The Supreme Court on Monday upheld the National Company Law Tribunal’s May 2021 order to wind up Bengaluru-based Devas Multimedia, which has over the last one and half decade been embroiled in a controversy over its 2005 agreement with ISRO’s commercial arm Antrix Corporation, which was later found to be fraudulent.
Even as the criminal aspects of the case are yet to be decided legally and Devas is equipped with international arbitral awards against Antrix, the apex court held that, “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 Bengaluru bench of the NCLT had in May ordered the winding up of Devas and had also appointed a provisional liquidator, saying the firm was incorporated with a fraudulent motive to collude and connive with the then officials of Antrix to get bandwidth from it. The NCLT’s order was also upheld by the National Company Law Appellate Tribunal in September.
An SC Bench comprising justices Hemant Gupt and V Ramasubramanian while dismissing the Devas’ appeal against its winding up said that “we find all the grounds of attack to the concurrent orders of the NCLT and NCLAT to be unsustainable.”
Rejecting the contentions that the actual motive of Antrix was to deprive Devas of the benefits of a unanimous award (of $1.3 billion) passed by the International Chamber of Commerce (ICC) arbitral tribunal in 2015, the judges said that “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 Rs 579 crore, the investors can hope to get tens of thousands of crores of rupees, even after siphoning off Rs 488 crore.”
It rejected the contentions of Devas counsel Mukul Rohtagi that the criminal complaint was yet to be taken to its logical end and if 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.
Antrix had annulled its 2005 contract to lease space segment capacity on two satellites in February 2011 after allegations of the deal being a quid pro quo “sweetheart deal” were raised. Devas then had invoked the India-Mauritius Bilateral Investment Protection Agreement and moved the Permanent Court of Arbitration (PCA), which directed India to pay $111 million with interest and costs. Devas had also won arbitration proceedings before the ICC in 2015 that resulted in an award of $1.3 billion against Antrix.
While the CBI and Enforcement Directorate were asked to probe the deal in 2014, Antrix had moved a winding up petition against Devas in January last year. Investigating agencies CBI and Enforcement Directorate have also unearthed fraud in executing the agreement and have initiated PMLA proceedings. The Ministry of Corporate Affairs (MCA) had also initiated an investigation into the affairs of Devas Multimedia but the Delhi High Court had stayed the move.