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HomeNewsFrom the Courts
17 Jan 2022 5:30 PM GMT

Supreme Court upholds NCLAT judgment

By: Nilima Pathak
Supreme Court upholds NCLAT judgment

Supreme Court upholds NCLAT judgment Orders winding up of Devas Multimedia following government-owned Antrix Corporation's petition The Supreme Court has upheld the judgment of the National Company Law Appellate Tribunal (NCLAT) allowing the winding up of Devas Multimedia, following a winding-up petition preferred by Central government-owned Antrix Corporation. The court turned down...

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Supreme Court upholds NCLAT judgment

Orders winding up of Devas Multimedia following government-owned Antrix Corporation's petition

The Supreme Court has upheld the judgment of the National Company Law Appellate Tribunal (NCLAT) allowing the winding up of Devas Multimedia, following a winding-up petition preferred by Central government-owned Antrix Corporation.

The court turned down the contention of Devas that the motive behind Antrix seeking winding up of Devas was to deprive it of the benefits of a unanimous award passed by the International Chamber of Commerce (ICC) Arbitral Tribunal in favor of Devas.

A bench comprising Justice Hemant Gupta and Justice V Ramasubramanian dismissed the appeal filed by Devas against the NCLAT judgment.

The court ruled, "We do not find any merit in the submission. If fraud, as projected by Antrix, stands established, the motive behind it is of no relevance. If the seeds of the commercial relationship between Antrix and Devas were a product of fraud perpetrated by Devas, it meant the disputes and arbitral awards were all infected."

Earlier, the Bengaluru bench of NCLAT had upheld the order passed by a former Chief Justice of India directing the winding up of Devas. The judge had ruled that such attempts on the part of a corporate entity (wholly owned by the Government of India) would send a wrong message to international investors.

Devas, a Bengaluru-based company (majorly owned by Mauritian and US firms), was purportedly established by two persons, one being a former employee of the Indian Space Research Organization (ISRO), with a share capital of Rs.1 lakh to pursue the digital multimedia services.

Devas and Antrix, the commercial arm of ISRO, entered into an agreement by which Antrix agreed to build, operate, and launch two satellites and lease the spectrum capacity on those satellites to Devas. The latter was to utilize this bandwidth to provide multimedia services across India.

However, Antrix, invoking force majeure, due to changes in policy decisions, terminated the agreement. A legal battle ensued between the two. In 2014, ICC rendered an award in favor of Devas. It directed Antrix to pay damages of around US$562.5 million to Devas, along with interest.

Antrix challenged the award before the Delhi High Court on the ground that the contract from which the arbitral award arose was wholly vitiated due to acts of corruption, fraud and criminality committed by the erstwhile management of Antrix and Devas.

While the challenge to the ICC award was pending, Antrix moved the National Company Law Tribunal (NCLT) for winding up of Devas. It said the objective of Devas was to "harm public interest and monies" and that Rs.296 crores were used for the personal gain of a few officials. This was in clear violation of the law and the policy.

Stating that the continuance of Devas' name on the rolls of the Registrar of Companies was not warranted at all, the Ministry of Corporate Affairs, supported Antrix's case.

In 2021, NCLT passed an order directing the winding up of Devas on the ground of fraud. The NCLAT confirmed the same, prompting the present appeal.

The Supreme Court held that there was no denial of the fact that Devas offered a bouquet of services. But none of those existed then or thereafter. It did not even hold necessary intellectual property rights though claiming it applied for it.

The court further noted that the formation of Devas was for a fraudulent and unlawful purpose. While the company was incorporated in December ¬2004, the preliminary meetings were held in Bengaluru and the US in 2003, followed by the signing of the Memorandum of Understanding (MoU).

"The groundwork was clearly done during the period from March ¬2003 to December ¬2004, even before the company was formally incorporated. Immediately after the incorporation, the agreement was signed in 2005. Therefore, the first ingredient of the Companies Act, 2013, (formation of the company for a fraudulent and unlawful purpose) was clear," the court ruled.

On the contention that the action of Antrix in seeking the winding up of Devas might send a wrong signal to the community of investors, the court said that it could not conclusively state anything on the same.

"But allowing Devas and its shareholders to reap the benefits of their fraudulent action, may nevertheless send another wrong message that by adopting fraudulent means and by bringing into India an investment of a sum of Rs.579 crores, the investors could hope to get tens of thousands of crores of rupees, even after siphoning off Rs.488 crores, the court concluded.

Devas was represented by senior advocates Mukul Rohtagi and Arvind P Datar. Additional Solicitor General N Venkataraman, along with Ajay Bhargava, Vanita Bhargava, Arvind Ray, Karan Gupta and Vansha S Suneja of Khaitan & Co, Delhi, represented Antrix.

Nilima Pathak

Nilima Pathak

TAGS:
  • Supreme Court 
  • Chief Justice of India 
  • Justice Hemant Gupta 
  • Justice V Ramasubramanian 
  • Delhi High Court 
  • National Company Law Tribunal 
  • National Company Law Appellate Tribunal 
  • International Chamber of Commerce Arbitral Tribunal 
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