How the devas multimedia case paves the way for Indian corporate litigation

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The respondent in this case is Antrix Corporation Limited (hereafter referred to as Antrix), Antrix is ​​the commercial wing of the Indian Space Research Organization (hereafter referred to as ISRO), which is 100% owned by the Government of India under the Space Department. ON 28.07.2003, Antrix entered into a memorandum of understanding with Forge Advisors. The objective of the MoU was to make both parties strong and vital partners in the implementation of new satellite applications in various sections including education, media, agriculture and telecommunications. Additionally, the intent of the MOU was for Forge Advisors to provide a wide range of consulting services in sales, business development, strategic negotiations and other related areas.

On 22.03.2004, Forge Advisors proposed a joint venture in India called DEVAS (Digitally Enhanced Video and Audio Services). This joint venture would be capable of delivering multimedia services via satellites to mobile devices in various market segments, consumer segment, commercial segment and social segments. Under this proposal, ISRO and Antrix had an obligation to invest in an operational S-band satellite in return. ISRO and Antrix would receive a lease payment of $11 million per year for 15 years.

Devas Multimedia Private Limited was (hereinafter referred to as Devas) the company in liquidation was incorporated on 17.13.2004. Immediately after incorporation, Antrix and Devas entered into an agreement for the lease of a space segment in order to develop a platform to deliver multimedia services from satellites to mobile receivers. Under the agreement, Antrix would lease 5 CXS transponder numbers each of 8.1 MHz capacity and 5 SXC transponder numbers each of 2.7 MHz capacity on the main satellite to Devas within 30 months of the agreement. , with 6 months as an additional period. . Article 7 of the agreement stipulated the termination of the agreement as well as the consequences of such termination.

On 25.02.2011, Antrix terminated the agreement in force majeure stipulated in article 7 (c) of the agreement. The reason given by Antrix was that the Indian government had implemented a policy of not providing S-band orbital slots for commercial activities.

Devas then initiated arbitration before the ICC Arbitral Tribunal. Similarly, Mauritian investors have initiated arbitration under the Bilateral Investment Treaty between India and Mauritius. A German company, Deutsche Telecom, has initiated arbitration under the bilateral investment treaty between India and Germany. Following various arbitration proceedings, the Indian government was asked to pay US$562.5 million with simple interest of 18% per annum.

On 03.16.2015, the Central Bureau of Investigation (hereinafter referred to as CBI) filed a First Information Report against Devas, Devas executives and Antrix executives for offenses under Section 420 lu with Section 120B of the IPC and Section 13(1)(d) read with Section 13(2) of the Prevention of Corruption Act 1988. Therefore, Antrix succeeded in seeking leave to commence proceedings under Section 271(c) of the Companies Act on the grounds that Antrix filed a petition in the NCLT, Bengaluru bench on 18.01 .2021 for liquidation of Devas. On 19.01.2021, NCLT granted the petition and appointed the official liquidator, and the Honorable High Court of Karnataka in Bangalore was appointed as provisional liquidator.

Dissatisfied with the order, Devas Employees Mauritius Private Limited (hereinafter referred to as DEML) filed an appeal with the NCLAT; the same was settled with an instruction to approach NCLT to raise their objections. Simultaneously, DEMPL filed Written Petition No. 6191 of 2021 challenging the validity of Section 271(c) of the Companies Act 2003 and revoking the authorization granted by the Department of Corporate Affairs. The motion was dismissed with costs for abuse of process.

This particular case is of major importance in corporate litigation. This dispute is one of the first of its kind in aerospace involving the Indian space organization coupled with an allegation of fraud, corruption, corporate liquidation and international arbitration. One of the grounds for the liquidation of devas was fraud, but before going any further it is important to consider the difference between Section 271 of the Companies Act 2013 and the 1956 Act. under the previous law, there were two categories of liquidation. By court and the other was voluntary. The cases where the company could be liquidated were prescribed by Article 433 of the previous law; this section has given examples for the same. Fraud in any form of the company or in the conduct of company affairs, actions of company officers. Section 243 of the 1956 Act empowered the central government to grant clearance for liquidation Sections 235 to 251 of the Inquiries Act empower the government to investigate and examine the mattress if it is of the opinion that the company activities are carried out for a fraudulent or unlawful purpose. A petition for liquidation under section 439 read with 237 of the 1956 Act must be made on an equitable basis. Under Section 237 of the 1956 Act, the central government had the power to order an investigation while it is before the Tribunal under Section 213 of the 2013 Act. The main difference between the two laws is the inclusion of fraud in the law of 2013, which is a direct circumstance of liquidation of a company. This did not exist in the previous act. The information above shows two ways to conclude for fraud. One is under section 271(c) by a person authorized by the government and under section 224(2)(a) based on an investigation report.

The limitation of the filing of the liquidation request was also a subject that was widely debated during this corporate litigation. He was satisfied by the devas that the petition under Section 271(c) was barred by limitation. The appellants argued that the limitation law prescribed a 3-year period for any claim, the date of discovery was reduced to the date of the first indictment on 11.08.2016, but Antrix filed a claim with the central government on 14.01.2021. The Appellants rely on Jignesh Shah and Anr v. Union of India (2019 10 SCC 750) where the Appellants argue that the liquidation petition should have been dismissed on the grounds of statute of limitations, even if we take the filing date of the sole indictment as the date of knowledge of the alleged fraud. The NCLAT technical member was of the view that the fraud alleged by Antrix was a transaction-based fraud and not a single act and that the liquidation petition was based on a number of acts. It is also important to note that the CBI had filed an additional cost sheet. In addition, a complaint was filed under the Prevention of Money Laundering Act 2002 alleging fraud only on 24.12.2018, the position taken by the NCLAT is plausible and sets an important precedent in terms of money laundering litigation. business and business fraud detection.

Another significant allegation that was addressed in full was the shareholders’ locus standi. The Appellant was of the view that the NCLT, the NCLAT and the Honorable High Court of Karnataka in Bangalore failed to give such opportunity to the shareholders. The appellants relied on National Textile Workers Union v. PR Ramakrishnan and Ors, it was argued that it would be contrary to all accepted principles of fair trial and violate the audi alteram partem rule which is one of the fundamental principles of natural justice. justice, to deny shareholders the right to be heard before an order affecting their interests is made. But the NCLAT was of the view that shareholder rights are limited to the extent of electing directors, voting at company meetings and distributing dividends. Under the Companies Act, there is no possibility of challenging a shareholder. This case sets a message to investors and corporate executives who believe they can reap the benefits by engaging in fraudulent actions or abusing the process of the law through litigation.

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