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The Supreme Court this week upheld an order passed by the National Company Law Appellate Tribunal confirming the winding-up of Devas Multimedia Private Limited (Devas), the firm at the core of the Antrix-Devas fiasco.
The dispute, which arose out of the cancelled satellite deal between Antrix Corporation (the commercial arm of ISRO) and Devas, has resulted in three adverse arbitration awards against India. The first was a commercial arbitration at the International Chambers of Commerce (ICC) between Antrix and Devas, and the other two were BIT (bilateral investment treaty) arbitrations – by Mauritian investors CC/Devas under the India-Mauritius BIT and Deutsche Telekom under the India-Germany BIT. The total cost of the compensation awarded in all these three arbitrations runs to almost Rs 15,ooo crore.
The apex court’s decision also comes at a time when Devas has succeeded in enforcing the arbitration awards in a number of foreign jurisdictions. Indeed, the judgment of the Supreme Court attests to the mistakes of the previous UPA government. Nevertheless, the handling of the dispute by the present government has been equally problematic.
The Mauritian investors of Devas initiated the arbitration under the India-Mauritius BIT in 2012, and Deutsche Telekom initiated arbitration under India-Germany BIT in 2013.
The majority of the arbitral proceedings relating to these two arbitrations were carried on after the present government came to power in 2014. If one looks at the timeline of the CC/Devas v India, the hearing on jurisdiction and liability took place in September 2014. The Indian government did not make any objection to the jurisdiction on the ground of corruption or fraud. The agencies such as CBI and ED had already started investigating the matter in 2014. If not anything else, the report of Comptroller Auditor General (CAG) flagging a series of violations and abuse of processes in the Antrix-Devas deal could have been placed before the arbitral tribunal to substantiate its objection to the jurisdiction. The award on jurisdiction and liability in CC/Devas v India, which was finalised on July 25, 2016, nowhere refers to the CAG report, probably because the government never raised this point.
Additionally, the CBI had filed its chargesheet in August 2016. Just a month later, the Indian government in September 2016 agreed to the timeline given by the arbitral tribunal for the quantification of damages in CC/Devas case. Even at this point, the government did not object or bring this issue before the arbitral tribunal. It was only in December 2016 that India presented a request to stay the arbitral proceedings on the ground that chargesheets have been filed by CBI and other investigative agencies against several Devas and government officials.
The approach of the government was similar in case of Deustsche Telekom v India, where it did not object to the jurisdiction on the ground until the hearing phase was over. A similar request for stay of proceedings was made before the tribunal in Deutsche Telekom in October 2016 which was rejected by the tribunal on the ground that it was untimely. The tribunal further said that even if the request were timely, it would not hold on merit given the fact that the CBI chargesheet contained mere allegations which had yet not been conclusively determined by the competent court.
The tardiness and vagueness of the government in raising the jurisdictional objections based on allegations of corruption and fraud in the Antrix-Devas deal was pointed out the Hague District Court in the proceedings to set aside the Devas award, as well as by the Swiss Federal Court in the set aside proceedings of Deutsche Telekom award.
What lies ahead?
The government has confirmed that it will proceed with winding up of Devas. Simultaneously, the Mauritian investors of Devas have been successful before the courts of Canada and France in securing the seizure of Indian assets for enforcing the BIT award.
The Indian government, now, will certainly invoke the Supreme Court’s judgment in order to challenge the enforcement proceedings before various courts. India would argue that the Antrix-Devas deal was tainted with fraud and corruption, and hence the enforcement of an award arising from a tainted agreement will be against international public policy.
While interpretations of public policy may vary with jurisdictions, there appears to be an international consensus on corruption being against international public policy. The recognition and enforcement have also been refused by various courts on the ground of corruption. For instance, the Paris Court of Appeal set aside an ICC arbitral award in Sorelec v Libya as the underlying agreement was tainted by corruption, and hence against international public policy. Similarly in Wells v Bravien, the Hague District Court set aside an ICC arbitral award on the ground that the underlying contract was procured through corruption.
The Indian government also resorted to this argument when it moved to the Hague District Court for setting aside the BIT award in CC/Devas, where it argued that the Antrix-Devas deal was fraudulent and corrupt and hence against public policy. However, the Dutch court was unimpressed. The court said that India has “failed to particularise the degree to which the accusations concern Devas et al. and its officers and to what degree these accusations then touch on the Devas Contract”.
In the words of Hague Court of Appeal, India was unable “to establish in the court that criminal acts played a role in the formation of the Devas contract” which would render the contract “null and void”.
It takes two to tango
It only remains to be seen how the foreign courts respond to the findings of the Supreme Court regarding Antrix-Devas in the absence of a conclusive determination of criminality of Devas and Antrix officials, as at present several cases are pending before the courts of the US, and other countries. The Indian government should expedite the investigations, and the trial concerning this case.
However, what is clear from this entire fiasco is the responsibility of the two successive governments. The Supreme Court has already attested to the blunder committed during the UPA government. The government would have had a better chance if it came clean on what actually happened in the deal, rather than focusing on the national security angle – which clearly faltered in both CC/Devas case, and Deutsche Telekom case. They already had the CAG report.
As for the NDA government, it inherited the mess created by the predecessor. However, rather than cleaning by adopting an effective litigation strategy, it decided to make a contribution by failing to raise objections in a timely manner, and to expedite the investigation of fraud and corruption in the Antrix-Devas deal.
The finance minister said in the press conference after the Supreme Court judgment that they were fighting to save the taxpayers’ money. Well, if taxpayers’ money was the prime motivation, there is one thing for sure – the government was expected to put up a better fight, which it did not.
Pushkar Anand is Assistant Professor at the Faculty of Law, University of Delhi.