Published on: August 30, 2022 at 18:20 IST
The Delhi High Court Bench of Justice Sanjeev Sachdeva has set aside a 2015 arbitral award. The award had directed a payment of USD 562.2 million by Antrix Corporation Limited, to Devas Multimedia Private Limited, for wrongful repudiation of contract.
The 2015 order suffered from patent illegalities and fraud and was not in line with the Country’s Public Policy, according to the Bench.
The Case: Antrix Corporation Ltd. vs. Devas Multimedia Private Limited
The Court was hearing a plea filed by Antrix, ISRO’s commercial and marketing arm. It was made under Section 34 of the Arbitration and Conciliation Act, 1996.
Antrix had approached the NCLT, requesting the winding up of Deva. It claimed that Devas was formed for an unlawful purpose and was working as a fraudulent organisation. A Provisional Liquidator was appointed by the NCLT in 2021, after which the NCLT directed for the wind up, which was challenged before the NCLAT.
The appeal, after being dismissed, was taken before the Supreme Court, which upheld the order of NCLAT.
As per a 2015 agreement between the two agencies, Antrix was to build, launch, and operate two satellites and lease spectrum capacity on those satellites to Devas. And Devas was to provide digital multimedia broadcasting services across India, for which it would pay Antrix a fee of USD 20 million per satellite, and lease fees of USD 9 million to USD 11.25 million per annum.
Antrix notified Devas for the termination of the above contract, as per Article 11 [Force Majeure] and Article 7(c) [Termination for convenience by Antrix] of the Contract. This was refused by Devas, which claimed damages of USD 1.6 billion from Antrix. Devas approached for Arbitration with the International Court of Arbitration of the International Chamber of Commerce, after denying the former’s offer of reconciliation.
The Tribunal had directed Antrix to pay USD 562.2 million to Devas, apart from the interest payment. It held that it was a decision of a governmental authority, as a sovereign function. Hence, it amounted to a Force Majeure event to be covered under Article 11(b). So, the breach of contract was not intentional.
The apex court held, “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 of a sum of INR 579 crores, the investors can hope to get tens of thousands of crores of rupees, even after syphoning off INR 488 crores.”
The bench also quoted: “If an arbitrator commits an error of jurisdiction outside the contract, the court can set it aside due to its illegality .”
The Arbitral Tribunal has excluded the evidence of pre-contractual negotiations, which is incorrect, and it had committed illegality in the award.
“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.”
Henceforth, the bench disposed of the plea.