Delhi High Court Sets Aside Arbitral Award Requiring ISRO's Commercial Arm 'Antrix' To Pay Over 560 Million USD To Devas Multimedia
The Delhi High Court has set aside a 2015 arbitral award directing Antrix Corporation Limited, commercial and marketing arm of ISRO, to pay US$ 562.2 million to Devas Multimedia Private Limited over wrongful repudiation of contract.Justice Sanjeev Sachdeva held that the arbitral award dated September 14, 2015 suffered from patent illegalities and fraud and was also in conflict with the...
The Delhi High Court has set aside a 2015 arbitral award directing Antrix Corporation Limited, commercial and marketing arm of ISRO, to pay US$ 562.2 million to Devas Multimedia Private Limited over wrongful repudiation of contract.
Justice Sanjeev Sachdeva held that the arbitral award dated September 14, 2015 suffered from patent illegalities and fraud and was also in conflict with the Public Policy of India.
The Court thus allowed the plea filed by Antrix under Section 34 of the Arbitration and Conciliation Act, 1996.
Antrix had sought winding up of Devas before the National Company Law Tribunal alleging that Devas was formed for a fraudulent and unlawful purpose and its affairs had been conducted in a fraudulent manner. In 2021, a Provisional Liquidator was appointed by the NCLT and NCLT had allowed winding up of Devas.
The order of winding up was challenged before the National Company Law Appellate Tribunal, appeals for which were dismissed. Thereafter, the orders were assailed before the Supreme Court which had upheld the order passed by NCLAT.
A contract was entered into between Antrix and Devas on January 28, 2015 for the Lease of Space Segment Capacity on ISRO/Antrix S-band Spacecraft. The Contract was executed between Antrix and Devas only and neither the Department of Space nor ISRO nor any other governmental agency was a party to the Contract.
As per the contract, Antrix was to build, launch and operate two satellites and lease spectrum capacity on those satellites to Devas, which Devas planned to use to provide digital multimedia broadcasting services across India. In return, Devas agreed to pay to Antrix Upfront Capacity Reservation Fees of US$ 20 million per satellite, and lease fees of US$ 9 million to US$ 11.25 million per annum.
Antrix notified Devas that the Contract was terminated inter alia citing Article 11 [Force Majeure] and Article 7(c) [Termination for convenience by Antrix] of the Contract. Devas refused to accept the termination and instead claimed specific performance of the contract and in the alternative claimed damages to the tune of US$ 1.6 billion.
Antrix then proposed a meeting of the senior management in terms of Article 20(a) of the Contract. However Devas instead of agreeing to the same filed a request for Arbitration with the International Court of Arbitration of the International Chamber of Commerce.
Vide the impugned order, the Arbitral Tribunal had held that the contract between the parties did not limit Devas' entitlement to alleged damages that it suffered by reason of Antrix's repudiation of the agreement. The Tribunal thus directed Antrix to pay US$ 562.2 million to Devas besides interest.
The Arbitral Tribunal had held that the decision of declining the grant of orbital slot to Antrix was a decision of a governmental authority in exercise of its sovereign function and amounted to a Force Majeure event and covered under Article 11(b). Thus it could not have held that the alleged breach on the part of Antrix was deliberate.
Perusing the orders passed by NCLAT and Supreme Court, the Court said:
"A product of fraud is in conflict with the public policy of any country including India. The basic notions of morality and justice are always in conflict with fraud. Further, allowing Devas and its shareholders to reap the benefits of their fraudulent action, would send another wrong message namely that by adopting fraudulent means and by bringing into India an investment in a sum of INR 579 crores, the investors can hope to get tens of thousands of crores of rupees, even after siphoning off INR 488 crores."
While observing that Courts do not sit in appeal against arbitral award and thus cannot re-appreciate evidence, the Court added that if an arbitrator takes a view which is not even a possible one, or if he commits an error of jurisdiction by wandering outside the contract and also ignores vital evidence are perverse, the same can be set aside on the ground of patent illegality.
"Contravention with the fundamental policy of Indian law or being in conflict with the most basic notions of morality or justice or contrary to national economic interest and disregarding the superior Courts in India would be antithetical to the fundamental policy of Indian law," the Court said.
The Court thus ruled that the Arbitral Tribunal had incorrectly excluded the evidence pertaining to the pre-contractual negotiations.
It also added that the Arbitral Tribunal had committed patent illegality in the award as findings on some issues were contradicted by the findings on other issues and were also contradicted by the reasoning given to reach the said conclusions.
"It has held that a product of fraud is in conflict with the public policy of any country including India. The basic notions of morality and justice are always in conflict with fraud and that allowing Devas and its shareholders to reap the benefits of their fraudulent action, would send another wrong message namely that by adopting fraudulent means and by bringing into India an investment in a sum of INR 579 crores, the investors can hope to get tens of thousands of crores of rupees, even after siphoning off INR 488 crores," the Court said.
The plea was thus disposed of.
Case Title: ANTRIX CORPORATION LTD. v. DEVAS MULTIMEDIA PRIVATE LIMITED
Citation: 2022 LiveLaw (Del) 812