India has lost its arbitration case in an international tribunal against the Bengaluru-based Devas Multimedia Private Ltd. for cancelling the space/satellite contract with the government-owned Antrix Corporation, Devas said on Tuesday.
In a statement, Devas said: "A Permanent Court of Arbitration (PCA) tribunal has found that the government of India's actions in annulling a contract between Devas and Antrix Corporation Ltd., and denying Devas commercial use of S-band spectrum, constituted an expropriation."
The ruling on Monday was the second by an international tribunal arising out of the cancellation of the Devas-Antrix contract, the statement added.
The Hague-based Permanent Court of Arbitration tribunal (PCA) also found that India breached its treaty commitments to accord fair and equitable treatment to Devas's foreign investors.
Antrix is the commercial arm of Indian space agency, the Indian Space Research Organisation (ISRO).
The PCA regularly administers cases involving states, including investment treaty claims brought under the arbitration rules of the United Nations Commission on International Trade Law (UNCITRAL), said Devas.
According to Devas, the unanimous decision included the arbitrator appointed to the tribunal by India.
In an earlier decision, an International Chamber of Commerce (ICC) tribunal in 2015 found unanimously that Antrix's repudiation of the Devas-Antrix contract was unlawful, and awarded Devas damages and pre-award interest of approximately $672 million, plus post-award annual interest accruing at 18 per cent until the award is paid in full.
The courts in the United Kingdom and France have recognised the ICC award and held it to be enforceable.
According to Lawrence Babbio, Chairman of Devas, with the PCA award, two international tribunals have now unanimously agreed that financial compensation should be paid after annulment of Devas's rights.
"Other courts in France and the United Kingdom have agreed that the award against Antrix ought to be enforced. We prefer a mutually agreeable resolution of this matter. But until that occurs, Devas and its investors will continue to press their claims before international tribunals and in courts around the world," Babbio was quoted as saying in the statement.
The PCA tribunal unanimously found that by annulling the contract in 2011 and denying the commercial use of S-band spectrum, the Indian government expropriated the investments of Devas's foreign shareholders and also acted unfairly and inequitably, thus making it liable to pay financial compensation.
Antrix entered into an agreement with Devas in 2005 for the long-term lease of two ISRO satellites operating in the S-band.
However, the then United Progressive Alliance government cancelled the controversial contract in February 2011, invoking sovereignty and decided to use the advanced satellite for the country's strategic use.
Under the annulled deal, Antrix was to lease satellite transponders to Devas for allowing it to offer digital multimedia services using the S-band wavelength (spectrum), reserved for strategic purpose.
Incidentally, the space agency launched the GSAT-6 on August 27 from its spaceport at Sriharikota in Andhra Pradesh, about 90 km north of Chennai, as a communication satellite, using a heavy rocket.
S. Rakesh, Chairman-cum-Managing Director of Antrix Corporation Limited, was not available for comments.
In June 2016, the Enforcement Directorate (ED) had issued a notice to Devas for alleged violation of foreign exchange laws involving around Rs 1,200 crore.
According to a government statement, Devas Multimedia is suspected to have received foreign direct investment of Rs 578.54 crore between May 2006 and June 2010 from various overseas investors, including CC Devas Mauritius Ltd, Telecom Devas Mauritius Ltd, Deutsche Telkom Asia Pvt. Ltd. and Devas Employees Mauritius Pvt. Ltd. in violation of the provisions of the Foreign Exchange Management Act.
The ED said the share subscription agreements entered by Devas Multimedia with the investors contained clauses relating to settlement of disputes in courts other than those in India and applicability other than Indian laws in matters of dispute.
As a result, the ED said, the FDI received by the firm was contrary to the conditions specified in the approvals granted by Foreign Investment Promotion Board.
The extent of contravention on the said count is Rs 578.54 crore, the ED said.
The ED also charged Devas Multimedia with contravening the FDI regulations under FEMA for assuring foreign investor an annual eight per cent priority dividend in addition to other dividends on cumulative basis.
The investments received by the Indian company with such assured returns is Rs 571.72 crore, the statement said.
According to the ED, Devas, for one tranche of receipt of funds, issued a security akin to an External Commercial Borrowing (ECB) promising higher returns than the ceiling fixed by the Reserve Bank of India. The extent of violation on this count is Rs 67.50 crore, the ED said.
According to the probe agency, a show cause notice has been issued to the Indian investors, the persons responsible in the Indian company, including its directors and foreign investors.
The ED has initiated the adjudication process. In case the alleged contravention is proved in the adjudication proceedings, the noticees are liable for penalty under FEMA, which may be imposed up to thrice the sum involved in such contravention.
--IANS
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