US court lifts stay on Devas plea for compensation for cancelling deal

In a petition filed in the US court, Devas has sought to enforce a compensation award of $ 563.4 million and interest made by an International Chamber of Commerce arbitration court in 2015 for the cancellation of the satellite deal inked in 2005. (File)

A US court has lifted a stay imposed last July on proceedings in a case where Bengaluru-based start-up Devas Multimedia Ltd sought compensation to the tune of $1.1 billion from the Indian Space Research Organisation’s (ISRO) commercial arm Antrix Corporation for cancelling a satellite deal in 2011.

In a September 17 order, the federal court for the Western District of Washington has cited lack of progress in the resolution of disputes pending in Indian courts between Devas and Antrix Corporation as a reason for lifting the stay imposed on July 10, 2019 on Devas’s demand for confirmation of the compensation award.

In a petition filed in the US court, Devas has sought to enforce a compensation award of $ 563.4 million and interest made by an International Chamber of Commerce arbitration court in 2015 for the cancellation of the satellite deal inked in 2005.

The US court has decided to proceed with hearing the plea of Devas to confirm the arbitration award after observing that “since the stay was entered more than one year ago, there have been no new developments in the Indian courts on the jurisdictional issue or on the merits of the proceedings”.

In its July 10, 2019 stay order, imposed till April 15, 2020 to allow legal proceedings to conclude in India, the US court had exempted Antrix from depositing the compensation but observed that it is liable under US laws to face the compensation confirmation case.

In its September 17 order stating that “a stay is no longer warranted”, the US court has said it “gives considerable weight to the protracted nature of this case — that more than five years have passed since the Award was issued, and nearly ten years have passed since the contract dispute arose”.

The US court has also noted that proceedings related to the Devas Multimedia versus Antrix Corporation compensation dispute have proceeded in France, the Netherlands, Switzerland, and the United Kingdom “despite the ongoing jurisdictional dispute in India”.

“There is little doubt that the delayed enforcement of the Award, particularly given the amount of money at issue, has burdened Petitioner (Devas Multimedia), which to date has not received any “suitable security”, the US court has observed in its latest order.

Devas, while seeking withdrawal of the stay, argued that the lack of a final decision on the compensation had enabled the Indian government to divest the company of its assets.

US district judge Thomas S Zilly has posted the case for October 14 to hear arguments for a decision on the compensation.

Last year, the US court ruled that it has jurisdiction in the dispute since Antrix Corporation is a firm belonging to the government of India.

“Antrix has no satellites, satellite launch vehicles, transponders, or electromagnetic spectrum of its own, but rather markets assets owned and controlled by ISRO and DOS. Most of Antrix’s commercial activities are financed by the government of India. Much of Antrix’s leadership is appointed by the government of India,” the US court observed while stating that it has jurisdiction over Antrix Corporation under the Foreign Sovereign Immunities Act.

Devas has been trying to get Antrix Corporation to pay the compensation plus interest awarded by an ICC tribunal by getting the tribunal’s orders confirmed in international courts like the US federal court.

The case in the US has proceeded even as CBI and ED are pursuing cases against Devas and former ISRO officials in India over alleged irregularities in the 2005 deal.

The agreement between Devas and Antrix Corporation was annulled by the UPA government in 2011 against the backdrop of the 2G case and allegations of a sweetheart deal in the allocation of S-band spectrum to Devas.

After the NDA came to power in 2014, the CBI was asked to investigate the 2005 deal.

In August 2016, the CBI filed a chargesheet against eight officials from Devas, ISRO and Antrix linked to the 2005 deal for “being party to a criminal conspiracy with an intent to cause undue gain to themselves or others by abusing official positions”. Among the eight persons chargesheeted by the CBI is former ISRO chairman G Madhavan Nair.

The CBI has accused former ISRO officials and Devas of causing a loss of approximately Rs 578 crore to the Indian government through the 2005 deal. The ED has filed a charge sheet under the Prevention of Money Laundering Act against a former managing director of Antrix Corporation and five Devas officials. The ED has stated that Devas transferred 85 per cent of the Rs 579 crore foreign funding it received on the back of the 2005 ISRO deal to the US under various claims.

Devas was started by a group of former ISRO and World Space employees in 2004. The foundation for the deal was laid during a 2003 visit to the US by ISRO and government officials.

Several people associated with Devas Multimedia have launched a similar satellite based multimedia services firm in the US by buying an unused satellite launched by a private company in 2001.

Devas founder and CEO Ramachandra Vishwanathan and a director at Devas Multimedia Lawrence Babbio are among key persons on the board of the US start-up Omnispace LLC which is trying to use S-band satellite spectrum to provide telecom and data services on mobile phones.

Omnispace LLC, in applications to the US Federal Communications Commission for signal testing, claimed ownership of the F2 satellite which lay unused after it was launched in 2001 by a private satellite firm ICO Global Communications.

The F2 satellite of ICO Global Communications bought by Omnispace LLC for its US business also operates in the S-band space spectrum. India’s VSNL which later became Tata Communications invested $ 150 million in ICO Global Communications in the late 1990s before the firm went bankrupt and was relaunched later as New ICO.

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