The Supreme Court kept in abeyance (stayed) the effect of a recent order by a court in the USA which had asked Antrix Corporation, the commercial arm of ISRO, to pay compensation of USD 1.2 billion to the Bengaluru-based startup, Devas Multimedia for cancelling a satellite deal in 2005. As per the agreement in January 2005, Antrix agreed to build, launch and operate two satellites and to make available 70 MHz of S-band spectrum to Devas, which the latter planned to use to offer hybrid satellite and terrestrial communication services throughout India.

Devas Multimedia Pvt Ltd (DMPL) was incorporated in 2004 by a few former employees of ISRO. It entered into an agreement with ANTRIX Corporation Ltd., a government-owned PSU under the control of ISRO. Antrix corp functions as the Indian space agency’s commercial arm.

About the deal

The deal between Antrix and Devas was signed in 2005 when G Madhavan Nair was at the helm of affairs in the Department of Space (DoS). He later blamed the UPA-2 government for things going south in the deal.

As per the agreement, Antrix was to provide 70 MHz of the scarce S-Band space segment to Devas for its digital multimedia services. Antrix was to lease satellite transponders to Devas for allowing it to offer digital multimedia services using the S-band wavelength (spectrum), reserved for strategic purpose. This was to be done by leasing 90 % of the transponders in satellites GSAT-6 and GSAT-6A that are proposed to be launched by ISRO. Devas, in turn, was to pay Antrix a total of 300 million US dollars over 12 years. The aim of the project was to provide broadband wireless services to the remote areas of India. However the deal failed to take off, as the then Manmohan Singh-led government in 2011 said that the project was already under review and action has been initiated for termination of the contract.

The scandal first came to light when in 2011, when “The Hindu” reported that there were some irregularities in the agreement between Antrix and Devas. They reported the findings of a draft audit report and pointed out discrepancies including financial mismanagement, conflict of interest, non-compliance of rules, and favouritism. This revelation came at the heels of the 2G spectrum scam which was condemned for a high-level of corruption.

The GOI finally cancelled the deal on February 17, 2011. Devas then took Antrix and the GOI to International Court for getting the contract of the deal cancelled by the Cabinet Committee on Security in 2011. After arbitration proceeding began in June 2013, Devas claimed $1.6 billion in damages. Antrix filed an arbitration suit in Bengaluru in November 2015 against the September 2015 order of the ICC arbitration court asking Antrix to pay damages of $672 million to Devas Multimedia.

The Department of Space, in a statement said that in the award, issued on “jurisdiction and merits on 25 July, 2016”, the tribunal has said that the Indian government’s essential security interest provisions “do apply in this case to an extent” and the “limited liability of compensation shall be limited to 40 percent of the value of the investment” but the precise quantum has not been determined as yet.

Devas Multimedia was also charged with contravening the FDI regulations under Fema for assuring foreign investors an annual eight per cent priority dividend in addition to other dividends on cumulative basis, and for one tranche of receipt of funds, issuing a security akin to an External Commercial Borrowing (ECB) promising higher returns than the ceiling fixed by the Reserve Bank of India.

The Department of Space said that the Central Bureau of Investigation (CBI) has filed an FIR against Devas and other unknown public servants of Antrix/ISRO/DoS.

The Enforcement Directorate (ED) had launched an investigation against Devas and its directors and foreign subsidiaries under Prevention of Money Laundering Act (PMLA) and Foreign Exchange Management Act (Fema).

ED stated, “Investigation revealed that an amount of around Rs 579 crore was brought into the company by various foreign companies in violation of the conditions of FIPB approval and provisions of Section 6(3)(b) and 6(3)(d) of FEMA read with Foreign Exchange Management Regulations. Accordingly, show cause notice under FEMA was issued. After completion of the adjudication proceedings a total penalty of Rs 1,585.08 crore had been imposed on DMPL, the foreign companies (investors), Indian and foreign directors of DMPL.” Properties worth Rs 79.76 crore of DMPL have already been attached under PMLA in the case.

Solicitor General Tushar Mehta, appearing for Antrix Corporation, sought an order keeping at abeyance the effect of US court’s October 27 decision. The apex court also allowed Mehta’s submission that the pending cases between the two parties be transferred to the Delhi High Court from Bengaluru. In the October 27 order, the US court had ruled that Antrix Corporation pay compensation of USD 562.5 million to Devas Multimedia Corporation and the related interest rate amounting to a total of USD 1.2 billion.

A bench headed by Chief Justice S A Bobde and Justices L. Nageshwara Rao and Indu Malhotra stayed the execution of the US court order till the objection against Antrix is not decided by the Delhi high court where the case is pending.

The author is a student member of Amity Centre of Happiness