Antrix-Devas Deal: Delhi High Court Sets Aside Arbitral Award Directing Antrix To Pay US $562 Million, Interest To Devas

CASE TITLE: 
Antrix Corporation Ltd Vs Devas Multimedia Private Limited

DATE OF ORDER: 
29 August 2022

JUDGE(S): 
HON’BLE MR. JUSTICE SANJEEV SACHDEVA

PARTIES: 
Petitioner: ANTRIX CORPORATION LTD.
       Respondents: DEVAS MULTIMEDIA PRIVATE LIMITED

SUBJECT

The High Court set aside the arbitral award dated 14.09.2015 passed by the arbitral tribunal against Antrix and in favour of Devas on the ground that the award suffered from illegal omissions and patent illegalities. 

IMPORTANT PROVISIONS

The Arbitration and Conciliation Act 1996

34. Application for setting aside arbitral award.—(1) Recourse to a Court against an arbitral award may be made only by an application for setting aside such award in accordance with sub-section (2) and sub-section (3). 

(2) An arbitral award may be set aside by the Court only if— 

(a) the party making the application establishes on the basis of the record of the arbitral tribunal that— 

(i) a party was under some incapacity, or 

(ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or 

(iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or 

(iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration: 

Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or 

(v) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part; or 

(b) the Court finds that— 

(i) the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or 

(ii) the arbitral award is in conflict with the public policy of India. 

Explanation 1.—For the avoidance of any doubt, it is clarified that an award is in conflict with the public policy of India, only if,— 

(i) the making of the award was induced or affected by fraud or corruption or was in violation of section 75 or section 81; or 

(ii) it is in contravention with the fundamental policy of Indian law; or 

(iii) it is in conflict with the most basic notions of morality or justice. 

Explanation 2.—For the avoidance of doubt, the test as to whether there is a contravention with the fundamental policy of Indian law shall not entail a review on the merits of the dispute.] 

(2A) An arbitral award arising out of arbitrations other than international commercial arbitrations, may also be set aside by the Court, if the Court finds that the award is vitiated by patent illegality appearing on the face of the award:

Companies Act 2013

271. Circumstances in which company may be wound up by Tribunal.— (1) A company may, on a petition under section 272, be wound up by the Tribunal,—

(c) if the company has acted against the interests of the sovereignty and integrity of India, the security of the State, friendly relations with foreign States, public order, decency or morality

272. Petition for winding up.— (1) Subject to the provisions of this section, a petition to the Tribunal for the winding up of a company shall be presented by—

(e) the Registrar;

BRIEF FACTS

• The present petition was filed by Antrix Corporation Ltd u/s 34 of the Arbitration and Conciliation Act (hereinafter referred as ‘the act’) to set aside the arbitral award dated 14.09.2015 passed by the Tribunal constituted by the International Chamber of Commerce allowing the claim of respondent Devas Multimedia Private Limited (hereinafter referred to as “Devas‟). 
• Antrix sought winding up of Devas from NCLT under sections 271 (c) and 272 (e) of the Companies Act alleging that it was formed for an unlawful purpose and its affairs had been conducted in a fraudulent manner. NCLT by its final order dated 25.05.2021 allowed the winding up of Devas. 
• The aforementioned order of NCLT was challenged by Devas and Devas Employees Mauritius Private Limited (hereinafter referred to as “DEMPL”) before NCLAT. Both appeals were dismissed by the Hon’ble NCLAT vide its order dated 08.09.2021. The Hon’ble Supreme Court also assailed the orders dismissed the appeals vide its order dated 17.01.2022.
• Devas was represented by the official liquidator in these proceedings. DEMPL filed an interlocutory application seeking impleadment in the proceedings on the ground that the official liquidator is not working in the interest of Devas. DEMPL was permitted to oppose the petition. 
• In the impugned order passed against Antrix, the tribunal held that termination of the contract by Antrix is wrongful repudiation making Devas entitled to receive damages it suffered due to Antrix’s repudiation of the Devas Agreement. The tribunal hence ordered Antrix to pay USD 562.2 million to Devas with interest. 
• Submissions of the parties largely pertained to the findings of NCLT, NCLAT, and the Supreme Court on the question of fraud committed by Devas. The said question was intermingled as the arbitral award was being challenged by filling objections U/s 34 of the Arbitration and Conciliation Act.
• Antrix is the Government Public Sector Enterprise and Government company carrying out inter-alia the business of marketing and sale of products and services of Indian Space Research Organisation (“ISRO”) to national and transnational customers.
• Devas is a limited liability company incorporated on 17.12.2004 having an authorized share capital of Rs. 11,50,000/- at the time of incorporation. 
• The contract in question (hereinafter referred to as ‘contract’) was entered into by Antrix and Devas on 28.01.2005 for the lease of space segment capacity on ISRO 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.
• The contract was executed only between Antrix and Deva and neither the department of space or ISRO nor any other government agency was made a party to it. The lease stipulated a period of 12 years, further extendable by 12 years.
• Antrix was supposed to build, launch and operate 2 satellites and lease spectrum capacity on them to Devas for purpose of providing multimedia and broadcasting services throughout the country. In consideration, Devas agreed to pay USD 20 million per satellite as Upfront Capacity Reservation Fees (UCRF)and lease fee of US$ 9 million to US$ 11.25 million per annum.
• First instalment Payments made by Devas towards UCRF:

• In February, the contract was annulled by the Cabinet Committee on Security. Pursuant to the decision on 23.02.2011, the committee asked the petitioner to inform the respondents about the decision of the government of India to terminate the contract which was done on 25.02.2011. By its letter dated 15.04.2011, Antrix tendered the UCRF paid by devas who refused to accept the termination and in turn asked for specific performance of the contract or damages amounting to USD 1.6 Billion as an alternative.
• Antrix approached Supreme Court by petition under sections 11(4) and 11(10) seeking the court’sdirections to Devas to appoint the arbitrator in accordance with UNCITRAL Rules instead of ICC Rules. 
• The Hon’ble Supreme Court by its judgment dated 10.05.2013 dismissed the above-mentioned petition by holding that once the tribunal has been constituted, the petition under Section 11 of the act would not lie. 
• It was contended by devas before the arbitral tribunal that Antrix was not entitled to terminate the agreement under Article 7(c)as 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. They further argued that Antrix could not have used the force majure clause as the decision of CCS to annul the contract was not an “act of or failure to act by any governmental authority acting in its sovereign capacity” within the meaning of clause 11(b).
• Antrix in turn contended that even if it was not entitled to terminate the contract under clause 7 or 11, still the decision of CCS made it impossible to perform the contract making it void under Section 56 of the Indian Contract Act. This argument was rejected by the tribunal and Consequently, it held that the letter of Antrix dated 25.02.2011 notifying Devas that the Contract was terminated inter alia citing Article 11 and Article 7(c) of the Contract was a wrongful repudiation of the Contract.
• Tribunal relied on Article 9.1 of the IBA rules to disregard evidence on pre-contractual negotiations. Tribunal further held that even if it had placed weight on the pre-contractual negotiations, it would have come to the same conclusion. 

QUESTIONS RAISED

1. Whether the arbitral award is illegal and liable to be set aside?

ANALYSIS BY THE COURT

• Findings given by the tribunal suffer from grave illegality as it failed to understand that IBA Rules on Taking of Evidence are applicable only in cases of international arbitration that too with consent of parties. The arbitration in the present case was a domestic arbitration involving two Indian Parties. 
• The high court examined the evidence of pre-contractual negotiations which was excluded by the arbitral tribunal. The documents on record regarding the same indicated the intention of the parties and Devas’ insistence on liquidated damages and damages beyond the refund of UCRF. 
• The tribunal incorrectly interpreted Article 7 of the contract which lead to exclusion of the evidence of pre-contractual negotiations which was contrary to the intention of the parties. 
• Tribunal’s finding that Antrix to liable on the ground that it committed a material breach of the Agreement is illegal as it is contrary to the other findings of the tribunal in that very award. 
• The space commission considering various aspects of technicalities concluded that the Department of Space may take required actions and instruct Antrix to annul the Antrix-Devas contract. Thereafter an opinion was sought from the Additional Solicitor General.
• Thereafter, a consultation took place with the cabinet committee on security, Department of Space on 23.02.2011 which directed Antrix to communicate the Government’s decision to terminate the contract to Devas. Antrix notified Devas on 25.02.2011 regarding the same inter-alia citing Article 11 and Article 7(c) of the Contract and returned UCRF paid by Devas. 
• The court treated the findings returned by NCLT, NCLAT, and the Hon’ble Supreme Court of India regarding fraud committed by Devas as Res-judicata.

CONCLUSION

The long and exhaustive judgment gave the much-anticipated relief to Antrix by setting aside the arbitral award which directed Antrix to pay damages to Devas. 

Learn the practical aspects of CrPC HERE, CPC HERE, IPC HERE, Evidence Act HERE, Family Laws HERE, DV Act HERE

Click here to download the original copy of the judgement