By Devika Mehra and Amit Kumar
The Hon’ble Delhi High Court, vide its order dated August 29, 2022 has set aside an arbitral award dated September 14, 2014 passed by Arbitral Tribunal constituted by the International Chamber of Commerce, which had allowed the claim of Devas Multimedia Private Limited (hereinafter referred to as “Devas”) against Antrix Corporation Limited (hereinafter referred to as “Antrix”). The arbitration tribunal in its order had directed Antrix to pay $562.2 million to Devas as the termination of the Contract by Antrix amounted to wrongful repudiation of the contract.
Brief Facts of the case
The subject contract, the breach of which led to the arbitration proceedings, was entered into between a Central Government public sector enterprise engaged in, inter alia, the business of marketing and sale of products and services of ISRO to national and international customers, and Devas, a limited liability company incorporated on December 17, 2004.
The contract dated January 28, 2005, was in furtherance to the lease of Space Segment capacity on ISRO/Antrix S-band Spacecraft. The contract was in reference to the lease of the transponders (a transmitter-receiver subsystem on board the satellite that processes, amplifies, and retransmits a range of frequencies to another location/terminal/antenna on the earth) on two satellites to be launched by ISRO to Devas for a period of 12 years, which was extendable by another 12 years.
However, Antrix called off the contract in 2011 by invoking the force majeure clause after reports of procedural and regulatory irregularities and corruption charges, aggrieved by which Devas approached the International Court of Arbitration of the International Chamber of Commerce for specific performance of contract and damages to the tune of US $1.6 billion.
Apart from challenging the impugned arbitral award before the Delhi High Court, Antrix had also initiated proceedings for winding up of Devas under Section 271(c) read with Section 272(1)(e) of the Companies Act, 2013 before the National Company Law Tribunal. It was alleged by Antrix that Devas was formed for a fraudulent and unlawful purpose and that its affairs had been conducted fraudulently. The petition seeking the winding up of Devas was allowed by the National Company Law Tribunal vide its order dated May 25, 2021. The Tribunal held that even the idea to form Devas was with fraudulent intentions along with malafide intention to enter into an Agreement with Antrix with no responsibility at all. It was further held that the agreement was signed by a clerk, by paying money for the same. Hence, the agreement was held to be void ab initio, capable of vesting no legal rights to Devas. The same was affirmed by the National Company Law Appellate Tribunal and later upheld by the Hon’ble Supreme Court, vide its order dated January 17, 2022. The Apex Court in its order stated that Devas was founded for a fraudulent and unlawful purpose of unjust enrichment.
The Delhi High Court in its recent order of August 2022, while setting aside the impugned arbitral award, held that being a product of fraud, Devas and its shareholders cannot be allowed to reap the benefits of their fraudulent action as it would send a wrong message to the society.
Justice Sanjeev Sachdeva, in his judgment, also cited the Hon’ble Supreme Court’s judgment dated January 21, 2022, which observed 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 judgment, while setting aside the arbitral award dated September 14, 2015, passed by the International Court of Arbitration, held that the award suffers from patent illegalities and fraud, which is in direct conflict with the Public Policy of India. The Hon’ble High Court, further, held that the Devas and its shareholders should not be allowed to reap the benefits out of their fraudulent actions sending a wrong message to society.