By LE Desk
Bengaluru, March 3: A US federal court has issued a temporary restraining order barring start-up firm Devas Multimedia from entering any agreement with Antrix Corporation, the commercial arm of the Indian Space Research Organisation (OSRO), for settlement of a USD 1.2 billion arbitration award confirmed by the US court over a failed 2005 satellite deal.
The US federal court of the Western District of Washington at Seattle passed the restraining order last week after three foreign investors in Devas Multimedia, and a US subsidiary – Devas Multimedia America Inc – expressed fears of Devas Multimedia entering into an agreement with Antrix on compensation payment in the wake of the ISRO unit moving to liquidate the Bengaluru-headquartered Devas Multimedia through a petition in NCLT, The Indian Express reported.
On February 24, the US court ordered that Devas Multimedia and “its shareholders, directors, officers, agents, employees, and legal representatives, are prohibited from taking any action with respect to the award” of $1.2 billion confirmed by the US court in November 2020 “without first obtaining the approval of the court”.
Devas must not enter into any agreement with Antrix, or “any part of its parent state of India with respect to the conduct of litigation respecting the award without first obtaining the approval of the court,” the US court stated. The temporary restraining order has been put in place until March 24.
The court allowed three foreign investors in Devas Multimedia – CC/Devas (Mauritius) Ltd, Devas Employees Mauritius Pvt Ltd, and Telecom Devas Mauritius Ltd – to intervene in the litigation where a $1.2-billion compensation award of the International Chamber of Commerce in favor of Devas was confirmed by the same US federal court in November 2020.
The US court has adjourned a plea by Devas Multimedia America, Inc. a subsidiary of Devas Multimedia, to replace the latter in the compensation award case.
The US federal court has justified its decision to impose a temporary restraining order on the grounds that the foreign investors are considering filing appeals in the Supreme Court of India against the NCLT order to appoint a provisional liquidator for Devas Multimedia.
“If intervenors are unable to appeal, they might lose the ability to collect on the judgment. Thus, the alternative remedy that Respondent (Antrix) states intervenors may pursue — namely relief in Indian courts — is the very remedy they fear losing if the court does not issue a TRO. These facts demonstrate a likelihood that the parties will seek to vacate the award or settle the dispute, frustrating this court’s order and judgment,” the US court said.
The three foreign investors and Devas Multimedia America moved the US courts after reportedly learning that an effort was being made to abort the payment of the $1.2 billion arbitration compensation award by Indian authorities by getting Devas Multimedia declared as a fraudulent entity. The foreign investors have claimed that Ministry of Law and Justice has issued an ordinance amending the Indian Arbitration and Conciliation Act of 1996 to allow courts to stay an arbitration award if it is proven that a “arbitration agreement or contract which is the basis of the award…was induced or effected by fraud or corruption.
The foreign investors have claimed that the National Company Law Tribunal in India has appointed a government official as “provisional liquidator” of Devas Multimedia following a plea by Antrix Corporation, which moved a liquidation plea after it was ordered to compensate for the failed 2005 satellite deal with Devas Multimedia.
The provisional liquidator in an interim report given in February has concluded the Devas-Antrix deal was “initiated by fraud”, and that Devas Multimedia was “incorporated with a view to obtain for itself the agreement and to enjoy the fruits of such fraud,” the foreign investors have claimed in the US court.
Since Antrix Corp began efforts to liquidate Devas Multimedia in January, the company has been taken over by a provisional liquidator appointed by NCLT and lawyers appearing for Devas Multimedia in courts in India and US have been replaced by new lawyers, the foreign investors have said in the US court .
Devas Employees Mauritius Pvt Ltd, which has a 3.48-per cent stake in Devas Multimedia, has challenged the liquidation move in the NCLAT on the grounds that Devas is a real firm with investors such as German telecom major Deutsche Telekom, which picked up a 17-percent stake after an FDI of more than Rs 300 crore was cleared by the FIPB in 2007.
The provisional liquidator for Devas Multimedia appointed by NCLT has filed an affidavit in the US court and is scheduled to be heard in the matter later this month.
Devas Multimedia and Antrix Corporation signed an agreement on January 28, 2005 for ISRO to lease two communication satellites for 12 years at a cost of Rs 167 crore to Devas Multimedia. The start-up was to provide multimedia services to mobile platforms in India using the space band or S-band spectrum transponders on ISRO’s GSAT 6 and 6A satellites built at a cost of Rs 766 crore by ISRO.
The deal was annulled by the UPA government in February 2011 in the backdrop of the 2G scam in the telecom sector and allegations of a sweetheart deal in allocation of the S-band spectrum to Devas Multimedia. The deal was cancelled by the government stating that the S-band spectrum allocated for the satellites to be built by ISRO for Devas was needed for military purposes.
After the NDA government came to power in 2014 the CBI was asked to investigate the 2005 deal.
After the deal was cancelled, Devas Multimedia and its foreign investors — Columbia Capital, Telcom Ventures and Deutsche Telekom — approached international arbitration tribunals to seek compensation for losses they incurred due to the sudden cancellation. Devas and all its foreign investors have been awarded compensation by arbitration tribunals over the failed deal.
The biggest compensation award has been a September 14, 2015 ICC tribunal award of over $1.2 billion, which was confirmed by a US federal court last year.
Antrix Corporation has filed an appeal against this order in the US Court of Appeals for the Ninth Circuit.