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Monday, September 20, 2021

Court rejects ED plea to split trial of PMLA case against start-up Devas Multimedia

The ED has sought a recall of the order and the matter is scheduled for hearing this week.

By: Express News Service | Bengaluru |
Updated: September 9, 2021 8:13:31 am
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A plea by the Enforcement Directorate (ED) to split the trial into the alleged money laundering by a Bengaluru start-up firm Devas Multimedia Pvt Ltd – following a failed satellite deal with Indian government entities – was rejected by a special court in Bengaluru on account of the central agency failing to issue summons to a US-based official of the firm and a US subsidiary.

The special court rejected an application filed by the ED to conduct a separate trial against Ramachandran Vishwanathan, the CEO of Devas Multimedia and Devas Multimedia America Inc (DMAI), a US arm of the start-up.

Vishwanathan and DMAI are among 10 individuals and entities accused of money laundering by the ED in a chargesheet filed in 2018 against Devas Multimedia.

The ED has sought a recall of the order and the matter is scheduled for hearing this week.

The ED had filed a charge sheet in 2018 under the Prevention of Money Laundering Act against Viswanathan, director of the firm M G Chandrashekar, Devas CTOs Desaraju Venugopal, Nataraj Dakshinamurthy, finance director Ranganathan Mohan, three Devas subsidiaries in Bengaluru and the US and K R Sridharamurthy, former executive director of Antrix Corporation.

In its chargesheet, the ED alleged that Devas Multimedia transferred 85 per cent of Rs 579 crore of foreign funding it received through a 2005 deal with ISRO to the US under various claims.

However, despite the passage of three years since the filing of the chargesheet, the ED reported that it has not been able to serve summons to two of the accused in the case who are in the US, resulting in the stalling of the trial in the case.

The ED recently asked the special court to split the case against Vishwanathan and DMAI on account of them not being served summons and to begin the trial against the remaining eight in the interest of justice.

The special court in an order on September 4 rejected the demand. “Since, the fate of earlier summons to accused No 2 and 7 is not known, it would be premature to segregate the case against accused No 2 and 7,” the special court observed.

In the course of the hearing in recent weeks, the ED sought the court’s assistance “to obtain information and documents from Singapore and Mauritius” with respect to Devas Multimedia America Inc.

“These applications reflect that the investigation itself has not been completed. This strengthens the argument of the other accused that the memo seeking splitting up of the case is premature. Therefore, there are no grounds to split up the case against accused No 2 and 7 at this stage,” the court said.

Under a 2005 deal, ISRO was contracted to lease two communication satellites for 12 years at a cost of Rs 167 crore to Devas Multimedia. The start-up was to provide audio-video services to mobile platforms in India using the space band or S-band spectrum transponders on ISRO’s GSAT 6 and 6A satellites built at a cost of Rs 766 crore by ISRO.

The Devas Multimedia-Antrix Corporation (ISRO) agreement was annulled by the Manmohan Singh-led UPA government in February 2011 following allegations of the contract being a “sweetheart deal” in the backdrop of the 2G scam in the telecom sector. The UPA annulled the deal citing demand for the S-band spectrum by the defence sector. After the NDA government came to power in 2014, the CBI and ED were asked to investigate the 2005 deal.

Out of the Rs 579 crore FDI received by Devas Multimedia in India via the Mauritius route — from investors like Columbia Capital and Deutsche Telekom — an amount of Rs 76.19 crore was transferred to a US subsidiary called Devas Multimedia America Inc as investment while an amount of Rs 180.77 crore was transferred to the subsidiary under the pretext of providing business support services and a further Rs 230.11 crore was spent as legal fee with a major portion being transferred to the US, the ED has alleged.

In February, 2017 the ED had provisionally attached Rs 79.76 crore belonging to Devas Multimedia Ltd which was in the form of upfront capacity reservation fees paid by Devas to ISRO to reserve two communication satellites for its use and mutual fund and bank deposits.

“The main purpose of entering the agreement with ISRO/ACL was to raise foreign investments on the strength of the agreement with ISRO and thereafter siphon off the investment raised, out of India in the guise of investment in subsidiary company, business support services and legal fee,” the ED said in a statement while attaching the assets of Devas Multimedia in 2017.

After the cancellation of the 2005 deal, in 2011, foreign investors in Devas Multimedia —German telecom major Deutsche Telekom, the three Mauritius-based foreign investors and Devas Multimedia approached various international tribunals seeking damages for the failed deal.

While Deutsche Telekom was awarded a compensation of $101 million plus interest by the Permanent Court of Arbitration in Geneva on May 27, 2020, the Mauritius investors were awarded a $111 million compensation (plus interest) by the United Nations Commission on International Trade Law tribunal on October 13, 2020 and Devas Multimedia was awarded a compensation of $1.3 billion by an International Chamber of Commerce tribunal on September 14, 2015.

The $1.3 billion compensation award to Devas Multimedia was confirmed by the US federal court for the western district of Washington on October 27, 2020. Antrix Corporation has appealed to a US court against this order and the Supreme Court of India has asked for the ICC tribunal award to be kept in abeyance through a November 4, 2020 order.

The Mauritius investors in Devas have also approached a Southern District of New York court with a plea to declare Air India an alter ego of India and to allow attachment of Air India properties in order to enforce payment of compensation awarded by the UN trade law tribunal.

The National Company Law Tribunal in India ordered the liquidation of Devas Multimedia on May 25 following a plea by Antrix Corporation. Investors in Devas and the company itself appealed against the NCLT order in the NCLAT and the matter was reserved for orders on July 28, 2021.

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