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Failed 2005 satellite deal: Air India opposes new identity for Devas’ Mauritius investors in US courts

🔴 The investors have sought substitution of the current entities in litigation in multiple courts in the US in the wake of the Supreme Court of India upholding a National Company Law Appellate Tribunal (NCLAT) order for liquidation of Devas Multimedia in India.

By: Express News Service | Bengaluru |
January 25, 2022 11:22:37 am
A spy satellite is among an array of sophisticated weapons systems that North Korean leader Kim Jong Un vowed last year to develop under military modernisation plans to cope with what he called hostile U.S. policies toward his country. (File/Representational)

Air India has opposed a move by three Mauritius-based investors in startup firm Devas Multimedia to be identified as new entities registered in the United States to enforce compensation awards made in favour of the investors, and Devas Multimedia, by multiple international arbitration courts.

The Air India move comes in the wake of three foreign investors in Devas Multimedia — CC/Devas (Mauritius) Limited., Telecom Devas Mauritius Limited, and Devas Employees Mauritius Private Limited — seeking to be identified as CCDM Holdings, LLC, Telcom Devas, LLC, and Devas Employees Fund US, LLC. This is to continue proceedings to attach assets of Air India for recovery of nearly $1.2 billion in compensation awarded over the cancellation of 2005 satellite deal signed by Devas with Indian Space Research Organisation’s (ISRO) Antrix Corporation.

The investors have sought substitution of the current entities in litigation in multiple courts in the US in the wake of the Supreme Court of India upholding a National Company Law Appellate Tribunal (NCLAT) order for liquidation of Devas Multimedia in India.

The substitution of entities has been sought by the Devas’ investors under a US rule which allows the ‘transfer of interest’ in cases that are being heard in a court.

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The three Mauritius-based investors were initially allowed by a US federal court to intervene on behalf of Devas Multimedia on February 24, 2021, in the wake of the Antrix Corporation seeking liquidation of Devas on the grounds that fraud was involved in the creation of the startup in Bengaluru in December 2004.

At the time, the liquidator for Devas Multimedia – who has taken over the company – argued that the US federal court cannot allow shareholders in Devas to proceed on behalf of the company since “it may run counter-productive to the efforts of the official liquidator” to liquidate Devas.

“Shareholders taking proactive steps in the United States to enforce the ICC (International Chamber of Commerce) award are committing contempt of court against the Supreme Court of India,” the liquidator argued.

The foreign investors in Devas Multimedia are seeking to discover assets of Air India and the Antrix Corporation in the US to recover the compensations awarded by international arbitration tribunals over the termination of a 2005 Devas-Antrix satellite deal.

Meanwhile, Air India has opposed a move by the three Mauritius shareholders to attach its assets in the US by citing a January 8 order of a Canadian court for attachment of 50 per cent of the deposits made by Air India with the Montreal-headquartered International Air Transport Association for air services.

In a letter to a US federal court for the southern district of New York, an advocate for Air India, Michael Schuster, has said that Air India enjoys sovereign immunity like the Republic of India and that a Canadian court has not identified it as an “alter ego” of India as claimed by the investors in Devas Multimedia in a letter to the court on January 13.

“Air India has threshold immunity and legal defenses that preclude this court’s jurisdiction even assuming that Air India is the alter ego of India,” states the letter to the US court.

“If Devas overcomes the Republic of India’s immunity defenses (which Air India shares); and if Devas then overcomes Air India’s independent immunity and legal defenses to be set forth in its previewed motion to dismiss; and if the Court then determines that the contested issue of Air India’s alter ego status must be resolved; then the parties can brief the effect, if any, of the Canadian court’s preliminary ruling,” says the letter.

The letter states that Air India has moved an appeal against a Canadian court’s preliminary order for attachment of Air India assets in Montreal based on a plea by Devas’ investors.

On January 8, the Superior Court of the province of Quebec in Canada – where investors in Devas Multimedia are pursuing seizure of funds deposited with IATA allowed the preliminary seizure of 50 per cent of $17.3 million of funds deposited by Air India with IATA.

The Mauritius investors are attempting to enforce a compensation award made against India for alleged violations of an India-Mauritius Bilateral Investment Treaty by attaching assets of the state-run Air India which is set to be sold to the Tata Group.

Under the 2005 deal, the ISRO was supposed to lease two communication satellites for 12 years at Rs 167 crore to Devas Multimedia.

The startup firm was to provide multimedia 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 Rs 766 crore by the ISRO.

The deal was annulled by the United Progressive Alliance (UPA) government in February 2011 amid the 2G scam crisis by citing the requirement of the S-band spectrum for security needs. After the NDA government came to power in 2014 the CBI and ED were asked to investigate the deal.

After the cancellation of the deal foreign investors in Devas Multimedia – the German telecom major Deutsche Telekom, the Mauritius investors, and Devas Multimedia approached various international tribunals seeking damages for the failed deal.

While Deutsche Telekom was awarded a compensation of $101 million by the Permanent Court of Arbitration in Geneva on May 27, 2020, the Mauritius investors were awarded a $111 million compensation by the United Nations Commission on International Trade Law tribunal on October 13, 2020.

Devas Multimedia was awarded a compensation of $1.2 billion by an International Chamber of Commerce tribunal on September 14, 2015.

The $1.2 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 gone in appeal 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 NCLAT ordered the liquidation of Devas Multimedia on May 25, 2021, following a plea by Antrix Corporation. Investors in Devas and this order was upheld by the NCLAT in September and the Supreme Court of India on January 17.

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