In a rare instance where a foreign company and its brass could face criminal prosecution in India, the Supreme Court on Wednesday restored the complaint by a domestic consortium of lenders against US telecom giant Motorola Incorporated and its five directors for alleged cheating.
The court, while allowing the plea of the consortium Iridium India India Telecom Ltd (IITL), set aside the Bombay High Court judgment that quashed the criminal case in 2003.
IITL had accused of Motorola taking Rs 500 crore from it for setting up a satellite communication project in 1987 even though the telecom firm knew right from the beginning that the venture would be a commercial disaster.
The consortium comprising IDBI, ICICI Bank, IL&FS, HDFC, LIC and SBI among others, entered into an agreement with Motorola to provide satellite-based phone services in India.
Motorola had taken a stand that it was not submitting to the jurisdiction of the Indian courts as there was no provision for effecting summons on a foreign entity or persons under the Indian law. When contacted, a Motorola India spok-esperson declined to comment.
While holding that the high court ?clearly exceeded? its jurisdiction in quashing the criminal proceedings, an SC bench comprising Justices B Sudershan Reddy and SS Nijjar, said: ?…the parties are yet to place on record the entire material in support of their claims. The issues involved are of considerable importance to the parties in particular and the world of trade and commerce in general.?
IITL had stated that Motorola, which had conceived the commercial wireless satellite communication system in 1987, had raised billion of dollars from all over the world through equity and debt offerings to the public through its 100% subsidiary Iridium Inc.
After Iridium proved to be a commercial disaster, US-based Iridium Inc promoted by Motorola filed for bankruptcy protection from its creditors under the US Bankruptcy Code in 1999. Later, the entire Iridium system was sold in bankruptcy at $25 million in 2001, which was less than 1,000th of the price ($6.5 billion) which Motorola was paid to put up the system, according to the petition.
It alleged that although the project went bankrupt, Motorola emerged as the sole beneficiary and pocketed a hefty $6.5 billion (approximately Rs 19,500 crore) from Iridium Inc for equipment supply and other services ?at artificially high prices?, while its own investment was a mere $315 million.
Motorola admitted that Iridium project failed as a commercial venture. It, however, said the investments made by the Indian investors at that time were to the tune of approximately $70 million (Rs 315 crore) which constituted approximately 4.7% of the total global offerings. ?The offerings were made after compliance with all legal obligations of the USA and the securities exchange Commission if the USA . The equity offerings attracted some of the most prominent financial institutions and investors in the world,? the telecom major said.