SC upholds NCLAT order for Devas Multimedia liquidation

Industry:    

The Supreme Court on Monday dismissed an appeal by Devas Multimedia Pvt. Ltd and parent Devas Employees Mauritius Pvt. Ltd against the National Company Law Tribunal (NCLT) and the National Company Law Appellate Tribunal (NCLAT) orders allowing the winding up of the company.

In January 2021, an NCLT bench had admitted a petition by the Indian Space Research Organization’s (ISRO’s)commercial arm, Antrix Corp. Ltd, urging the tribunal to allow the winding up of Devas Multimedia for fraud under Sections 271 and 272 of the Companies Act 2013. Subsequently, the NCLAT also upheld the order of the NCLT.

“We find all the grounds of attack to the concurrent orders of the NCLT and NCLAT to be unsustainable. Therefore, the appeals by Devas Multimedia are dismissed,” said an SC bench led by Justice V. Ramasubramanian and Hemant Gupta. “We do not know if the action of Antrix in seeking the winding up of Devas may send a wrong message to the community of investors, but allowing Devas and its shareholders to reap the benefits of their fraudulent actions, may nevertheless send another wrong message, namely that by adopting fraudulent means and by bringing into India an investment of ₹579 crore, the 133 investors can hope to get tens of thousands of crore of rupees, even after siphoning off ₹488 crore,” it added.

Devas was incorporated in December 2004 to offer multi-media and information services via satellite to mobile devices for consumer, commercial, and social sectors.

The NCLT order had said Devas Multimedia was formed with the fraudulent intent of colluding and conspiring with former Antrix Corp. officials in order to get bandwidth from the company through a 2005 agreement that was cancelled by the government in 2011. It had also appointed a provisional liquidator for Devas Multimedia.

While upholding the NCLT order, the NCLAT observed that Devas had reached an arrangement with Antrix “through fraud, misrepresentation or suppression”.

The termination of the agreement between the government and Devas prompted the media company to initiate a commercial arbitration in India before the International Chamber of Commerce (ICC) Arbitral Tribunal. Independently, the Mauritius-based investors initiated an arbitration process under the India-Mauritius Bilateral Investment Treaty (BIT).

In 2015, the Central Bureau of Investigation registered a First Investigation Report (FIR) against Devas and its officers under the Prevention of Corruption Act, 1988.

However, the ICC Arbitral Tribunal passed an award in August 2015, directing Antrix to pay Devas $562.5 million, with an interest of 18% per annum.

Nirav Shah, partner, DSK Legal, said, “the winding-up controversy has now been put to rest by this Supreme Court verdict. Now that the appointment of the liquidator has been confirmed, it will be interesting to see the fate of the US proceedings, which had been initiated by Devas against Antrix, which also has resulted in them going after various assets owned by Air India all over the world. It will be interesting to see what strategy the liquidator will adopt once he takes over this litigation against Antrix.

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