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Devas investors move US court, tag Air India assets to recover award

The Mauritius investors have followed in the footsteps of the UK firm Cairn Energy in seeking to get Air India declared an alter ego of India in order to pursue assets of the national carrier as a strategy to enforce arbitration awards against the government.

By: Express News Service | Bengaluru |
Updated: June 30, 2021 9:06:30 am
The move comes even as a Bengaluru bench of the National Company Law Tribunal ordered liquidation of Devas Multimedia on May 26 on the grounds that the firm was created fraudulently.

A group of foreign investors in the start-up Devas Multimedia, who are seeking to enforce a $160-million arbitration compensation award over a failed 2005 satellite deal with the Indian Space Research Organisation’s (ISRO) commercial arm Antrix Corporation, have moved a US federal court, seeking to take over the assets of Air India to enforce payments.

The group of foreign investors — CC/Devas Mauritius, Telcom Devas Mauritius, and Devas Employees Mauritius Pvt Ltd — approached the Southern District of New York court on Monday with a plea to declare Air India an alter ego of India, and to allow attachment of the airline’s properties in order to enforce payment of compensation awarded by an international tribunal in favour of the investors.

The Mauritius-based investors in Devas Multimedia were awarded a $160-million compensation by a tribunal of the UN Commission on International Trade Law on October 13, 2020, following an arbitration process over alleged violations by the Indian government of a bilateral investment treaty with Mauritius. Earlier this year, the investors had moved a US federal court seeking enforcement of the arbitration award.

The Mauritius investors have followed in the footsteps of the UK firm Cairn Energy in seeking to get Air India declared an alter ego of India in order to pursue assets of the national carrier as a strategy to enforce arbitration awards against the government.

Cairn Energy’s complaint was filed in the same court on May 17.

The Mauritius investors have contended that Air India should be made jointly liable “for debts and obligations of India itself”, according to the court filing. The complaint says A-I should be made liable for payments due to Devas shareholders on account of the UNCITRAL arbitration award.

The move comes even as a Bengaluru bench of the National Company Law Tribunal ordered liquidation of Devas Multimedia on May 26 on the grounds that the firm was created fraudulently. The Enforcement Directorate and the CBI are pursuing cases of money laundering and corruption against Devas over the 2005 deal.

Last week, a special court in Bengaluru where a Prevention of Money Laundering Act case against Devas is awaiting trial asked the official liquidator appointed to liquidate Devas Multimedia whether he would defend the money laundering charges against the firm. The liquidator has sought time to respond and the case is to be taken up again in July.

The liquidator has also sought the release of Rs 79 crore seized from Devas Multimedia by the ED as part of the PMLA case proceedings, which has been objected to by some Devas officials accused in the case.

Under the 2005 deal, ISRO was supposed to lease two communication satellites for 12 years at a cost of Rs 167 crore to Devas Multimedia. After the cancellation of the deal in 2011, foreign investors in Devas Multimedia — German telecom major Deutsche Telekom, three Mauritius-based 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 $111 million compensation by the United Nations Commission on International Trade Law tribunal on October 13, 2020. Devas Multimedia was awarded a compensation of $1.3 billion by an International Chamber of Commerce tribunal on September 14, 2017.

The $1.3-billion compensation award to Devas 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.

Earlier this month, the Supreme Court rejected a plea by Devas to restrain the official liquidator from taking any step in a case pending in Delhi High Court between Antrix and Devas over the $1.3 billion ICC tribunal award.

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