ED presses for declaring Devas CEO a fugitive offender in case over failed 2005 deal with ISRO

The court ordered a notice to the US-based CEO and Devas Multimedia America Inc, following an ED application under the Fugitive Economic Offenders Act 2018. It has been informed about a December 12, 2022, communication received from the Ministry of External Affairs and a communication received from the US for the service of the court notice in that country.

Devas Multimedia was liquidated in May 2021 by the National Company Law Tribunal. The ED alleges that Viswanathan and nine others diverted to the US 85 per cent of Rs 579 crore of foreign direct investment that the startup received following a 2005 deal with the Indian Space Research Organisation (ISRO), after the satellite deal was annulled in 2011. The ED chargesheet against them was filed in 2018.

The declaration of an individual as a fugitive economic offender will allow the ED to seek confiscation of properties in India and abroad that are identified as proceeds of a crime.

Viswanathan is now president of Omnispace LLC, a satellite communications startup in the US, which is putting together a constellation of satellites to power 5G from space – especially to provide connectivity to remote areas where terrestrial mobile networks do not work.

The others accused in the case under the Prevention of Money Laundering Act are Devas Multimedia director M G Chandrashekar, Devas chief technology officers Desaraju Venugopal and Nataraj Dakshinamurthy, finance director Ranganathan Mohan and three Devas subsidiaries.

The Karnataka High Court in September 2022 acquitted K R Sridharamurthy, former executive director of the ISRO’s Antrix Corporation, from the case. While the others have responded to summons issued by the special court for the start of the trial, Viswanathan has not. The 2005 deal between Devas Multimedia and Antrix Corporation was about using two ISRO communication satellites to provide multimedia services to mobile devices in remote areas where conventional, terrestrial telecom networks do not have reach.

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

The Devas Multimedia-Antrix Corporation agreement was annulled by the UPA government in February 2011 following allegations of the contract being a “sweetheart deal” against the backdrop of the 2G scam. After the NDA government came to power in 2014, the CBI and the ED began full-fledged investigations of the 2005 satellite deal. The CBI filed a chargesheet in 2016 against Devas and Antrix and their executives including former ISRO chairman G Madhavan Nair on charges of corruption.

Following the cancellation of the 2005 deal, Devas Multimedia and its foreign investors approached international arbitration tribunals to seek compensation for losses they had incurred. They have been awarded compensation by three arbitration tribunals over the failed deal, the biggest being a September 14, 2015, International Chamber of Commerce tribunal award of over $1.2 billion. It was confirmed by a US federal court on October 27, 2020. Antrix Corporation has filed an appeal against this order in the US Court of Appeals for the Ninth Circuit.

Based on the CBI and ED cases against Devas Multimedia, the National Company Law Tribunal ordered the liquidation of Devas in May 2021 on charges that the company was created in a fraudulent manner. This order was upheld by the Supreme Court in January last year.

On August 29, 2022, the Delhi High Court set aside the ICC tribunal award of $1.2 billion compensation to Devas Multimedia and its investors and said that award suffered “from patent illegalities and fraud and is in conflict with the public policy of India”.

Devas Multimedia and its investors, including the German Deutsche Telekom, are involved in a protracted legal battle across the world over the India government’s 2011 decision to annul the satellite deal between the former and the ISRO’s Antrix Corporation.