Updated: August 11, 2021 11:28:37 am
A US federal court has refused to stay proceedings in a plea by foreign investors in the startup firm Devas Multimedia for confirmation of a $1.3 billion compensation to be paid by the Antrix Corporation, the commercial arm of the Indian Space Research Organisation (ISRO), on account of a failed 2005 deal for the Antrix to build and launch two satellites for Devas.
The US federal court for the Western District of Washington has cited delays in the appointment of an advocate for Devas Multimedia by a liquidator for the company while rejecting a plea for a stay on confirmation of a September 14, 2015 International Chamber of Commerce arbitration award.
The liquidator appointed on the orders of the National Company Law Tribunal (NCLT) in Bengaluru had opposed the move by three foreign investors in Devas Multimedia to seek confirmation of the $1.3 billion arbitration award by citing an order for liquidation of Devas Multimedia by the tribunal.
“The liquidator for petitioner fired petitioner’s former counsel in early February 2021 and although the court directed the liquidator to hire new counsel in compliance with the local civil rules on March 23, 2021, the liquidator waited nearly four months to do so on July 14, 2021,” the US court has observed in an August 9 order.
“As the court has repeatedly emphasised, this matter has been subjected to hindrance and delay, largely on the part of respondent Antrix Corp. Ltd. The parties’ dispute arises from conduct in February 2011, the award was issued in favour of petitioner in September 2015, and petitioner’s related confirmation action was filed in this court nearly three years ago in September 2018,” the district judge Thomas S Zilly has noted.
“The court concludes that petitioner’s motion for a stay lacks merit under these circumstances and is intended to further delay these proceedings, as well as petitioners or intervenors’ right to recover on the award,” the US federal court has stated.
The $1.3 billion compensation award to Devas Multimedia was confirmed by the same US federal court for the western district of Washington on October 27, 2020 . Three foreign investors in Devas Multimedia, and a US subsidiary – Devas Multimedia America Inc, approached the US court again earlier this year expressing fears of Devas Multimedia entering an agreement with Antrix Corp.
on compensation payment in the wake of the ISRO unit moving to liquidate the Bengaluru headquartered Devas Multimedia through a petition filed in the NCLT in January.
In the recent proceedings in the US federal court, the liquidator for Devas Multimedia – who has taken over the company – argued that the US court cannot allow Devas shareholders to proceed on behalf of Devas 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 Award are committing contempt of court against the Supreme Court of India,” the liquidator argued.
Under the 2005 deal, ISRO was supposed to lease two communication satellites for 12 years for 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 ISRO’s GSAT 6 and 6A satellites built for Rs 766 crore by ISRO.
The deal was annulled by the UPA government in February 2011 amid the 2G scam crisis by citing the requirement of the S-band spectrum for the security needs of the country. 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, 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 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 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 NCLT 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.
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