, the SC decision is neither a setback not a surprise to them. “The (Narendra) Modi government will now appeal to global courts waving the National Company Law Tribunal (NCLT) ruling as yet another bogus excuse to evade payment. Courts in the US, Netherlands, Canada and France, have seen through the previous sham proceedings and evasion tactics, and this ruling is no different. Devas shareholders will continue to identify and seize Indian state assets around the world until the debt has been paid,” he says in an email. 
 
Meanwhile, a day after the SC uphold the liquidation of Devas Multimedia, Union finance minister Nirmala Sitharaman slammed the 2005 Antrix-Devas deal as a fraud against the country. "Antrix-Devas deal was a fraud by the Congress, of Congress, for Congress," the minister says, adding, “(the) government will target assets owned by Devas promoters.”
 
In May last year, the Bengaluru bench of the NCLT ordered the winding up of Devas, at the instance of Antrix. It also appointed a provisional liquidator, saying Devas was incorporated with a fraudulent motive to collude with the then officials of Antrix Corporation, to get bandwidth from it by entering into an agreement in 2005. In September last year, the National Company Law Appellate Tribunal upheld the NCLT’s order.
 
Justice Ramasubramanian, who authored the judgement on behalf of the bench, said: “If the seeds of the commercial relationship between Antrix and Devas were a product of fraud perpetrated by Devas, every part of the plant that grew out of those seeds, such as the agreement, the disputes, arbitral awards etc., are all infected with the poison of fraud. A product of fraud is in conflict with the public policy of any country including India.”
 
The bench emphasised that the basic notions of morality and justice are always in conflict with fraud and, hence, the motive behind the action brought by the victim of fraud can never stand as an impediment. Dismissing Devas’ appeal against its winding up, the bench said: “We find all the grounds of attack to the concurrent orders of the NCLT and NCLAT to be unsustainable.”
 
Devas Multimedia is also seeking over US$1.2 billion from India it won in international arbitration in September 2017. In 2020, an arbitration tribunal had awarded more than $111 million along with interest to Devas. The company also won US$562.5 million in damages from separate proceedings at the International Chamber of Commerce.
 
This dispute goes back to 2011, when Antrix Corp, a unit of Indian Space Research Organization (ISRO) annulled an agreement with Devas Multimedia citing force majeure (unforeseeable circumstances that prevent someone from fulfilling a contract).  
 
The then United Progressive Alliance (UPA) government cancelled the controversial Devas-Antrix contract in February 2011, invoking sovereignty and decided to use the advanced satellite (GSAT-6) for the country’s strategic use.
 
Under the annulled deal, Antrix was to lease transponders of the satellite to Devas for allowing it to offer digital multimedia services using the S-band wavelength (spectrum), reserved for strategic purposes.  
 
After the cancellation of the deal, Deutsche Telekom, three Mauritius-based foreign investors in Devas Multimedia, and Devas Multimedia itself, approached various international arbitration tribunals seeking damages from the Indian government. 
 
Earlier this month, a law court in Montreal district of Canada allowed three Mauritius-based investors of Devas Multimedia, a joint venture between the Indian government-owned Antrix Corporation and Devas Multimedia Ltd, to seize funds deposited by Airport Authority of India (AAI) and Air India with International Air Transport Association (IATA). According to media reports, the court, on 21 December 2021, had issued the order for ordering preliminary attachment of $6.8 million of the AAI funds deposited as air service fees with the Montreal-based IATA.
 
According to reports, the Canadian court in Montreal passed separate orders on 24th November and 21 December 2021 on pleas by shareholders of Devas Multimedia Pvt Ltd to enforce arbitration awards against the Indian government.
 
After the order was issued on 21st December, Air India removed its inventory from global distribution systems (GDS), used by travel agents to issue tickets, it added.
 
AAI says it would take legal recourse against the order by a court in Canada. “The AAI has not been served any order by the Quebec Court, Canada, in this matter. However, the IATA shared certain documents on the AAI’s request, for suspending the transfer of the amount collected on behalf of the AAI. The AAI is taking legal recourse to defend itself,” the Airports Authority says in a statement. (Read: Canadian Court Allows Devas Investors To Seize Funds Collected by IATA from AAI and Air India: Reports)
 
Comments
saharaaj
4 months ago
It is like Undersecretary in doT writing letter to SC no dues on TELCOs after getting 176 K Cr order
S.SuchindranathAiyer
4 months ago
The Indian state accustomed to a selectively communist and colonial command economy run by capricious and corrupt bureaucrats, supported with impunity granted by expensive tardy and incompetent courts needs to establish equity and rule of law internally before it can deal with International business.
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