Foreign investors in Devas Multimedia target Air India assets in US, cite Canadian court order

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A Jan. 8 order from a Superior Court in Canada’s Quebec region – identifying India’s state-owned aircraft carrier Air India as an alter ego of the Indian government – was cited by investors in start-up Devas Multimedia to ask the seizure of Air India assets in the United States to recover $111 million in compensation following a failed deal in 2005 with Antrix Corporation, the commercial arm of the Indian Space Research Organization (ISRO).

In a January 13 letter to a U.S. federal court judge in the Southern District of New York, on behalf of three foreign investors in Devas Multimedia – CC/Devas Mauritius, Telcom Devas Mauritius and Devas Employees Mauritius Pvt Ltd – a legal representative , Mathew D Mcgill, cited the Canadian court’s January 8 order seeking the seizure of Air India’s assets in the United States.

The three Mauritian investors are trying to recover compensation awarded to them by an international tribunal for the cancellation of a 2005 satellite contract between Devas Multimedia and Antrix Corp by the Indian government in 2011.

On January 8, the Superior Court of the Province of Quebec in Canada – where Devas Multimedia investors are suing the seizure of funds deposited with the International Air Transport Association (IATA) by Air India and the Airports Authority of India – identified Air India as an alter ego of the GoI and authorized the preliminary seizure of 50% of its IATA funds.

Mauritian investors in Devas Multimedia are trying to enforce compensation awarded to India for alleged breaches of a bilateral investment treaty between India and Mauritius by seizing the assets of state-owned company Air India which is to be sold to the Tata group.

“Plaintiffs write to inform the Court that in another case brought by Plaintiffs before the Commercial Division of the Superior Court of Quebec, Canada, to enforce the same arbitral award, the court recently issued a preliminary ruling that “Air India Ltd. . . [is] the alter ego of the Republic of India and as such, [its] the assets are seized as if they belonged to the Republic of India,” said the Mauritian investors’ letter to the US court.

“The Claimants also seek to enforce their arbitral award against the assets of Air India in this action on the grounds that Air India was and is an alter ego of India. Air India has stated that it intends to seek dismissal on the grounds that she is not an alter ego of India and therefore is immune under the Foreign Sovereign Immunities Act,” the January 13 letter to the US court reads.

Air India sent a January 14 letter to the US court in response to the January 13 letter from Devas Multimedia investors to counter allegations that Air India has been recognized as an alter ego of the Indian government. The letters were documented by the US court.

On January 8, 2022, the Superior Court of the Canadian province of Quebec upheld an interim order issued by a Montreal court for the seizure of deposits made by Air India with IATA, but only authorized the seizure of 50 % of funds after Air India pointed out that its operations would be hampered by seizing all its funds from IATA.

The Superior Court of Quebec, however, quashed an order seizing the funds of the Airports Authority of India (AAI) deposited with IATA, whose head office is in Montreal.

IATA, earlier on January 3, said it “held $17,306,658.70 on behalf of Air India as of December 31, 2021 and $12,767,745.25 on behalf of AAI as of December 31, 2021” , observed the Canadian court.

Devas investors have also argued in courts in Canada and the United States that there is an urgent need to seize Air India’s assets due to the impending sale of the Indian government’s stake in the airline to the Tata Group.

During the proceedings in the Canadian court, Air India did not claim immunity under a state immunity law, which AAI did, but argued that the funds seized by the IATA accounted for “about 65% to 75% of its revenue” and that the seizure of this amount would require “Air India to fly anywhere in the world with barely 25 to 35% of its usual passenger turnover”. .

According to the records of the proceedings – as documented in the Canadian court order – Air India argued that seizing its IATA funds would put its operations in jeopardy.

One of the significant observations made by the court in Canada – while affirming the preliminary seizure of 50% of Air India funds available from IATA – is that the actions taken by the Indian government against Devas Multimedia in India suggest that it would be “almost impossible” for the company’s investors to recover compensation in India,

“Without going into detail of the numerous factual allegations aimed at establishing India’s wrongful and abusive conduct towards the plaintiffs, the numerous actions, direct or indirect, of India within the borders of its country to attack, among other things, the arbitral awards and preventing their execution by Claimants are simply mind-boggling, to say the least on the face of it, and leave no doubt in the Court’s mind that it would be virtually impossible to enforce arbitral awards in India, leaving claimants with the only realistic alternative, but to enforce the same on assets located outside of that country,” the Canadian court said.

“These actions taken and measures taken by India within its jurisdiction, directly or indirectly through its wholly state-owned company Antrix, as detailed in the affidavits, go far beyond a legitimate challenge to the validity of arbitral awards before international courts and tribunals,” the court in Canada said while accepting that investors’ fears of non-payment of compensation amounts by India are justified

The three Mauritian investors have also, in the meantime, applied to the US Federal Court for the Southern District of New York to be recognized as CCDM Holdings, LLC, Devas Employees Fund US, LLC and Telcom Devas, LLC in future proceedings.

Mauritius-based investors in Devas Multimedia have moved courts around the world to seize Indian government assets to enforce an October 13, 2020 order from a tribunal of the United Nations Commission on International Trade Law asking the state-owned Antrix Corporation to pay $111 million in compensation for the cancellation of a Devas-Antrix satellite contract signed in 2005.

Last year, a Paris court reportedly authorized the seizure of property from the Indian consulate worth 3.8 million euros.

On January 3, the US Federal Court for the Western District of Washington allowed the three Mauritian investors of Devas Multimedia to uncover Antrix’s assets in the US Eastern District of Virginia after the investors said Antrix had no assets. in the District of Washington.

Antrix Corporation said in documents filed in US federal court for the Western District of Washington that it has very few assets in the United States. Antrix said that only two US companies – Intelsat Service and Equipment LLC and Yazmi USA LLC owe ISRO’s commercial arm dues that would be of interest to investors.

“Intelsat owes less than $150,000 to Antrix. Intelsat filed for bankruptcy in May 2020 and this bankruptcy proceeding is pending in the U.S. Bankruptcy Court for the Eastern District of Virginia. Yazmi owes Antrix less than $40,000 Other than $186,304 owed by these two companies, the record indicates that Antrix has no assets in the United States,” Antrix said in US court filings.

Air India – which is being taken over by the Tata Group – challenged the decision of foreign investors in Devas (including German telecommunications major Deutsche Telekom) in US federal court for the Southern District of New York to identify Air India as an alter ego of the Indian government (before the privatization of Air India).

Under the failed Antrix-Devas deal of 2005, ISRO was supposed to lease two communications satellites for 12 years at Rs 167 crore from Devas Multimedia. The startup was to provide multimedia services to mobile platforms in India using space band or S-band transponders on ISRO’s GSAT 6 and 6A satellites built at Rs 766 crore by ISRO.

The deal was canceled by the UPA government in February 2011 amid the 2G crisis citing the requirement for S-band spectrum for the country’s security purposes. After the NDA government came to power in 2014, the CBI and ED were asked to investigate the deal.

After the cancellation of the agreement, the foreign investors in Devas Multimedia – the large German telecommunications company Deutsche Telekom, the three Mauritian investors and Devas Multimedia itself, approached various international courts to seek compensation for the failure of the agreement.

Deutsche Telekom was awarded $101 million in compensation by the Permanent Court of Arbitration in Geneva, Mauritian investors were awarded $111 million by UNCITRAL and Devas Multimedia itself was awarded $1.2 billion by a chamber of International Trade (September 14, 2017).

The $1.2 billion award to Devas Multimedia was upheld by the U.S. District Court for the Western District of Washington on October 27, 2020. Antrix Corporation appealed this order to a U.S. Court of Appeals and the Court Supreme Court of India has requested the decision of the ICC tribunal will be suspended by an order dated November 4, 2020.

The Law Enforcement Directorate and Central Bureau of Investigation (CBI) in India is pursuing money laundering and corruption cases in India against Devas and his officials. The National Company Law Tribunal in India ordered the liquidation of Devas Multimedia on May 25 this year citing fraud in its establishment.

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