TaxTMI 
TaxTMI 
2022 (9) TMI 1298
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.... 1. Petitioner - Antrix Corporation Limited (hereinafter referred to as 'Antrix') by this petition under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the Act) seeks setting aside of the Arbitral award dated 14.09.2015 passed by the Arbitral Tribunal constituted by the International Chamber of Commerce allowing the claim of the Respondent - Devas Multimedia Private Limited (hereinafter referred to as 'Devas'). 2. Antrix sought winding up of Devas under Section 271(c) read with Section 272(1)(e) of the Companies Act, 2013 before the National Company Law Tribunal (hereinafter referred to as 'NCLT') alleging that Devas was formed for a fraudulent and unlawful purpose and its affairs had been conducted in a fraudulent manner. On 19.01.2021, a Provisional Liquidator was appointed by the NCLT and by final order dated 25.05.2021 NCLT allowed winding up of Devas. 3. The order of winding up was challenged by Devas and Devas Employees Mauritius Private Limited (hereinafter referred to as 'DEMPL') before the National Company Law Appellate Tribunal (hereinafter referred to as 'NCLAT'). NCLAT by its order dated 08.09.2021 dismissed both the appeal....
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....s engaged, inter alia, in the business of marketing and sale of products and services of Indian Space Research Organisation ('ISRO') to national and international customers. 11. Devas is a limited liability company incorporated on 17.12.2004 under the Companies Act 1956. The initial subscribers to the Memorandum of Association of the Respondent were Mr. D. Venugopal holding 9000 shares and Mr. M. Umesh holding 1000 shares and its authorized share capital at the time of its incorporation was Rs. 11,50,000/-. 12. Subject contract leading to these proceedings was entered into between Antrix and Devas on 28.01.2005 (hereinafter referred to as the 'Contract') for the Lease of Space Segment Capacity on ISRO/Antrix S-band Spacecraft. It provided for the lease to Devas of transponders on satellite GSAT-6, referred to in the Contract as Primary Satellite 1 or PS1. It also contained an option for Devas to lease transponders on a second satellite, GSAT-6A, referred to in the Contract as Primary Satellite 2 or PS2. 13. The Contract was executed between Antrix and Devas only and neither the Department of Space- nor ISRO nor any other governmental agency was a party to the Contract. ....
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....al and business activities.' 16. The Lease period stipulated was 12 years, which was extendable by a further period of 12 years. 17. Article 3 of the Contract pertaining to Period of Lease and Terms & Conditions inter alia stipulated as under: 'a. ........ c. ANTRIX shall be responsible for obtaining all necessary Governmental and Regulatory Approvals relating to orbital slot and frequency clearances, and funding for the satellite to facilitate DEVAS services. Further, ANTRIX shall provide appropriate technical assistance to DEVAS on a best effort basis for obtaining required operating licenses and Regulatory Approvals from various ministries so as to deliver DEVAS services via satellite and terrestrial networks. However the cost of obtaining such approvals shall be borne by DEVAS. ....... e. The Parties agree and confirm that a part of PS1, as mutually agreed in writing, such agreement by DEVAS not to be unreasonably withheld, shall be used by ISRO for its own purposes, provided such usage does not interfere or compete in any way with the DEVAS Services. ....... j. ANTRIX agrees; that to the best possible extent,....
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....all have any further obligation to the other Party under this Agreement nor be liable to pay any sum as compensation or damages (by whatever name called). c. Termination for convenience by ANTRIX ANTRIX may terminate this Agreement in the event ANTRIX is unable to obtain the necessary frequency and orbital slot coordination required for operating PS1 on or before the completion of the Pre Shipment Review of the PS1. In the event of such termination, ANTRIX shall immediately reimburse DEVAS all the Upfront Capacity Reservation Fees and corresponding service taxes received by ANTRIX till that date. Upon such termination, neither Party shall have any further obligation to the other Party under this Agreement nor be liable to pay any sum as compensation or damages (by whatever name called). d. Termination by ANTRIX for fault of DEVAS ANTRIX may terminate this Agreement at any time if: i DEVAS is in material breach of any provisions of this Agreement and DEVAS has failed to cure the breach within three months after receiving notice from ANTRIX regarding such breach or, ii Non payment of (a) the Lease Fees and other charges (such as s....
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.... Termination of this Agreement for any reason whatsoever, shall not extinguish the rights and obligations of Parties under clauses related to Arbitration (Article 20), Confidentiality (Article 18) and obligations related to refund/payment of monies that have accrued before termination, and they shall survive termination and or expiry of this Agreement for a further period of 5 (five) years or fulfillment of these terms whichever is later.' 19. Article 11 of the Contract relates to Force Majeure conditions and reads as under: 'Article 11. Force Majeure a. Neither of the Parties hereto shall be liable for any failure or delay in performance of its obligations hereunder if such failure or delay is due to Force Majeure as defined in this Article, provided that notice thereof is given to the other Party within seven (7) calendar days after such event has occurred. b. For the purposes of this Agreement, 'Force Majeure Event'' shall include any event, condition or circumstance that is beyond the reasonable control of the party affected (the 'Affected Party') and that, despite ail efforts of the Affected Party to prevent it or mitigate its effects (incl....
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....elay in the performance of this Agreement arising out of an event of Force Majeure which lasts longer than 90 (ninety) days, both parties shall discuss the further course of action on a mutually agreeable basis. However, such action could include termination at the option of Unaffected Party if total delays exceed 12 (twelve) months, it is hereby expressly agreed by the parties that no financial or other liability shall arise on termination under this clause as far as the affected party is concerned.' 20. Another clause relied upon by the Arbitral Tribunal in the impugned award is Article 13 dealing with Indemnities, which reads as under: 'Article 13. Indemnities a. Either of the Parties (ANTRIX or DEVAS) shall indemnify, defend and hold harmless the other Party, its officers, directors, employees, agents, consultants from and against any loss. damages, liabilities, expenses, claims, actions, charges, costs, interests, and penalties suffered by the indemnified Party together with the attorney's fees, arising from the fault of the indemnifying Party b. it is further agreed that DEVAS shall indemnify ANTRIX for the following i Libel, slander, in....
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.... 22. The Arbitration agreement between the parties is contained in Article 20 of the Contract, which reads as under: 'Article 20. Arbitration a. In the event of there being any dispute or difference between the Parties hereto as to any clause or provision of this Agreement or as to the interpretation thereof or as to any account or valuation or as to the rights, liabilities, acts, omissions of any Party hereto arising under or by virtue of these presents or otherwise in any way relating to this Agreement such dispute or difference shall be referred to the senior management of both Parties to resolve within three (3) weeks falling which It will be referred to an Arbital Tribunal comprising of three arbitrators, one to be appointed by each party (i.e. DEVAS and ANTRIX) and the arbitrators so appointed will appoint the third arbitrator. b. The seat of Arbitration shall be at NEW DELHI in India. c. The Arbitration proceedings shall be held in accordance with the rules and procedures of the ICC (International Chamber of Commerce) or UNCITRAL. d. The Arbitration Tribunal shall reach and render a decision or award in writing (concurred in by a....
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....Devas agreed to pay to Antrix Upfront Capacity Reservation Fees (hereinafter referred to as UCRF) of US$ 20 million per satellite, and lease fees of US$ 9 million to US$ 11.25 million per annum. The lease term was twelve years, with a right of renewal at reasonable lease fees for a further twelve years. 25. On 21.06.2006, Devas made the payment of the first instalment of UCRF for PS1 of approximately US$ 7 million. On 18.06.2007 Devas made another payment of approximately US$ 7 million as the UCRF for PS2. 26. In February 2011, the Cabinet Committee on Security took the decision to deny orbital slot in S-band to Antrix for any commercial activities and to annul the Contract. Pursuant, to the decision of the Cabinet Committee on Security, on 23.02.2011, the Department Of Space directed the Petitioner to notify the Respondent of the decision of the Government of India regarding the termination of the Contract. 27. Antrix notified Devas on 25.02.2011 that the Contract was terminated inter alia citing Article 11 and Article 7(c) of the Contract. Post the termination by letter dated 25.02.2011, Antrix by its letter dated 15.04.2011 tendered the UCRF that had been received from ....
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....to challenge the constitution in appropriate proceedings but not by way of an application under section 11(6) of the Act. 34. Before the Arbitral Tribunal, Devas contended that Antrix was not entitled to terminate the agreement under Article 7(c). It contended that Antrix was able to - and did - obtain the necessary frequency and orbital slot coordination required for operating PS1, so Article 7(c) could not apply. 35. Devas further contended that Antrix was not entitled to rely on Article 11 (Force Majeure) as the decision of the CCS to annul the agreement was not an 'act of or failure to act by any governmental authority acting in its sovereign capacity' within the meaning of Article 11(b). It was contended that the CCS decision was brought about by, and is otherwise attributable to Antrix's Own or its parent's actions. 36. It further submitted that Antrix instigated the alleged Force Majeure Event, and thus it was not beyond the reasonable control of Antrix within the meaning of Article 11(b). It also contended that Antrix did not make all efforts to prevent it or mitigate its effects as required by Article 11(b). It lastly contended that Article 11 permitted, the Unaff....
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....egotiations, it would have reached the same conclusion. Tribunal held that the its conclusion regarding the intended operation of Article 7(b), suggests that Antrix persuaded Devas that, if Antrix committed a material breach, Devas should not be entitled to both an indemnity (if the agreement remained on foot) and substantial liquidated damages (if Devas chose to terminate rather than perform the agreement), it suggests that the compromise that was reached was that Devas would forfeit its right to compensation if, but only if, when faced with the option of either performing the agreement or terminating it. 43. The finding returned is a complete perversity, the Tribunal has committed a patent illegality in not appreciating that the IBA Rules on Taking of Evidence are applicable only in case of International Arbitration and that also with the consent of parties. Subject arbitration proceedings are domestic arbitration between two Indian parties and not International Arbitration proceedings and as such said rules are not applicable and the evidence could not have been excluded. 44. Even otherwise, the Tribunal has not appreciated the true import of Article 9 of IBA Rules which r....
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.... signature of Definitive Agreements and prior to Devas raising its institutional financing, ISRO shall refund to Devas all the amounts paid by Devas to ISRO for any reason whatsoever, plus liquidated damages of INR 460 million for investment in the business and related losses including but not limited to investments, capital raising costs, lost business opportunities, reputation loss, penalties, development costs, mobile receiver and terrestrial repeater development, infrastructure costs, severances, and vendor and dealer negotiation costs. In the event that ISRO terminates the Definitive Agreement for any other reason following signature of Definitive Agreements and after Devas has raised its first Institutional round of funding, ISRO shall refund to Devas all the amounts paid by Devas to ISRO for any reason whatsoever, plus, liquidated damages of INR 6.9 billion for investment in the business and related losses including but not limited to, investments, capital raising costs, lost business opportunities, reputation loss, penalties, development costs, mobile receiver and terrestrial repeater development, infrastructure costs, severances, and vendor and dealer negotiation ....
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....he Agreement. Tribunal has committed a patent illegality as the finding returned is contrary to several findings returned by the Tribunal itself in this very award. 57. On the one hand the Tribunal holds that the decision of the Cabinet Committee on Security (CCS) to annul the contract was an act of a governmental authority acting in a sovereign capacity and thus amounted to a Force Majeure event as contemplated by the contract, however, goes on to hold that Antrix is liable for wrongful termination. 58. At this juncture it would be necessary to refer to a brief overview of the international regulation of radio frequencies and the spectrum that was sought to be leased to Devas and the rationale behind the CCS decision to annul the contract. 59. As noticed in the impugned Award, there are a limited number of available radio frequencies in the world, which are known by names such as C, extended C band, Ku. and S-band. As radio frequencies do not stop at national boundaries, governments have sought to regulate their allocation through the International Telecommunications Union (ITU), an agency of the United Nations. 60. The ITU is responsible for allocating available spect....
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....ion (30 MHz for each satellite, for a total of 60 MHz of India's total of 80 MHz of S-BSS) and 10 MHz of the S-MSS allocated for satellite use. 67. Owing to the unique nature of the S-band spectrum where its frequencies have low attenuation i.e. the signal does not fade and it can also be sent and received by small units, such as mobile phones and laptop computers, without requiring the antenna on such units to be pointed precisely at the satellite India's military and paramilitary agencies also had demands for S-band capacity for non-commercial purposes. 68. In May 2003, ISRO launched a satellite for military purposes to utilise 20 MHz segment of S-MSS capacity. The military, however, was looking for higher performance and capacity and demanded from ISRO a communication system/with greater capacity (including increased data rates and the ability to service a larger number of terminals). 69. This was followed by a demand in April 2004, by the military for a dedicated satellite for Naval use and the Naval Communications were most intricately complex, because of four distinct participants viz. ships, submarines, aircraft and shore authorities, all of which needed to communic....
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....y requirements for strategic purposes made it clear that the national security requirements far exceeded, India's S-band capacity. In addition to the 8 MHz of Sband that were to be utilised by the satellite for the Navy that was ordered in 2004 and launched in August 2013, by the end of 2009 17.5 MHz in S-band was identified as required for-meeting immediate requirements of the Armed Forces; Another 40 MHz of S-band during the five-year period from 2012 to 2017 (the 12th plan period); Another 50 MHz of S-band during the subsequent five-year period (the 13th plan period from 2017-2022) besides meeting the Requirements from internal security agencies, including the Border Security Force, the Central Industrial Security Force, the Central Reserve Police Force, the Coast Guard and the Police for meeting their secured communications needs and the capacity for the traintracking requirements of the Indian Railways. 77. As per Antrix, in November 2009, Mr. A. Vijay Anand, the Joint Secretary of the Department of Space, who was also its Chief Vigilance Officer, learned of possible irregularities relating to the Contract and initiated a preliminary, internal review of certain of the alleg....
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.... in respect of various forces like BSF, CISF, CRPF, RPF etc. any commercial activity cannot override to sovereign function. The Central Government/ISRO is not duty bound to provide orbit slot to Antrix for commercial activities, especially when there is strategic requirements. When the Central Government/ISRO denies the orbit slot to Antrix in exercise of its sovereign power and function, such event may fall under the category of Force Measure' as contemplated in Article 11. 84. The Ministry of Law and Justice further opined that the Central Government (Department of Space), in exercise of its sovereign power and function, if so desire and feel appropriate, may take a policy decision to the effect that due to the needs of strategic requirements, the Central Govt/ISRO would not be able to provide orbit slot in S band for operating PS1 to the ANTRIX for commercial activities. In that event, ANTRIX in terms of Article 7 (c) read with Article 11, of the agreement may terminate the agreement and inform M/s DEVAS accordingly. However on such termination ANTRIX shall be required to reimburse DEVAS all the Upfront Capacity Reservation Fees and corresponding service taxes received by ANT....
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....eting their secured communication needs. Indian Railways have also projected S band requirements for train-tracking. Commission noted that, in view of these emerging requirements, there is an imminent need to preserve the S band spectrum for vital strategic and societal applications. .......... It was noted that Space spectrum is a vital national resource and it is of utmost importance to preserve it for emerging national applications for Strategic uses and societal applications. Given the limited availability of S band spectrum, meeting the strategic and societal needs is of higher priority than commercial/ entertainment sectors.' 88. The Space Commission concluded that the Department of Space may take necessary actions and instruct Antrix to annul the Antrix Devas contract. Thereafter an opinion was taken from the Additional Solicitor General. 89. Consistent with the Additional Solicitor General's opinion, and in accordance with Rule 4 of the Transaction of Business Rules of the Government of India, a note was placed before the Cabinet Committee on Security to for decision. 90. The Cabinet Committee on Security, comprised of the Prime Min....
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....nge in the policy of not providing orbital slot in S-band for commercial use and of reserving S-band for military use. 95. Devas contended before the Tribunal that Antrix did not have the right to terminate the Contract pursuant to Article 7(c) of the Contract. 96. Article 7(c) stipulates that Antrix may terminate the Agreement in the event Antrix is unable to obtain the necessary frequency and orbital slot coordination required for operating PS1. As per Devas Antrix was able to and did obtain the necessary frequency and orbital slot coordination required for operating PS1. 97. The Tribunal has held that Antrix was not required to apply for frequency and orbital slot clearance from the Cabinet Committee on Security (CCS) and thus it could not rely upon the CCS decision alone in order to terminate the agreement pursuant to Article 7(c). T 98. he Tribunal further held that even if the CCS' decision had the effect of annulling any necessary clearance or approval that Antrix had obtained, that would not be sufficient to enliven Article 7(c) as what was required was 'inability to obtain' a relevant clearance and not 'inability to retain' a clearance. 99. Once again a pate....
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.... time that he was appointed Chairman of Antrix, and acting in his capacity as Chairman of Antrix, done everything in his power to ensure that the agreement remained on foot, he would not have taken any of-the steps that led to the CCS being asked to approve the annulment of the agreement. As a result, those steps would not have occurred. 108. This is contradictory to the very stand of Devas and the finding returned by the Tribunal that when Dr. Radhakrishanan obtained the opinion of the Ministry of Law Justice, he was not acting in his capacity as Chairman of Antrix but was acting in his capacity as Secretary of the Department of Space and/or Chairman of ISRO or the Space Commission. 109. The Tribunal has returned a perverse finding that 'Further, since Dr Radhakrishnan (acting in his capacity as Chairman of Antrix) could have prevented the CCS from being asked to annul the agreement, Antrix could have effectively prevented the CCS from making that decision, which means that the CCS' decision was not beyond Antrix's reasonable control.' 110. On the one hand the Tribunal holds that Dr. Radhakrishnan was not acting in his capacity as Chairman of Antrix and was acting in his ....
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....r would be to ask whether the party in breach has by his breach produced a situation fundamentally different from anything which the parties could as reasonable men have contemplated when the contract was made. Then one would have to ask not only what had already happened but also what was likely to happen in future. And there the fact that the breach was deliberate might be of great importance.' 116. As noticed from Article 7(c) of the Contract parties had in their contemplation that Antrix had to obtain the orbital slot coordination and the CCS decided not to grant the orbital slot coordination to Antrix. Tribunal has held that the decision of the CCS in declining the grant of orbital slot to Antrix was a decision of a governmental authority in exercise of its sovereign function and amounted to a Force Majeure event and covered under article 11(b). Thus it could not have held that the alleged breach on the part of Antrix was deliberate. 117. Further, the award suffers from patent illegality as the Tribunal had overlooked the provisions of Article 25 of the Contract that stipulates that the Agreement shall not be binding on DEVAS or ANTRIX until and unless ANTRIX receives al....
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....s adequate experience and infrastructure in the field for a considerable period of time. 125. NCLT noticed that it was not in dispute that Devas, at the time of entering into the contract, did not possess the minimum experience even to qualify to participate in such a contract, much less obtain it. 126. NCLT held that it had falsely contended that it has experienced Scientists/Technical experts to get sophisticated technology as were required to provide in terms of Contract in question. NCLT was of the view that same was possible only with direct collusion and connivance with the then officials of Antrix. 127. NCLT noticed that Union of India came to know about the fraud only in the year 2016, when the CBI investigated the issue and thereafter initiated various proceedings by invoking various provisions of Indian Penal Code, Prevention of Money Laundering Act, Foreign Exchange Management Act etc., against Devas, its officials, and the then officials of Antrix. 128. NCLT held that there is a long history of fraud and fraudulent activities committed by Devas and its Management before and after its incorporation. It held that Devas brought Rs. 589 crores into India, withou....
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....n authorised officer of the Company as required under Section 54 of the Companies Act, 1956 and it is held that the said act is an 'illegal' and act of 'trickery'. 136. Mr. Justice M. Venugopal in his judgement dated 08.09.2021 held that admittedly, the approval obtained by Devas from the Foreign Investment Promotion Board (FIPB) was only for 'ISP Services' and the 'Department of Telecommunication' had only issued an 'ISP Licence' and therefore the Investments of the overseas shareholders could not be utilised for payment of the UCRF for the proposed 'SBand' transponder, in breach of 'FIPB' approval and the 'Department of Telecommunication Licence'. 137. Further, it is held that out of Rs. 579 Crores of Foreign Investment amounts of Rs. 76,19,04,563/- share subscription / investment in 'Devas' America Inc (subsidiary of Devas) and Rs.180,77,58,989/- were laundered out of the country under the garb of 'Service Fee' towards business support services. 138. In between 2006 - October 2010, Devas, in the absence of Agreement had paid nearly Rs.40 Crores when the Agreement with the US Subsidiary was entered into only in October 2010. A sum of Rs.256,96,63,544/- was sent out of In....
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....several firm expressions of interest. It was an undisputed fact that 97% of the capacity in the GSAT-6/INSAT-4E satellite had been allotted to Devas fraudulently when this Cabinet Note was prepared. This fact was concealed and suppressed in the note for the Cabinet. 146. NCLAT further noticed that, when the Cabinet Note prepared by DoS was forwarded for the approval of the Union Cabinet, the Union Cabinet was under the pretext that other service providers were showing several firm expressions of interest, which was factually false. Thus NCLAT held that the Cabinet Note prepared by DoS suffered from suppression of material facts and fraudulent misrepresentations and same could not confer any benefit on Devas under the agreement dated 28.01.2005. 147. An ex-director of Devas on behalf of Devas and DEMPL, both filed appeals before the Supreme Court of India impugning the Judgment of the NCLAT. 148. Supreme Court of India by its Judgment dated 17.01.2022 dismissed both the appeals. 149. Supreme Court rejected the contention of Devas that Antrix was estopped from raising the plea of fraud as it has not terminated the agreement on the ground of fraud and had also not set up f....
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.... 9.12 If the auditors of a company fail to make a report in terms of Section 143(12), despite having knowledge about the fraud, they may become liable for penal consequences under Section 448 read with Section 447 of the Companies Act, 2013. But the failure of the auditors to make a report as required by Section 143(12) or as required by the order issued under Section 143(11), cannot operate as estoppel against the company. The auditor's report can neither be taken as gospel truth nor act as estoppel against the company. The statement in the auditor's report, is as per the information given to them or as per the information culled out to the best of their ability. 9.13 The reliance placed upon Section 19 of the Indian Contract Act, 1872 to raise the plea of estoppel may not wholly be correct. Section 19 of the Indian Contract Act, deals with only one type of fraud namely, a fraud perpetrated on a party to secure his consent to an agreement. Section 19 begins with the words 'when consent to an agreement is caused by coercion, fraud.....'. Frauds other than those used to induce the consent of a party to an agreement, are not covered by Section 19. In fact, the definiti....
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.... technology, infrastructure or experience to perform their obligations under the Agreement; (iii) that one of the subscribers to the Memorandum of Association of the company in liquidation was an Auditor by name Shri M. Umesh, whose Article Clerk by name Gururaj was the one signed the Agreement; (iv) that the Executive Director of Antrix who signed the Agreement of behalf of Antrix is one of accused in the criminal cases; (v) that the incorporation of Devas was with fraudulent motive and unlawful object, to bring money into India and divert it by dubious methods; (vi) that even after the termination of the Agreement, Devas was not carrying on any business operations; (vii) that the objective of Devas was hardly to do any business except grabbing Primary Satellite I (PSI) and Primary Satellite II (PSII), and that therefore the requirements of Section 271(c) stand satisfied. 12.5 The order of the Appellate Tribunal is in two parts; the first authored by Member (Judicial), and the second authored by Member (Technical). The Member (Judicial) noted, (i) that the company in liquidation failed to establish either the existence....
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....); (xvi) that Devas fraudulently approached FIPB through the ISP route to avoid scrutiny by Department of Space; (xvii) that the investors of Devas actually became shareholders and they also had their nominees on the Board of Devas; (xviii) that therefore these persons were also guilty of the conduct of the affairs of Devas in the manner stated; (xix) that the Share Subscription Agreement dated 06.03.2006 entered into with the investors contains a recital as though appropriate licences have been validly issued or assigned to the company, though in fact the only licence namely ISP licence was obtained much later on 02.05.2008 and (xx) that therefore the formation of the company and the conduct of the affairs of the company were fraudulent and the persons concerned therewith were also guilty of fraud. 12.6 In his independent but concurrent opinion the Member (Technical) of NCLAT classified the items of fraud into eight categories. He first found that the company was formed and the Agreement was entered into with the stated object of providing a bouquet of services, which were nonexistent. The second category of fraud dealt with by....
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.... DEVAS LLC, USA to Shri K.R. Sridhara Murty, Executive Director of Antrix with copies to Dr. G. Madhavan Nair, Chairman, ISRO and others that Shri Ramachandran Viswanathan, met the then Chairman of ISRO and other officials in Bangalore in April 2003 and they met once again in Washington D.C. during the visit of the then Chairman of ISRO. These meetings, which were not preceded by any invitation to the public for any Expression of Interest, culminated in a Memorandum of Understanding dated 28.07.2003. Though it is not clear where the MoU was signed, there are indications that it was signed overseas; (ii) It must be noted here that a one man Committee comprising of Dr. B.N. Suresh, former Member of the Space Commission and Director of Indian Institute of Space Science and Technology, was constituted on 8.12.2009, long after the commencement of the commercial relationship, to look comprehensively into all aspects of the contract, both commercial and technical. According to the Report submitted by him in May 2010, it was Forge Advisors, USA which made a presentation in March 2003, on technology aspects of digital multimedia services to Antrix/ISRO, followed by a presenta....
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....fferent from mobile phones, which are capable of providing a two way communication. The technology for providing the services through mobile phones was not in existence at that time, which is why the proposal made by Forge Advisors included an expectation that such a service may be launched by the end of 2006. It was with this expectation/promise that an Agreement was entered into on 28.01.2005 but this so-called new national service was never launched as promised in 2006. The launch of the services was not linked to the provision of a S-band satellite by Antrix, at least at the time when negotiations took place; (v) Admittedly, FIPB (Foreign Investment Promotion Board) approvals taken by Devas during the period May-2006 to September-2009 were on the basis of the ISP (Internet Service Provider) license secured from the Department of Telecommunications on 02.05.2008 and IPTV (Internet Protocol Television) services license obtained on 31.03.2009; (vi) Therefore, the finding of the Tribunal, (a) that a public largesse was doled out in favour of Devas, in contravention of the public policy in India; (b) that Devas enticed Antrix/ISRO to enter into an....
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.... more productive venture, namely, arbitration. The manner in which a misleading note was put to the cabinet and the manner in which the minutes of the meeting of TAG subcommittee were manipulated, highlighted by the Tribunal, also shows that the affairs of the company were conducted in a fraudulent manner. Thus, the second limb of Section 271(c), namely, the conduct of the affairs of the company in a fraudulent manner, also stood established. (xi) SATCOM Policy perceived telecommunication and broadcasting services to be independent of each other and also mutually exclusive. Therefore, a combination of both was not permitted by law. It is especially so since no deliberation took place with the Ministry of Information and Broadcasting. Moreover, unless ICC allocates space segment, to a private player, the same becomes unlawful. This is why the conduct of the affairs of the company became unlawful; (xii) That the officials of the Department of Space and Antrix were in collusion and that it was a case of fence eating the crop (and also allowing others to eat the crop), by joining hands with third parties, is borne out by the fact that the Note of the 104th Space Commi....
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....d recorded by the NCLT and NCLAT but reaffirmed the same and further held that there was no perversity in the same and said finding were borne out from the undisputed record and documents. 157. The Supreme Court further negated the contention on behalf of Devas that it was a lis between two private parties and held that 'The space segment in the satellite proposed to be launched by the Government of India, is the property of the Government of India. In fact, the shareholders have secured two awards against the Republic of India under BIT. Therefore, it is neither a lis between two private parties nor a private lis between a private party and a public authority. It is a case of fraud of a huge magnitude which cannot be brushed under the carpet, as a private lis.' 158. Another contention raised on behalf of Devas that the actual motive behind Antrix seeking the winding up of Devas, is to deprive Devas of the benefits of an unanimous award passed by the ICC Arbitral tribunal presided over by a former Chief Justice of India and the two BIT awards and that such attempts on the part of a corporate entity wholly owned by the Government of India would send a wrong message to internat....
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....ince the Judgments are admissible and court is bound to take judicial notice of the same, Antrix does not need to refer to the applications filed by it seeking to amend the objections filed under section 34 of the Act. 161. Mr. Venkataraman, Learned Additional Solicitor General has relied upon on the Judgments of the NCLT, NCLAT and the Supreme Court to address the issue of fraud played by Devas. 162. Since the issue of fraud is established by the said Judgments and would also operate as res - judicata between the parties, the submission on behalf of DEMPL that Antrix cannot be permitted to amend the objections under section 34 of the Act as the application has been filed beyond the statutory period is of no consequence. 163. Accordingly, the judgments in the case of (i) P. Radha Bai & Others vs. P Ashok Kumar & Anr. (2019) 13 SCC 445; (ii) Bhaven Construction vs. Executive Engineer, Sardar Sarovar Narmada Nigam Limited (2022) 1 SCC 75 and (iii) State of Maharashtra vs. Hindustan Construction Company Limited (2010) 4 SCC 518 relied upon by Mr. Suhail Dutt learned Senior Counsel for DEMPL on the question of delay in seeking amendment of the objections are not applicable to ....
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....r interference insofar as it concerns 'interest of India' has since been deleted, and therefore, no longer obtains. Equally, the ground for interference on the basis that the award is in conflict with justice or morality is now to be understood as a conflict with the 'most basic notions of morality or justice'. This again would be in line with paras 36 to 39 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] , as it is only such arbitral awards that shock the conscience of the court that can be set aside on this ground. 36. Thus, it is clear that public policy of India is now constricted to mean firstly, that a domestic award is contrary to the fundamental policy of Indian law, as understood in paras 18 and 27 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] , or secondly, that such award is against basic notions of justice or morality as understood in paras 36 to 39 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] . Explanation 2 to Section 34(2)(b)(ii) and Explanation 2 to Section 48(2)(b)(ii) was added by the Amendment Act only so that Western G....
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....d added under Section 34(2-A). 41. What is important to note is that a decision which is perverse, as understood in paras 31 and 32 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] , while no longer being a ground for challenge under 'public policy of India', would certainly amount to a patent illegality appearing on the face of the award. Thus, a finding based on no evidence at all or an award which ignores vital evidence in arriving at its decision would be perverse and liable to be set aside on the ground of patent illegality. Additionally, a finding based on documents taken behind the back of the parties by the arbitrator would also qualify as a decision based on no evidence inasmuch as such decision is not based on evidence led by the parties, and therefore, would also have to be characterised as perverse.' 28. This Court has in several other judgments interpreted Section 34 of the 1996 Act to stress on the restraint to be shown by Courts while examining the validity of the arbitral awards. The limited grounds available to Courts for annulment of arbitral awards are well known to legally trained minds. However, the d....
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....ssion 'patent illegality'. 30. Section 34(2)(b) refers to the other grounds on which a court can set aside an arbitral award. If a dispute which is not capable of settlement by arbitration is the subject-matter of the award or if the award is in conflict with public policy of India, the award is liable to be set aside. Explanation (1), amended by the 2015 Amendment Act, clarified the expression 'public policy of India' and its connotations for the purposes of reviewing arbitral awards. It has been made clear that an award would be in conflict with public policy of India only when it is induced or affected by fraud or corruption or is in violation of Section 75 or Section 81 of the 1996 Act, if it is in contravention with the fundamental policy of Indian law or if it is in conflict with the most basic notions of morality or justice. 31. In Ssangyong [Ssangyong Engg. & Construction Co. Ltd. v. NHAI, (2019) 15 SCC 131 : (2020) 2 SCC (Civ) 213] , this Court held that the meaning of the expression 'fundamental policy of Indian law' would be in accordance with the understanding of this Court in Renusagar Power Co. Ltd. v. General Electric Co. [Renusagar Power Co. Ltd. v....
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....possible one, or interprets a clause in the contract in such a manner which no fair-minded or reasonable person would, or if the arbitrator commits an error of jurisdiction by wandering outside the contract and dealing with matters not allotted to them or basing the conclusions on no evidence or conclusions have been arrived at by ignoring vital evidence are perverse and can be set aside on the ground of patent illegality. 167. Contravention with the fundamental policy of Indian law or being in conflict with the most basic notions of morality or justice or contrary to national economic interest and disregarding the superior Courts in India would be antithetical to the fundamental policy of Indian law. 168. As noticed above the Arbitral Tribunal has incorrectly excluded the evidence pertaining to the pre-contractual negotiations which it could not have and has thus committed a patent illegality in the award. 169. Further, as noticed hereinabove, the Arbitral Tribunal has committed patent illegality in the award as findings on some issues are contradicted by the findings on other issues and are also contradicted by the reasoning given to reach the said conclusions. 170. A....