Important lessons can be learned even as India appeals against the verdict handed out by the Permanent Court of Arbitration (PCA) at Hague in the arbitration case between ISRO’s marketing-arm Antrix Corp and Bangalore-based Devas Multimedia.
The PCA recently ruled that the Indian government’s actions in 2011 to scrap the Antrix-Devas S-Band spectrum deal “amounted to expropriation” and “breached treaty commitments to accord fair and equitable treatment to Devas’ foreign investors”. Reports suggest that India could end up paying damages of up to a billion dollars.
Just to refresh memory, in January 2005 Devas and Antrix signed a deal whereby ISRO agreed to spend $110 million on building, launching and operating two satellites — GSAT 6 and GSAT 6A — whose capacity was to be leased out to Devas. What happened subsequently, and is currently under probe by CBI and Enforcement Directorate, is that on the basis of the deal with Antrix, Devas reportedly sold its shares at a huge premium ($18,000 per share) and even offloaded 17 per cent to German firm DeutscheTelekom and other investors including former ISRO scientists for $75 million in July 2008.
As flagged by a CAG report, no inter-ministerial consultations were held, nor comments from telecom or I&B ministry were sought and the central government had virtually no idea about the gravity of the deal, its impact, or the one-sided allotment of transponder capacity. Sensing another spectrum scam, the then UPA-II government decided to annul the Antrix-Devas deal on 17 February, 2011, a decision vetted by a cabinet committee on security. But interestingly, the official reasons given for annulling the deal were not corruption, conflict of interest, or deal favouring one entity. The government cited “force majeure” (something beyond normal control), as the reason for the annullment. An official statement said: “...there has been an increased demand for allocation of spectrum for national needs, including for the needs of defence, para-military forces…the government will not be able to provide orbit slot in S-band to Antrix for commercial activities, including for those which are the subject matter of existing contractual obligations for S-band.” Sadly, these arguments did not hold up before the International Chamber of Commerce and later PCA, and both these courts’ orders went against Antrix.
The three key takeaways from this saga: always allocate natural resources through auctions (now being followed), never scrap business deals involving foreign investors in a hurry. Always seek professional legal help rather than depending on in-house ministers who are lawyers. UPA had some, so does the NDA today. Any takers?
BW Reporters
Ashish Sinha is an experienced business journalist who has covered FMCG, auto, infrastructure, tourism, telecom among several other beats. Ashish has keen interest in the regulatory scenario impacting different sectors. He writes on aviation, railways, post and telegraph, infrastructure, defence, media & entertainment, among a wide variety of other subjects.
