Devas v. Antrix: Supreme Court upholds NCLAT judgment ordering winding up of Devas Multimedia

The Supreme Court on Monday upheld a judgment of the National Company Law Appellate Tribunal (NCLAT) allowing winding up of Devas Multimedia Private Limited (Devas) following a winding-up petition preferred by Central government-owned Antrix Corporation [Devas Multimedia v Antrix Corporation]..A Bench comprising Justices Hemant Gupta and V Ramasubramanian dismissed the appeal filed by Devas against NCLAT judgment which in turn had upheld an earlier order of the Bengaluru Bench of the National Company Law Tribunal (NCLT) directing winding up of Devas..The Court turned down the contention of Devas that the motive behind Antrix seeking the winding up of Devas was to deprive Devas of the benefits of an unanimous award passed by the ICC Arbitral tribunal presided over by a former Chief Justice of India and that such attempts on the part of a corporate entity wholly owned by the Government of India (Antirx) would send a wrong message to international investors."We do not find any merit in the above submission. If as a matter of fact, fraud as projected by Antrix, stands established, the motive behind the victim of fraud, coming up with a petition for winding up, is of no relevance. If the seeds of the commercial relationship between Antrix and Devas were a product of fraud perpetrated by Devas, every part of the plant that grew out of those seeds, such as the Agreement, the disputes, arbitral awards etc., are all infected with the poison of fraud," the Court ruled..Devas a Bangalore based company, majority owned by Mauritian and US firms, was purportedly established by two persons, one being a former employee of ISRO, with a share capital of INR 1,00,000 to pursue digital multimedia services. Antrix, the commercial arm of the Indian Space Research Organization (ISRO) and Devas entered into an agreement by which Antrix agreed to build, operate, and launch two satellites and lease spectrum capacity on those satellites to Devas. Devas had to utilise this bandwidth to provide multimedia services across India. However, the agreement was terminated by Antrix, invoking force majeure, due to changes in policy decisions. A legal battle between the parties ensued in which, on September 14, 2014, the International Chamber of Commerce (ICC) rendered an award in favour of Devas, directing Antrix to pay damages of around US$562.5 million along with interest. However, Antrix challenged the award before the Delhi High Court on the ground that the contract from which the arbitral award arose was wholly vitiated due to acts of corruption, fraud and criminality committed by the erstwhile management of Antrix and Devas..While the challenge to the ICC award remained pending before the Delhi High Court, Antrix Corporation moved NCLT for winding up of Devas on the ground that the objective of Devas Multimedia was to “harm public interest and monies” and that ₹296 crore was used for personal gain of few officials, which was in clear violation of law and policy.Antrix’s case was supported by the Ministry of Corporate Affairs which stated that the continuance of Devas Multimedia’s name on the rolls of Registrar of Companies was not warranted at all.The NCLT on May 25, 2021 passed an order directing winding up of Devas on the ground of fraud. On appeal, the NCLAT confirmed the same on September 8, 2021 prompting the present appeal..The Supreme Court held that the following findings of the NCLT are proved from the records available:- that a public largesse was doled out in favour of Devas, in contravention of the public policy in India; - that Devas enticed Antrix/ISRO to enter into an MoU followed by an Agreement by promising to provide something that was not in existence at that time and which did not come into existence even later; - that the licenses and approvals were for completely different services; and - that the services offered were not within the scope of SATCOM Policy.."There is no denial of the fact that Devas offered a bouquet of services known as (a) Devas Services through a device called (b) Devas device in a hybrid mode of transmission, which is a combination of satellite and terrestrial transmissions, and which is called (c) Devas Technology but none of which existed at the relevant point of time or even thereafter; Devas did not even hold necessary intellectual property rights in this regard though they claimed to have applied," the judgment said..The Court further noted that the formation of Devas was for a fraudulent and unlawful purpose was borne out by the fact that the company was incorporated in December 2004, as a result of preliminary meetings held at Bangalore in March 2003 and in USA in May 2003, followed by the signing of the MoU on July 28, 2003."The ground work was clearly done during the period from March 2003 to December 2004 before the company was formally incorporated. Immediately after incorporation, the Agreement dated January 28, 2005 was signed. Therefore, the first ingredient of Section 271(c) of the Companies Act, 2013, namely, the formation of the company for a fraudulent and unlawful purpose was clearly made out," the Court ruled..On the contention that the action of Antrix in seeking the winding up of Devas may send a wrong message to the community of investors, the Court said that it cannot conclusively state anything on the same. "But allowing Devas and its shareholders to reap the benefits of their fraudulent action, may nevertheless send another wrong message namely that by adopting fraudulent means and by bringing into India an investment in a sum of INR 579 crores, the investors can hope to get tens of thousands of crores of rupees, even after siphoning off ₹488 crores," the Court concluded.It, therefore, rejected the appeal.Devas was represented by Senior Advocates Mukul Rohtagi and Arvind P Datar. Antrix was represented by Additional Solicitor General N Venkataraman, along with Ajay Bhargava, Vanita Bhargava, Arvind Ray, Karan Gupta and Vansha S Suneja, of Khaitan & Co Delhi..[Read Judgment]