The Delhi High Court on Friday upheld an order of a single judge of the HC which had set aside a 2015 arbitral award under which government-owned Antrix Corporation Limited was asked to pay more than $ 562.5 million to Devas Multimedia Private Limited.
A division bench of Chief Justice Satish Chandra Sharma and Justice Subramonium Prasad referred to the judgment of the Supreme Court of January 17, 2022, upholding a May 25, 2021, order of the National Company Law Tribunal (NCLT) to liquidate Devas on the ground that the firm was created under fraudulent circumstances.
The bench said that the SC is the final court and once it lays down a law, it is “binding on all courts, Tribunals, on the Legislature and the Executive”. The bench said that the apex court based on documents before it, held that Devas was incorporated for fraudulent purposes and the affairs of the company were being conducted in a fraudulent manner and the agreement, from which the arbitration arose “was a product of fraud”.
“After such a finding has been rendered by the Apex Court, it was not open for the learned Single Judge to come to the conclusion that the award, which has been held to be a product of fraud and which is in contravention of the fundamental policies of India, which is in conflict with the most basic notions of morality or justice, would still be enforceable in the country. Such a finding by the learned Single Judge would be against the spirit of Article 144 of the Constitution of India,” the HC said upholding single judge’s order which held that the arbitral award suffered from patent illegalities and fraud. The award is in conflict with the public policy of India, the single judge had said.
The division bench held that it sees “no perversity” in the findings of the single judge on the grounds of fraud and it being in conflict with the public policy of India.
“Accordingly, the challenge to the Impugned Judgment by the Appellant, on the ground that the Ld. Single Judge could not consider the grounds of public policy and fraud under Section 34 fails,” the HC said dismissing the plea. In doing so it also observed that even though there was no specific pleading alleging fraud before the single judge there was no necessity for the same as the single judge could not have ignored the findings of the apex court.
The bench said that it was “established that Devas was incorporated with fraudulent intentions, so that it could enter into the Devas Agreement with Antrix”. The bench observed that material information was suppressed by Devas when Cabinet approval was obtained by it. The court also noted that when the agreement was entered into “Devas did not have the technology, infrastructure or experience to perform their obligations under the Agreement”.
“…The nature of fraud is so serious and complex that it not only resulted in the company being wound up under the Companies Act, 2013, but also led to a criminal investigation against the company and its officers…The fraud propagated by Devas is not only against Respondent No. 1, but against the State as a whole, inasmuch as it attempts to obtain monetary benefits from the State itself, by attempting to enforce an arbitral award, which itself is arising out of fraud. A fraud of such scale would certainly render the award to be in conflict with the public policy of India,” the HC held.
Antrix, which is engaged in the marketing and sale of products and services of Indian Space Research Organisation (ISRO), in 2005 had entered into a contract for the lease of a part space segment capacity on a communication satellite and an option to gain additional capacity on another satellite to Devas for 12 years. Devas planned to use the same to provide digital multimedia broadcasting services across India.
In February 2011, the Cabinet Committee on Security decided to annul the contract. The matter then went to arbitration before the International Court of Arbitration of the International Chamber of Commerce (ICC Court). The tribunal in 2015 ruled in favour of Devas — the decision was challenged by Antrix before the High Court here.
CASE TITLE: DEVAS EMPLOYEES MAURITIUS PVT. LTD vs ANTRIX CORPORATION LIMITED & ORS
CASE DETAILS: FAO(OS) (COMM) 289/2022
CORAM: Chief Justice Satish Chandra Sharma and Justice Subramonium Prasad
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