“If as a matter of fact, fraud as projected by Antrix, stands established, the motive behind the victim of fraud, coming up with a petition for winding up, is of no relevance. 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.” – Supreme Court of India
A day after the Supreme Court of India dismissed a petition challenging the concurrent orders of NCLT (National Company Law Tribunal) and NCLAT (National Company Law Appellate Tribunal) to shut down Devas Multimedia Private Limited, India’s Finance Minister Nirmala Sitharaman in a press conference said on Tuesday 18 January that the deal between ISRO`s commercial arm Antrix and Devas Multimedia that was signed in 2005 under the Congress-party led government was a fraud and has caused massive damage to the exchequer.
The Finance Minister said the satellite deal between ISRO`s commercial arm Antrix and Devas Multimedia signed in 2005 was a fraud against the country.
The Supreme Court has observed ” …allowing Devas and its shareholders to reap the benefits of their fraudulent action, may nevertheless 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.”
With this in focus, the central Government also should inform the people of India the exact amount, in hundreds of crores, that has been paid and also the names of the law firms that have received this money as fees to represent ANTRIX in the Antrix-Devas case in India and abroad.
A two Judge Bench of Justice Hemant Gupta and Justice V Ramasubramanian has said in its order in response to a petition by Devas Multimedia Private Limited: “We do not know if the action of Antrix in seeking the winding up of Devas may send a wrong message, to the community of investors. But allowing Devas and its shareholders to reap the benefits of their fraudulent action, may nevertheless 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.
Senior Counsel Mukul Rohtagi appeared for Devas Multimedia – the company in liquidation; Senior Counsel Arvind P. Datar, appeared for the shareholderappellant; and Additional Solicitor General N. Venkataraman appeared for Antrix Corporation Limited.
The apex cort has observed: “If as a matter of fact, fraud as projected by Antrix, stands established, the motive behind the victim of fraud, coming up with a petition for winding up, is of no relevance. 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 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.” This observation came, especially in reponse to the contention that the actual motive behind Antrix seeking the winding up of Devas, is to deprive Devas, of the benefits of an unanimous award passed by the ICC Arbitral tribunal presided over by a former Chief Justice of India and the two BIT awards and that such attempts on the part of a corporate entity wholly owned by the Government of India would send a wrong message to international investors.
Another contention raised on behalf of the appellants was that the criminal complaint filed for the offences punishable under Section 420 read with Section 120B IPC, has not yet been taken to its logical end. Therefore, it is contended that in case the officials of Antrix and shareholders of Devas are acquitted after trial, the clock cannot be put back, if the company is now wound up. The Supreme Court has said – “Attractive as it may seem at first blush, this contention cannot hold water, if scrutinised a little deeper. The standard of proof required in a criminal case is different from the standard of proof required in the proceedings before NCLT. The outcome of one need not depend upon the outcome of the other, as the consequences are civil under the Companies Act, 2013 and penal in the criminal proceedings. Moreover, this argument can be reversed like the handle of a dagger. What if the company is allowed to continue to exist and also enforce the arbitration awards for amounts totaling to tens of thousands of crores of Indian Rupees (The ICC award is stated to be for INR 10,000 crores and the 2 BIT awards are stated to be for INR 5,000 crores) and eventually the Criminal Court finds all shareholders guilty of fraud? The answer to this question would be abhorring.
The apex Court order points out that the officials of the Department of Space and Antrix were in collusion and that it was a case of fence eating the crop (and also allowing others to eat the crop), by joining hands with third parties, is borne out by the fact that the Note of the 104th Space Commission did not contain a reference to the Agreement. The Cabinet Note dated 17 November 2005 prepared after ten months of signing of the Agreement, did not make a mention about Devas or the Agreement, but proceeded on the basis as though ISRO received several Expressions of Interest. These materials show the complicity of the officials to allow Devas to have unjust enrichment.
Also it is on record that the minutes of the meeting of the Sub-Committee dated 6 January 2009 were manipulated and the experimental license was granted on 7 May 2009. Only thereafter, the original minutes were restored on 20 November 2009 and that too after protest.
Supreme Court has underscored in its order that SATCOM Policy perceived telecommunication and broadcasting services to be independent of each other and also mutually exclusive. Therefore, a combination of both was not permitted by law. It is especially so since no deliberation took place with the Ministry of Information and Broadcasting. Moreover, unless ICC allocates space segment, to a private player, the same becomes unlawful. This is why the conduct of the affairs of the company became unlawful.
Supreme Court of India has said that the kind of licenses obtained such as ISP and IPTV licenses and the object for which FIPB approvals were taken but showcased as those sufficient for fulfilling the obligations under the Agreement pf 28 January 2005 demonstrated that the affairs of the company were conducted in a fraudulent manner. This is fortified by the fact that a total amount of Rs.579 crores was brought in, but almost 85% of the said amount was siphoned out of India partly towards establishment of a subsidiary in the US, partly towards business support services and partly towards litigation expenses. We do not know if the amount of Rs.233 crores taken out of India towards litigation services, also became a part of the investment in a more productive venture, namely, arbitration. The manner in which a misleading note was put to the cabinet and the manner in which the minutes of the meeting of
TAG subcommittee were manipulated, highlighted by the Tribunal, also shows that the affairs of the company were conducted in a fraudulent manner. Thus, the second limb of Section 271(c), namely, the conduct of the affairs of the company in a fraudulent manner, also stood established. [ Click for Supreme Court order ]
Backgound of the case
Antrix Corporation Limited (hereinafter referred to as Antrix), incorporated on 28 September 1992 under the Companies Act, 1956, is the commercial arm of the Indian Space Research Organisation (ISRO), which is wholly owned by the Government of India and coming under the administrative control of the Department of Space.
On 28 July 2003, Antrix entered into a Memorandum of Understanding with Forge Advisors, LLC, a Virginia Corporation. The intent, as spelt out in the MOU, was to make both parties become “strong and vital partners in evaluating and implementing major new satellite applications across diverse sectors including agriculture, education, media and telecommunications”. Apart from other things, the MOU contemplated Forge Advisors to provide a broad array of advisory services that included near-term tactical projects in the areas of sales, marketing, business development, strategic partnership negotiations and other related business areas and long term projects in the areas of corporate strategy, market opportunity assessment, business case development for new services, launch of new application services etc.
On 22 March 2004, Forge Advisors made a presentation proposing an Indian joint venture, to launch what came to be known as “DEVAS” (Digitally Enhanced Video and Audio Services). It was projected in the said proposal that DEVAS platform will be capable of delivering multimedia and information services via satellite to mobile devices tailored to the needs of various market segments such as (i) consumer segment, comprising of entertainment and information services to digital multimedia consoles in cars and vehicles; (ii) commercial segment, comprising of high value information services to Commercial Information Devices in commercial transport vehicles; and (iii) social segment, comprising of Developmental Information Services to Rural Information kiosks in underserved areas.
The presentation on 22 March 2004 was followed by a proposal on 15 April 2004. The proposal was to form “a strategic partnership to launch DEVAS, a new service that delivers video, multimedia and information services via satellite to mobile receivers in vehicles and mobile phones across India”. The proposal of 15 April 2004 indicated that DEVAS was conceived as a new National Service, expected to be launched by the end of 2006, that would deliver video, multimedia and information services via satellite to mobile receivers in vehicles and mobile phones across India. The proposal contemplated the formation of a joint venture and an obligation on the part of ISRO and Antrix to invest in one operational SBand satellite with a ground space segment to be leased to the joint venture. In return, ISRO and Antrix were to receive lease payments of USD 11 million annually for a period of 15 years.
The concept of DEVAS, as indicated in the penultimate paragraph of the Executive Summary of the proposal of 15 April 2004, was based upon the evolution and performance of similar services in other markets such as XM Radio and Sirius Radio in the United States and Mobile Broadcasting Corporation’s multimedia services via satellite in Korea and Japan.
After this proposal several meetings were held between the representatives of Forge and ISRO/Antrix and a Committee headed by one Dr. K.N. Shankara, Director of SAC (Space Application Centre) was constituted to examine the proposal.
On 17 December 2004 Devas Multimedia Private Limited, (the ‘company in liquidation’) was incorporated as a private company under the Companies Act,1956. Immediately thereafter, Antrix entered into an Agreement with this company on 28 January 2005. The Agreement was titled as “Agreement for the lease of space segment capacity on ISRO/Antrix S Band spacecraft by DEVAS”. The preamble of the Agreement stated that Devas was developing a platform capable of delivering multimedia and information services via satellite and terrestrial system to mobile receivers, tailored to the needs of various market segments and that Devas had, therefore, requested Antrix, space segment capacity for the purpose of offering SDMB service, a new digital multimedia and information service, including but not limited to audio and video content and information interactive services, across India that will be delivered via satellite and terrestrial system via fixed, portable mobile receivers including mobile phones, mobile video/audio receivers for vehicles etc.. What was to be leased out by Antrix to Devas was 5 numbers of C X S transponders each of 8.1 MHz capacity and 5 numbers of S X C transponders each of 2.7 MHz capacity on the Primary Satellite 1 (PS1). The leased capacity was agreed to be delivered by Antrix to Devas from a fully operational and ready PS1 within 30 months of the agreement, with a further grace period of six months.
The agreement contained provisions for the termination of the Agreement by either of the parties, with certain consequences to one or the other, depending upon the circumstances under which termination was made.
Devas obtained approvals from Foreign Investment Promotion Board (FIPB) during the period May 2006 to September 2009. Subsequently, Devas brought into India, an investment of about INR 579 crores. Devas also obtained an Internet Service Provider (ISP) License from the Department of Telecommunications on 2 May 2008.
Devas then obtained permission from the Department of Telecommunications on 31 March 2009 for providing Internet Protocol Television (IPTV) Services within the scope of the terms and conditions of ISP license. Devas claims to have conducted experiments on the emerging technologies for satellite and terrestrial system in September 2009.
However the Agreement of 28 January 2005 was terminated by Antrix by a Communication dated 25 February 2011.