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The Supreme Court on Monday upheld the order of winding up passed against Devas Multimedia Private Limited, while remarking that all the grounds of attack to the concurrent orders of the NCLT and NCLAT raised by Devas were unsustainable.

"We do not know if the action of Antrix in seeking the winding up of Devas may send a wrong message, to the community of investors. 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 INR 488 crores", observed a bench of Justices Hemant Gupta and V. Ramasubramanian.

Challenging an order of winding up passed by the National Company Law Tribunal under Section 271(c) of the Companies Act, 2013 which was confirmed by the National Company Law Appellate Tribunal on appeals, Devas Multimedia, through its ex-Director filed an appeal, while one of the shareholders of the company in liquidation, namely, Devas Employees Mauritius Private Limited filed another appeal.

Antrix Corporation Limited, the commercial arm of the Indian Space Research Organisation entered into an agreement with Devas titled as “Agreement for the lease of space segment capacity on ISRO/Antrix S-Band spacecraft by DEVAS” under which Devas was   developing a platform capable of delivering multimedia and information services via satellite and terrestrial system to mobile receivers, tailored to the needs of various market segments.

After the contract was terminated by Antrix invoking force majeure, due to changes in policy decisions, commercial arbitral proceeding were initiated by Devas and an award was passed in its favour, directing Antrix to pay a sum of USD 562.5 million with simple interest @ 18% p.a. The Government suffered similar awards 2 other BIT Arbitral proceedings also.

In the meantime, CBI filed a FIR, against Devas, as well as the officers of Devas and Antrix for the offences under Section 420 read with Section 120B of the IPC and Section 13(1)(d) read with Section 13(2) of the Prevention of Corruption Act, 1988. Similarly, the  Enforcement Directorate filed a report.

Antrix then filed a petition before NCLT seeking winding up of Devas.

The Top Court turned down the contention of Devas that the motive behind Antrix seeking the winding up was to deprive Devas of the benefits of an unanimous award passed by the ICC Arbitral tribunal and that such attempts on the part of a corporate entity wholly owned by the Government of India 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 observed.

Devas further argued that the criminal complaint filed against it had not yet been taken to its logical end and if the officials of Antrix and the shareholders of Devas are acquitted after trial, the clock cannot be put back. To this the Court said,

"Attractive as it may seem at first blush, this contention cannot hold water, if scrutinised a little deeper. The standard of proof required in a required criminal case is different from the standard of proof required in the proceedings before NCLT. The outcome of one need not depend upon the outcome of the other, as the consequences are civil under the Companies Act, 2013 and penal in the criminal   proceedings."

The Court further opined that If the seeds of the commercial relationship between Antrix and Devas are a product of fraud, then 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. 

"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", said the bench.

Senior Advocate Mukul Rohtagi appeared for Devas Multimedia, Senior Advocate Arvind P. Datar represented the shareholder­appellant Devas Employees, Additional Solicitor General N. Venkataraman appeared for Antrix and Additional Solicitor General Balbir Singh appeared for the Union of India.

Cause Title: DEVAS MULTIMEDIA PRIVATE LTD. v ANTRIX CORPORATION LTD. & ANR.