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The fraudulent seeds, bitters fruits of the Antrix-Devas case

🔴 Ravi Shankar Prasad writes: The Supreme Court's historic judgment underscores how corruption marked UPA government’s decision-making

Written by Ravi Shankar Prasad |
Updated: January 25, 2022 9:15:15 am
Devas was in a strategic partnership with Antrix to launch a new service to deliver video, multimedia and information services via satellite to mobile phones across India. (Representational Image)

The recent Supreme Court judgment held that the entire Antrix-Devas deal is based on fraud; that the incorporation of Devas was with the fraudulent intention to grab prestigious contracts and corner natural resources in connivance with officials of Antrix. In many ways, it exposes again the corrupt manner in which the UPA government led by Manmohan Singh sought to squander national resources and allowed the loot of public money. The finding of the apex court comes as a vindication for many of us who raised the voice of opposition in Parliament, criticised the deal and demanded accountability, leading to its cancellation in 2011. The SC has upheld the order of liquidation for Devas, which was demanded by the new management of the Antrix corporation after the Narendra Modi government came to power. This exposes the rank fraud in the deal made with Devas, which was constituted hurriedly to corner precious S-Band reserved for defence purposes, and showed that the company has no technical competence or infrastructure to execute the project.

It would be appropriate to recall some facts that form a part of the judgment. Devas was a private limited company in a strategic partnership with Antrix Corporation Limited, the commercial arm of Indian Space Research Organization (ISRO), a wholly-owned government undertaking, to launch a new service to deliver video, multimedia and information services via satellite to mobile phones across India. The agreement talked of three components — Devas Technology, Devas Services and Devas Device — none of which existed at the time of the agreement or its termination or even on the date of winding up. The company was formed in December 2004 with an authorised share capital of Rs 1 lakh only and yet it managed to secure a contract for a consideration of $20 million per satellite apart from an annual licence fee of Rs 9 million per satellite. Precious S-Band was also to be allotted without any auction and such a heavy contract was entered into only with a private negotiation and not through tender or public auction. The entire company and this deal were for windfall gains only.

This is evident because the equity share of Rs 10 was sold at the rate of Rs 1.26 lakh per share after the agreement. The company showcased an investment of Rs 579 crore inflow into India and then transferred out a sum of Rs 75 crore for creating wholly-owned subsidiaries in the US; a sum of Rs 180 crore for business support and Rs 233 crore towards litigation services. Therefore, out of an inflow of Rs 579 crore, only Rs 92 crore was kept in India. The unlawful purpose of its creation and the fraudulent manner in which the affairs of the company were conducted was evident from the beginning.

The court has also noted that at the time of entering into the contract, Devas did not have the technology infrastructure or experience to perform its obligation under the agreement. The company even failed to show whether any such technology existed and that it has intellectual property over the same. After the PM Modi-led government came to power, a CBI enquiry was initiated and after investigation, a chargesheet filed. Significantly, the UPA government did not terminate the agreement on the grounds of corruption or impropriety but the ground that a policy decision has been taken not to provide orbital slots in S-Band for commercial activities. Obviously, this fraudulent deal had powerful political patronage. Else, an agreement of such magnitude for leasing 10 transponders of 8.1 MHz, 2.78 MHz capacity on primary satellites would not have happened without any auction or tender. It was not only a bounty for Devas but also for its foreign investors. Against a mere authorised share capital of Rs 1 lakh, and investment inflow of Rs 579 crore, Devas and its foreign investors managed to get an award of Rs 10,000 crore from the ICC Arbitration Tribunal and Rs 5,000 crore into two bilateral investment treaties (BITs), which is sought to be executed. It was because of these compelling reasons that the government rightly revisited various BITs with different countries executed by the previous government. We should not forget that these awards are ultimately paid by the taxpayer.

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Another serious issue: Devas claimed before the SC that a unanimous award was passed by the ICC tribunal, which was presided over by a former Chief Justice of India. The CBI has already filed the chargesheet, the deal is dishonest and disregards all standards of propriety and fair play and yet, such a huge amount was awarded. It is to be noted that the CBI investigation was initiated by the present government in 2015. We also had to move an amendment to the arbitration law ensuring that the court could stay the award unconditionally, pending the disposal of the challenge to the award, if the court is satisfied that prima facie, the contract, which is the basis of award, was induced by fraud or corruption. Perhaps, there is a compelling need to introspect as to how arbitration proceedings are being conducted in sensitive cases.

The SC observed that if the seeds of commercial relationship between Antrix and Devas were a product of fraud, then every part of the plant that grew out of those seeds, such as the agreement, the disputes and the awards, are infected with fraud. The court also held that allowing Devas and its shareholders to reap the benefits of their fraudulent action may itself send the wrong signal to the global community. The Devas case highlights once again how corruption and extraneous considerations played a dominant role in most of the decisions of the UPA, leading to a loss of public money.

This column first appeared in the print edition on January 25, 2022 under the title ‘A dark cloud loomed’. The writer is a BJP MP and former Union law and justice minister

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