Antrix Deal: Liquidate Devas, Orders NCLT

The Bengaluru bench of the National Company Law Tribunal has ordered the liquidation of Devas Multimedia Pvt. on grounds that the company was incorporated in a fraudulent manner to siphon funds to dubious foreign accounts.

The order has come in a winding up petition filed by Antrix Corporation Ltd. in January this year. Antrix is a company wholly owned by the Indian government. At the time, experts BloombergQuint spoke with had said the government’s objective could be twofold: one, get a finding of fraud from the NCLT and use it as a ground to challenge enforcement of an arbitral award that Devas has won against Antrix. And two, take over the management of Devas via a liquidator so as to have the power to negate the company’s claim against Antrix.

The bench held that Devas was incorporated with a fraudulent motive and as such its existence in the eyes of law is void ab initio. Even after incorporation, the company resorted to fraudulent activities. As such, it was liable to be struck from the Registrar of Companies because of the winding-up proceedings.

Devas has started a proxy war by approaching other forums like NCLAT and high court and simultaneously stalling the winding up proceedings on untenable contentions, the NCLT order said. The bench said the only reason Devas wants to remain in existence is so that it can prosecute enforcement of arbitral awards secured by it.

The dispute dates back to 2005 when Devas and Antrix entered into a contract to lease space segment capacity on two satellites, which was later annulled by Antrix.

As a result, Devas invoked the India-Mauritius Bilateral Investment Protection Agreement. It won arbitration proceedings before the International Chamber of Commerce in 2015, resulting in an award of $1.3 billion against Antrix.

Even as Devas’ application to enforce the award was pending before the Delhi High Court, the government via Antrix initiated winding up proceedings. Devas’ challenge on grounds of limitation and jurisdiction were dismissed by the NCLT.

In its order on May 25, the tribunal directed the official liquidator to take “expeditious steps” to liquidate the company to prevent it from perpetuating its fraudulent activities and abusing the process of law and submit a report by July 7.

Matthew McGill of Gibson Dunn, lead counsel for Devas’ shareholders, said in an emailed statement they will appeal against the NCLT’s ruling.

Earlier this month, Devas’ investors had issued a fresh notice of arbitration under the India-Mauritius Bilateral Investment Treaty to the Indian government.

In the letter, Devas alleged India was in breach of its treaty obligations of “fair and equitable conduct” by running an improper campaign and sham investigations against Devas, its employees and officials. These improprieties were merely to subvert the ICC Award against Devas, it alleged.

(Correction: An earlier version of this story erroneously stated that the tribunal had temporarily stayed its judgement so as to allow an appeal. That was a prayer made by the lawyer for Devas. The tribunal said it cannot suspend its own order. And that the counsel may approach a higher court as per law.)