Antrix Devas Case

INTERNATIONAL COMMERCIAL LAW

Submitted to Mr. Aditya Vikram Sharma

Submitted by Arpit Maggo

40717703516
VIII-M

VIVEKANANDA SCHOOL OF LAW AND LEGAL STUDIES

VIPS
DELHI
 Antrix Corporation V. Devas Multimedia

Devas, an Indian company entered into an agreement, with Antrix, a wholly owned
subsidiary of the Government of India1.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).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 percent 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.

The arbitration agreement between the parties provided that a dispute under the
agreement was to be first referred to the senior management of the parties. The
agreement provided for a reference to arbitration if the dispute is not resolved by the
senior management within 3 (Three) weeks. The most significant feature of the
agreement was that it provided a choice to the parties to select between two sets of
arbitration rules, namely the ICC or the UNICITRAL rules.However, the deal failed
to take off, as the then Manmohan Singh-led government in 2011 said 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, 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 heel of the 2G spectrum scam which was condemned for the
high-level of corruption. The government finally cancelled the deal on 17 February,

1Article by Abhishek Singhm -file:///Users/arpitmaggo/Downloads/

Antrix%20Corporation%20v%20Devas%20Multimedia.pdf
2011. Devas then took Antrix and the Government to International Court for
cancelling its contract by the Cabinet Committee on Security in 2011.
Devas instead of referring the matter to the senior management for resolution directly
approached the ICC with a request to initiate arbitration. Further, Devas did not
notify Antrix and unilaterally approached the ICC seeking the constitution of an
arbitral tribunal in accordance with the ICC Rules and nominated its Arbitrator. As a
result, ICC wrote to Antrix inviting it to appoint its arbitrator. Instead of responding
to the ICC letter, Antrix wrote to Devas insisting that the matter be resolved through a
senior management meeting. The senior management meeting was held; however,
Devas maintained that the ICC arbitration has already been invoked and the dispute
should be resolved through the ICC arbitration. Subsequently, Antrix invoked
arbitration under the UNICITRAL rules and asked Devas to nominate its arbitrator, as
Devas had invoked the ICC arbitration unilaterally. ICC sent another letter to Antrix
informing it that all the issues concerning jurisdiction will be decided by it. However,
Antrix responded by filing an application under Section 11 of the Arbitration and
Conciliation Act, 1996 (“Act”), seeking a direction to compel Devas to appoint its
arbitrator. Antrix also prayed that the Court should uphold the validity of the
UNICITRAL arbitration. 2

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 (DoS), 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.

2Article in Firepost -https://www.firstpost.com/business/antrix-devas-case-fifteen-points-to-help-

you-understand-the-deal-2918312.html
The Permanent Court of Arbitration (PCA) tribunal in The Hague, Netherlands also
ruled against Antrix Corporation. Following the ruling, India may have to give 1
billion compensation to Devas.3

There was considerable fall-out following the cancellation of the deal by the Indian
government. Devas sued, and won, and achieved International Chamber of
Commerce Arbitration tribunal victories which – in summary – awarded overall
damages of around $1 billion ($672 million plus interest at 18 per cent annually).
That sum has grown to an estimated $1.6 billion.

However, Devas wasn’t off the hook because the Indian government accused Devas
of breaching the country’s Foreign Exchange Management Act (FEMA) and a
massive fine levied by the Enforcement Directorate.The Foreign Exchange
Management Act (FEMA) Adjudication Authority has held Devas Multimedia, its
directors, and overseas investors guilty of an illegal foreign investment of ₹579 crore,

and imposed a penalty of ₹1,585.08 crore, based on the Enforcement Directorate’s

(ED) probe into the Antrix-Devas case.

The Foreign Exchange Management Act (FEMA) Adjudication Authority has held
Devas Multimedia, its directors, and overseas investors guilty of an illegal foreign
investment of ₹579 crore, and imposed a penalty of ₹1,585.08 crore, based on the
Enforcement Directorate’s (ED) probe into the Antrix-Devas case.
The ED investigation followed inputs that Devas Multimedia had received the funds
in violation of FEMA rules.

The company was incorporated in 2004 by some former employees of the Indian
Space Research Organisation (ISRO). It entered into an agreement with ISRO’s
commercial arm Antrix Corporation to get bandwidth facilities in two proposed
satellites for a range of services in the digital media and broadcasting business.
3 Article in IAS4sure-http://www.ias4sure.com/wikiias/gs3/antrix-devas-case/
Based on the findings, the Directorate served a show-cause notice to the accused
persons. “After completion of the adjudication proceedings, a total penalty of
₹1,585.08 crore has been imposed on them,” said an official. FEMA provides for a
maximum of 300% penalty on foreign exchange rule violations.

Money Laundering Investigation

In a separate case, which is based on an FIR registered by the CBI, the ED had
conducted money laundering investigation against Devas Multimedia and others. A
special court in Bengaluru took cognisance of its charge sheet on February 1.
The agency, in the money laundering case, has alleged that the company and others
illegally entered into the agreement with Antrix Corporation by making false claims
that it had the ownership and intellectual property rights to use the technology for
delivering multimedia services in India. It turned out that Devas Multimedia was
incorporated on December 17, 2004, and the claims were made days later, on January
28, 2005.

“Employees of ISRO/Antrix Corporation also conspired with the company for

entering into the agreement. On the strength of the agreement, the company raised
foreign investment of ₹579 crore and subsequently, illegally transferred 85% of the
funds to its subsidiary in the United States on the pretext of investment, payment for
services or legal fee,” the official said. Under the Prevention of Money Laundering
Act, the ED has attached assets worth about ₹80 crore of Devas Multimedia and
requested the court for its confiscation.4

It wasn’t just Devas which sued. Deutsche Telekom (because they were investors in
Devas) sued Antrix in September 2013. A ruling in December 2018 a Tribunal found
that India had breached the “fair and equitable treatment standard” provided by a
Germany-India bilateral trade agreement.

4Article in The Hindu, dated Feb 2, 2019 -https://www.thehindu.com/news/national/antrix-devas-

case-1585-cr-penalty-imposed-on-devas-multimedia-and-others/article26162513.ece
Subsequently India commenced an action in a US Federal Court (in Washington
state) and where Devas requested a $1.1 billion bond be placed into the court by
Antrix. The court said a bond need not be paid. Antrix is arguing with a counter-claim
saying that Devas does not come under US law or jurisdiction. Antrix also pointed
out that it is pursuing Devas throu5gh the Indian court system.
The US court has ruled that Devas can sue under US law, although ‘stayed’ both
actions for 12 months (to April 2020) to allow India legal actions to end.
“Antrix is subject to this Court’s personal jurisdiction pursuant to the Foreign
Sovereign Immunities Act (FSIA),’’ the Washington court ruled, while refusing to
throw out the case on the grounds of lack of jurisdiction. “The Court exercises its
discretion to stay this action pursuant to Article VI of the New York Convention
pending the resolution of Antrix’s challenge to the underlying award in India’s
courts,’’ Judge Thomas S Zilly noted.

Jurisdiction
The Delhi High Court held that Bengaluru court has the jurisdiction to hear the dispute
between ISRO's Antrix Corporation and Devas Multimedia, which has won an arbitral
award of USD 672 million from an international tribunal, as the issue was first raised there.

A bench of Justices S Ravindra Bhat and Yogesh Khanna said that according to the
mandate of the Arbitration Act, the court which is seized of a dispute first should decide it
and, in the present case, it was the Bangalore City Civil Court and not the Delhi High
Court.

The bench said that Antrix had in 2011 moved a plea in the Bangalore City Civil Court to
restrain Devas from proceeding with the arbitration and stop the arbitral tribunal set up by
Paris-based International Chamber of Commerce from going ahead with the matter.

While the matter was pending in the court in Bengaluru, ICC's arbitration body --
International Court of Arbitration -- in its September 2015 ruling had asked Antrix to pay
damages amounting to USD 672 million (Rs 4,432 crore) to Devas for "unlawfully"
terminating a deal in 2011 citing national security reasons.

Subsequently, in September 2015, Devas moved the Delhi High Court for implementation
of the arbitral award by seeking attachment of bank accounts of Antrix.

In November that year, Antrix had challenged the award in the Bangalore City Civil Court
where Devas argued that the Delhi High Court had jurisdiction to hear the dispute.
Thereafter, on February 28, 2017, the Delhi High Court had held that Antrix's pleas in the
court in Bengaluru were not maintainable.6

Setting aside the February 28, 2017 decision of the single judge, the division bench said
the Delhi High Court "does not possess the exclusive jurisdiction to deal with or adjudicate
any applications arising out of the arbitration agreement between Antrix and Devas and
section 42 of the Act precludes and bars this court from hearing and deciding the
application preferred by Devas, in the facts and circumstances of the case”
.
The bench said the Bangalore City Civil Court should first decide Antrix's initial plea
against the arbitration proceedings and whether it is "maintainable, vexatious or mala-
fide".

"If the petition is found to be maintainable and bona-fide, then section 42 would be
applicable and all subsequent applications would have to be made by the parties before
that court," it said.

The bench also said that Devas' objections on maintainability and mala-fide nature of
Antrix' plea should be made before the Bangalore City Civil Court.

"If that court were to uphold Devas' objections and find Antrix's petition to be barred in law
or vexatious, and declare it non-est, as if it never validly existed, then the first application
would be Devas' application before this court, which would then not be hit by section 42,"
the high court said.

Section 42 of the Arbitration Act deals with the jurisdiction of a court to hear a matter in
connection with an arbitration agreement or arbitral award.

"Adopting a prima facie view of the matter therefore, since there is nothing in law which
causes this court to find that the Bangalore City Civil Court inherently lacks jurisdiction
over the arbitration proceedings between the parties, it must be held that section 42
applies and the Bangalore City Civil Court being first seized of Antrix's petition, must be
allowed to first decide that petition, and depending on the outcome and findings, all
subsequent applications may or may not have to be made in that court alone," the bench
said in its 49-page judgement allowing Antrix' appeal against the single judge's order.

6Advanced Televison Article, dated Aug 2 , 2019 - https://advanced-television.com/2019/08/02/

antrix-vs-devas-legal-case-rages-on/
7Article in The Economic Times, dated May 30, 2018 - https://economictimes.indiatimes.com/
news/politics-and-nation/bengaluru-court-has-jurisdiction-to-hear-antrix-devas-dispute-hc/
articleshow/64385218.cms