Delhi HC sets aside arbitral award asking ISRO's Antrix to pay $562 million to Devas

Antrix had sought winding up of NCLT alleging that Devas was formed for a fraudulent and unlawful purpose

The Delhi High Court Monday set aside an arbitral award directing ISRO's Antrix Corporation to pay damages of USD 562.2 million with interest to Devas for “unlawfully” terminating a deal in 2011, saying the award suffered from "patent illegalities and fraud", and was in conflict with the public policy of India.

Justice Sanjeev Sachdeva allowed the petition filed by Antrix under the Arbitration and Conciliation Act seeking setting aside of the arbitral award passed on September 14, 2005, by the Arbitral Tribunal constituted by the International Chamber of Commerce which had allowed the claim of Devas Multimedia Private Limited.

The high court referred to a January 17, 2022 judgement of the Supreme Court which held that the very seeds of the commercial relationship between Antrix and Devas were a product of fraud perpetrated by Devas and thus 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.

“The basic notions of morality and justice are always in conflict with fraud and that allowing Devas and its shareholders to reap the benefits of their fraudulent action would send another wrong message namely that by adopting fraudulent means and by bringing into India an investment in a sum of Rs 579 crores, the investors can hope to get tens of thousands of crores of rupees, even after siphoning off Rs 488 crores,” the apex court had noted in its order.

The high court, in its 87-page judgement, said the objections filed by petitioner Antrix under Section 34 of the Arbitration and Conciliation Act are allowed and it is held that the impugned award of September 14, 2015, suffers from “patent illegalities and fraud and is in conflict with the Public Policy of India”, and it is set aside.

Antrix had sought winding up of Devas before the National Company Law Tribunal (NCLT) alleging that Devas was formed for a fraudulent and unlawful purpose and its affairs had been conducted in a fraudulent manner. The NCLT had allowed the winding up of Devas which was then challenged by the company and Devas Employees Mauritius Pvt Ltd before the National Company Law Appellate Tribunal (NCLAT).

In September 2021, NCLAT dismissed both the appeals and the orders were then challenged before the Supreme Court which also dismissed the appeals on January 17 this year.

Since the order for winding up Devas had been upheld by the Supreme Court, the company was represented during the high court proceedings by the Official Liquidator.

The arbitral tribunal, while passing the award in 2015, had held that the termination of the contract on the part of Antrix amounted to a wrongful repudiation of the contract and accordingly Article 7(b) of the contract did not limit Devas' entitlement to alleged damages that it suffered due to Antrix's repudiation of the agreement.

The tribunal had directed Antrix to pay USD 562.2 million to Devas besides interest.

Antrix is a Central Public Sector Enterprise and is engaged in the business of marketing and sale of products and services of the Indian Space Research Organisation (ISRO) to national and international customers.

Devas is a limited liability company incorporated in December 2004.

Antrix and Devas had entered into a contract on January 28, 2005, for the lease of Space Segment Capacity on ISRO/ Antrix S-band Spacecraft. It provided for the lease to Devas of transponders on satellite GSAT-6, referred to in the contract as Primary Satellite 1 or PS1.

It also contained an option for Devas to lease transponders on a second satellite, GSAT-6A, referred to in the contract as Primary Satellite 2 or PS2. 13. The contract was executed between Antrix and Devas only and neither the Department of Space nor ISRO nor any other government agency was a party to the contract.

Antrix had notified Devas in February 2011 that the contract was terminated, which the latter refused to accept and claimed damages.

The high court, in its verdict, said contravention with the fundamental policy of Indian law or being in conflict with the most basic notions of morality or justice or contrary to national economic interest and disregarding the superior courts in India would be “antithetical” to the fundamental policy of Indian law.

“As noticed above the arbitral tribunal has incorrectly excluded the evidence pertaining to the pre-contractual negotiations which it could not have and has thus committed a patent illegality in the award.

“… the arbitral tribunal has committed patent illegality in the award as findings on some issues are contradicted by the findings on other issues and are also contradicted by the reasoning given to reach the said conclusions,” it said.

It further said the findings on fraud returned by the Supreme Court in its January 2022 judgement clearly establish that “award contravenes the fundamental policy of Indian law being in conflict with the most basic notions of justice and is also contrary to the national economic interest having also violated the 'FIPB Policies' and the provisions of 'FEMA' and 'PMLA' and thus antithetical to the fundamental policy of Indian law”.