Supreme Court upholds NCLAT order to wind up Devas

The court stated that it is a case of “fraud of a huge magnitude which cannot be brushed under the carpet, as a private lis (suit)”.

A bench of Justices Hemant Gupta and V Ramasubramanian dismissed the appeal filed by Devas. The court stated that the “finding of the Tribunal, (a) that a public largesse was doled out in favour of Devas, in contravention of the public policy in India; (b) 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; (c) that the licenses and approvals were for completely different services; and (d) that the services offered were not within the scope of SATCOM Policy etc. are actually borne out by records”.

Writing for the bench, Justice Ramasubramanian said, “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 National Company Law Tribunal had ordered winding up of Devas on May 25, 2021 on a petition by Antrix. This was affirmed by NCLAT on September 8, 2021.

In arbitral proceedings, the International Chamber of Commerce (ICC) Arbitral Tribunal passed an award on September 9, 2015 directing Antrix to pay Devas $562.5 million with simple interest at 18% per annum.

Devas contended in its appeal before SC that the actual motive behind Antrix seeking winding up of Devas was to deprive Devas of the ICC Tribunal award, and that it would send a wrong message to international investors.

The apex court said it found no merit in the argument.

The judgement said that “a product of fraud is in conflict with the public policy of any country including India. The basic notions of morality and justice are always in conflict with fraud and hence the motive behind the action brought by the victim of fraud can never stand as an impediment.”

The top court said it does not know if the action of Antrix in seeking winding up of Devas may send a wrong message to the community of investors, but added that “allowing Devas and its shareholders to reap benefits of their fraudulent action may nevertheless send another wrong message… that by adopting fraudulent means and by bringing into India an investment in a sum of Rs 579 crore, the investors can hope to get tens of thousands of crores, even after siphoning off Rs 488 crore”.

Devas had managed to bring investment of Rs 579 crore into India, but Rs 488 crore was later taken outside the country for setting up subsidiary in the US.

The apex court did not agree with Devas’s submission that the FIR by CBI for offences punishable under Section 420, read with Section 120B IPC, has not yet been taken to its logical end.