The Devas effect

Both UPA and NDA have a lot of explaining to do

On Tuesday, Union Finance Minister Nirmala Sitharaman took time out from Budget-making to address a press conference, excoriating the United Progressive Alliance (UPA) for perpetrating “a fraud against the country” in the deal between Antrix, the Indian Space Research Organisation’s (Isro’s) commercial arm, and Devas, a multimedia services start-up set up by former Isro executives. The press conference was called after the Supreme Court upheld a National Company Law Tribunal (NCLT) order to liquidate Devas. It is unclear why a senior minister in the throes of a deeply consequential exercise for the country decided to address a 10-year-old controversy that should have been handled by the official concerned in the Prime Minister’s Office. It is possible that the intention is to underline the Congress-led UPA’s faults on the eve of critical Assembly elections as well as send a message to Devas’ foreign investors armed with compensatory awards. The problem with the National Democratic Alliance’s (NDA’s) position, as articulated by Ms Sitharaman, is that neither regime emerges unscathed from the controversy. If the UPA was admittedly ham-fisted, international investors are unlikely to be reassured by the NDA’s approach either.
 

The controversy dates back to 2005, when Antrix tied up with Bengaluru-headquartered Devas, with investment from Deutsche Telekom and Mauritius-based Columbia Capital, to lease capacity on two Isro communication satellites to provide multi-media services in India. The company received clearance from the Foreign Investment Promotion Board and an Internet Service Providers licence from the Department of Telecommunications. Six years later, in 2011, the UPA government cancelled the deal, citing security issues on account of corruption allegations and under-pricing of spectrum. Subsequently, Devas and its foreign investors claimed compensation — the deal was signed under the German and Mauritius bilateral investment treaties — in international law courts. In 2015, the International Chamber of Commerce tribunal awarded Devas $1.2 billion in compensation (upheld by a US Federal Court in October 2020). In May and October 2020, respectively, Deutsche Telekom was awarded $101 million plus interest by the Permanent Court of Arbitration and the Mauritius investors won $111 million by a UN international trade tribunal.

These awards were granted even as the Central Bureau of Investigation and Enforcement Directorate filed charge sheets in 2016 and 2018, respectively, against a former Isro chief and other Devas officials for fraud. Yet, it took the NDA government till January 2021 to approach the NCLT with a winding-up petition for Devas. The urgency of the subsequent appeal process before the appellate tribunal and the Supreme Court must be set against the fact that foreign investors such as Cairn in a separate retrospective tax case had started approaching foreign courts to seize the Indian government’s overseas assets. Cairn won one such appeal in July 2021; in December 2021, a Canadian court allowed Devas to seize assets of Air India, which is in the process of being transferred to the Tata group. Given the sequence of events, it is no surprise that international investors view the winding-up process as a means of avoiding paying out awards mandated by three international tribunals. If the government were to use the apex court judgment to appeal in international courts against these awards, it would not be covering itself in a great deal of credibility either. As it did with the retrospective tax case, it may be better to explore imaginative ways to cut its losses and salvage the country’s reputation in the international business community.