Prior to the winding-up petition, as it happens, Devas was investigated by both the CBI and the Enforcement Directorate and, at one point, a fine of Rs 1,585 crore was imposed on it on grounds that the FDI it brought in—Rs 579 crore—violated India’s Fema rules.
It is truly unfortunate that, with Isro’s commercial arm Antrix Corporation losing its second arbitration case against Devas Multimedia, and being ordered to pay the latter $1.2bn, the government is trying to wind up Devas on grounds of fraud. Indeed, the National Company Law Tribunal (NCLT) has acted with alacrity on Antrix’s winding-up petition and already appointed a provisional liquidator for Devas. The reasons cited for the demand to wind up Devas are interesting; the government is arguing that Devas committed a fraud against Antrix and so needs to be wound up; if that happens, the liquidator who takes charge of Devas can even stop the company’s demand against Antrix or, alternately, the government can petition Indian courts to overturn the global awards on grounds of fraud.
The problem with the move is that given the government’s rich history of not honouring global arbitration awards—and this is not unique to just the current establishment—few international investors are going to believe the arguments; indeed, it will be viewed as another attempt by India to avoid honouring global awards. Prior to the winding-up petition, as it happens, Devas was investigated by both the CBI and the Enforcement Directorate and, at one point, a fine of Rs 1,585 crore was imposed on it on grounds that the FDI it brought in—Rs 579 crore—violated India’s Fema rules. The winding-up petition argues more fraud and says that Antrix never even had the technology it claimed to have and that the technology to deliver internet services using satellites did not even exist when Devas signed the deal with Antrix to build satellites for it.
There are several problems with the approach. For one, as the Delhi High Court ruled in the Tata Docomo award case, even it was true that Tata paying Docomo violated Fema rules—in that case too, the government argued that the original agreement between Tata and Docomo was illegal—the award would have to be complied with, and the Tatas could pay the Fema fine as well. Two, the investigating authorities alleging fraud and proving it are two different things; indeed, their track record in proving cases is hardly inspiring. Also, the government would certainly have argued fraud in both the arbitration hearings, but their awards suggest this did not cut much ice; it will now have to prove this in various courts, starting from the NCLT to the NCLAT, and, finally the Supreme Court. Three, if Devas did not have the technology to deliver terrestrial internet services using satellite signals at that time, that was its problem, not Antrix’s.
It is unfortunate aside that the allegation of fraud makes a mockery of the arguments made by top Isro officials, including its then chief G Madhavan Nair, at the time that the space spectrum it was selling Antrix was, in itself, not worth much, and that the CAG, which had raised an alarm over it—that is why the government cancelled the contract, after which Antrix went to arbitration courts—had got it quite wrong. It was argued that, while it was true the spectrum became more valuable when it was used to provide terrestrial services like broadband internet, the telecom department would have charged Devas a license fee at that time.