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New Delhi: The Delhi High Court on Friday 17 March dismissed an appeal filed by Devas Employees Mauritius Private Limited (DEMPL) against the Judgment by a single Judge Bench of the Delh High Court on 29 August 2022 setting aside the ICC Award or damages amounting to USD 562.5 million along with interest and costs in favour of Devas Multimedia Private Limited under Section 34 of the Arbitration Act on the grounds that it suffered from fraud, patent illegality and was in conflict with the public policy of India.

The March 17 order by a two- Judge Bench of Delhi High Court presided by Chief Justice Satish Chandra Sharma and comprising Justice Subramonium Prasad underscroes – “The learned Single Judge has not made an error in setting aside the ICC Award on the grounds of fraud and it being in conflict with the public policy of India.”

Further, the order states: “The principle of “fraud vitiates all solemn acts” is applicable not only to the primary proceedings, but also to all collateral proceedings that arise out of the same facts and circumstances. The act of fraud is an anathema to all equitable principles and every transaction tainted with fraud must be viewed with disdain by Courts. In the instant case, the Supreme Court in the Civil Appeal No.5766/2021 has held that the commercial relationship between Devas and Antrix is a product of fraud, and as a consequence, the Devas Agreement, the ICC Award, and all other disputes arising out of the transaction would be tainted by fraud. Permitting Devas and its shareholders to reap the benefits of the ICC Award would amount to this Court perpetuating the fraud. Such a view would be against all principles of justice, equity and good conscience.”

Background of the case

Devas Employees Mauritius Pvt. Ltd. is a company incorporated under the laws of Mauritius and is a shareholder, owning 3.48% of the issued and paid-up equity share capital of Devas Multimedia Private Limited, which was a company incorporated under the Companies Act, 1956 and has been wound up under the provisions of the Companies Act, 2013 and was represented in the latest proceedings through its Official Liquidator.

Antrix Corporation Limited, is a company incorporated under the Companies Act, 1956, and is the commercial arm of the Indian Space Research Organisation (ISRO) which is wholly owned by the Government of India.

Antrix entered into a Memorandum of Understanding (MOU) with Forge Advisors, LLC, a Virginia Corporation, USA. Forge Advisors made a presentation to Antrix Corporation Limited proposing an Indian Joint Venture which has now came to be known as “DEVAS” (Digitally Enhanced Video and Audio Services).

It was projected 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. This presentation was followed by a proposal to form a strategic partnership to launch DEVAS that delivers video, multimedia and information services via satellite to mobile receivers in vehicles and mobile phones across India.

Under this proposal, it was contemplated to form a joint venture which would cast an obligation on the part of ISRO and Antrix, to invest in one operational S-Band 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.

In pursuance of the proposal, several meetings were held between the representatives of Forge and ISRO/Antrix. On 17 December 2004, Devas Multimedia Private Limited was incorporated as a private company under the Companies Act, 1956, and Antrix entered into an Agreement with Devas Multimedia Private Limited 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 in question 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 in the country and in return Devas had requested Antrix for space segment capacity for the purpose of offering S-DMB 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. Antrix was to lease out to Devas five numbers of C X S transponders, each of 8.1 MHz capacity, and five numbers of S X C transponders, each of 2.7 MHz capacity, on the Primary Satellite 1 (PS1). It was agreed that the leased capacity would be delivered by Antrix to Devas, i.e. a fully operational and ready PS-1 satellite was to be delivered within 30 months of the agreement, with a further grace period of six months. Devas obtained approvals from the Foreign Investment Promotion Board (FIPB) during the period between May 2006 and September 2009. Devas also obtained an Internet Service Provider (ISP) License from the Department of Telecommunications on 2 May 2008. Devas also 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 Internet Service Provider (ISP) License.

The Agreement of 28 January 2005 was terminated by Antrix by a Communication (dated 25 February 2011), which stated that the Government of India had taken a policy decision not to provide orbital slots in S-Band for commercial activities (check The Upright Bureaucrat)

The termination of the Devas Agreement by Antrix was disputed by Devas which invoked Article 20(a) of the Devas Agreement to refer the dispute to the senior management of both the parties. However, on 15 April 2011, Antrix wrote to Devas referring to the letter of termination of the Devas Agreement and enclosed with it a cheque of INR 58,37,34,000/- (approximately USD 13 million) as reimbursement of the Upfront Capacity Reservation Fee (UCRF) already paid by Devas under the Devas Agreement. Devas, returned the cheque and wrote to Antrix stating that it had failed to state a proper basis for termination of the Devas Agreement.

Eventually, on 1 July 2011, Devas initiated arbitration proceedings against Antrix under the rules of the International Chambers of Commerce (ICC), seeking damages for repudiatory breach of the Devas Agreement by Antrix. Between the period of July 2011 and March 2015, the arbitral tribunal was constituted, pleadings were completed by both the parties and hearing was concluded in the arbitral proceedings between Devas and Antrix. On 14 September 2015, an arbitral tribunal comprising of Dr. Adarsh Sein Anand (former Chief Justice of India), Mr. V.V. Veeder and Dr. Michael Pryles, published the ICC Award in favour of Devas for damages amounting to USD 562.5 million along with interest and costs, for wrongful repudiation of the Devas Agreement by Antrix.

During the pendency of proceedings before the ICC Arbitral Tribunal, the Central Bureau of Investigation (CBI) had registered an FIR on 16 March 2015 alleging criminal conspiracy, criminal misconduct, cheating and other corrupt practices on the part of Devas and its officers. A charge-sheet in respect of the FIR was filed against Devas, its officers and certain other individuals by the CBI on 11 August 2016. The CBI also filed a supplementary charge-sheet in respect of the FIR on 8 January 2019.

Subsequent to the publishing of the ICC Award, on 19 November 2015, Antrix filed a petition under Section 34 of the Arbitration Act before the Addl. City Civil and Sessions Judge, Bengaluru, Karnataka, challenging the ICC Award. Subsequently, on 10 November 2016, Antrix filed an amendment application to incorporate subsequent events and take additional grounds. Thereafter, on 4 November 2020, the Supreme Court passed an order in SLP No. 28434/2018 to transfer the Petition filed by Antrix under Section 34 of the Arbitration Act from the Court in Bengaluru to the Delhi High Court and stayed the ICC Award in the interim. On 12 January 2021, Antrix filed another amendment application seeking to add further subsequent events and additional grounds in its Section 34 Petition.

While the proceedings under Section 34 of the Arbitration Act were still pending, Antrix moved an application before the National Company Law Tribunal, Bengaluru Bench under Section 271(c) read with Section 272(1)(e) of the Companies Act, 2013 for winding up Devas on the grounds that Devas was incorporated for fraudulent and unlawful purposes and the affairs of the company were being conducted in a fraudulent manner.

Through its order of 25 May 2021, the NCLT allowed the petition for winding up preferred by Antrix, declaring that Devas had been formed for fraudulent and unlawful purposes and its affairs had been conducted in a fraudulent manner. This order of the NCLT was challenged by Devas along with DEMPL before the National Company Law Appellate Tribunal, which dismissed the appeal on 8 September 2021 and upheld the order of 25 May 2021, passed by the NCLT.

The order of 8 September 2021, passed by the NCLAT, was challenged by Devas and DEMPL before the Apex Court and the Apex Court gave its judgment on 17 January 2022 in response to Civil Appeal No.5766/2021 and upheld the order passed by the NCLAT. The Apex Court rejected the claim of Devas that the proceedings before it were barred by Limitation. It further held that Antrix could not be stopped from pleading fraud and seeking winding up of Devas even if the plea of fraud was not used to terminate the Devas Agreement in 2011 or that it was not raised before the Arbitral Tribunal, as the fraud was discovered much later. The Court stated that it did not find any perversity in the findings on facts recorded by either the NCLT or NCLAT as they were borne out by documents which weren’t challenged as fabricated or inadmissible. The Apex Court further held that the seeds of the commercial relationship between Antrix and Devas were a product of fraud perpetrated by Devas and every plant that grew out of those seeds, including an arbitral award, would be infected with the poison of fraud. The Apex Court further observed 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 allowing Devas and its shareholders to reap the benefits of their fraudulent action, would send wrong message to international investors, 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.