Isro's Antrix vs Devas: Countering ED probe on FEMA, multimedia firm moves Karnataka HC

In an arbitration case involving Indian Space Research Organisation (Isro) and Devas Multimedia, the Government of India has lost the case in the international tribunal. This would mean the government’s space arm Isro may have to pay $1 billion in damages to Devas for cancelling a deal in 2010, the tribunal ruled at The Hague.

Even as the international court ruled in favour of the multi media firm, the Enforcement Directorate (ED) launched an investigation against Devas and its directors and foreign subsidiaries under Prevention of Money Laundering Act (PMLA) and Foreign Exchange Management Act (Fema). According to The Times of India , this will allow the government to recover from Devas, “the amount it hopes to earn through international arbitration.”

The ED’s case rests on the basis that approval for foreign direct investment (FDI) to Devas was based on conditions that foreign investors would be subject to Indian laws.

In a swift action to the ED probe, Devas moved the Karnataka High court against the ED notice on FEMA violation, and the High court has stayed the notice issued by ED for 8 weeks (2 months) vide its order dated 28 June 2016.

In a writ petition filed filed before the Karnataka High Court, Devas Multimedia Private Limited has challenged the Show Cause Notice dated 6 June 2016 issued by an Adjudicating Authority being a Special Director of the Enforcement Directorate under the Foreign Exchange Management Act, 1999.

Further, Devas has also challenged a complaint dated 31 May 2016 issued by the Assistant Director, Enforcement Directorate, Bangalore before the High Court.

Devas has argued that the Show Cause Notice and Complaint are wholly without jurisdiction, and in any event vitiated by malice in law and fact and hence void, invalid and non-est.

The High Court on 28 June 2016 stayed the operation of the Show Cause Notice and the Complaint and all proceedings initiated there under for a period of 8 weeks. (2 months).

According to a report by News18.com, Isro’s commercial arm Antrix had cancelled a deal involving use of two satellites and a spectrum after which Devas Multimedia filed the case against the former.

The deal between Antrix and Devas was signed in 2005 when G Madhavan Nair was at the helm of affairs in the Department of Space. As per the agreement, Antrix was to provide 70 MHz of the scarce S-Band space segment to Devas for its digital multimedia services.

This was to be done by leasing 90 percent of the transponders in satellites GSAT-6 and GSAT-6A that are proposed to be launched by Isro. Devas, in turn, was to pay Antrix a total of $300 million over 12 years.

However, the deal failed to take off, as the then Manmohan Singh-led government in 2011 said the project was already under review and action has been initiated for termination of the contract.

The government finally cancelled the deal on 17 February, 2011. Devas then took Antrix and the Government to International Court for cancelling its contract by the Cabinet Committee on Security in 2011.

After arbitration proceeding began in June 2013, Devas claimed $1.6 billion in damages.

In 2015, Antrix was slapped a fine of about Rs 4,400 crore ($672 million) by International Arbitration Court for unilaterally terminating the contract with Devas, the News18.com report said.