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Statement from Devas Shareholders on Karnataka High Court Decision

Indian Court Refuses to Stop Modi Government’s Illegal Theft of Devas to Evade Paying Arbitration Award

April 28, 2021
– Following today’s decision before the High Court of Karnataka that refused to stop the illegal theft of Devas Multimedia Private Ltd. from its shareholders, Matthew D. McGill of Gibson Dunn & Crutcher LLP, lead counsel for a number of the shareholders of Devas Multimedia Private Ltd., made the following statement:

“Today’s decision in the Devas matter is another disappointing departure from the rule of law in India. The Modi government’s sham liquidation proceeding against Devas is a reckless effort to evade the judgments of three different international arbitration panels that each concluded that India and commercial arm, Antrix, had breached their obligations.  The Devas shareholders will enforce their legal rights in India and around the world, for as long as it takes to obtain justice. The Modi government’s lawless actions with respect to Devas will continue to define Modi’s India as an unsafe and untrustworthy place for investors.”

About Devas

Devas and its affiliates are currently owed more than US$1.5 billion by the Government of India, as confirmed by three separate independent international arbitration tribunals, as a result of the Government’s decision to illegally expropriate and breach the company’s due process rights when the Government improperly terminated Devas’ contract with Antrix, the marketing arm of India’s national satellite industry.

In the early 2000s, global pioneers and investors in satellite communications conceived the idea of Devas Multimedia Pvt. Ltd.  In January 2005, Devas entered into an Agreement (the ‘Devas Agreement’) with Antrix  and its parent the Indian Space Research Organisation (ISRO) to build out an innovative hybrid satellite and terrestrial communications service throughout India. This system would have delivered cutting-edge digital multimedia broadcasting service and mobile broadband across India using the S-band spectrum. The project would have brought significant economic and societal advancement for the lives of hundreds of millions of people by ensuring access to high-speed communications and the internet. In February 2011, behind the back of Devas and its investors, the Government of India secretly moved to wrongfully terminate the agreement.

International Arbitration Actions

Following India’s decision to repudiate the Devas Agreement, Devas and its shareholders initiated a series of arbitration actions. The first was a tribunal in New Delhi against Antrix under the rules of the International Chamber of Commerce (ICC), as per Article 20 of the arbitration provisions of the Devas Agreement. Devas’s Mauritian shareholders commenced the second arbitration action against India at a tribunal seated at the Permanent Court of Arbitration at The Hague under the Arbitration Rules of the United Nations Commission on International Trade Law (“UNCITRAL “). In September 2015, the ICC tribunal ruled in favor of Devas, resulting in an award of US$672 million for “unlawfully terminating” the agreement. In July 2016, the UNCITRAL tribunal ruled in favor of Devas’s Mauritian shareholders, finding India liable for “unlawful expropriation” of Devas and for failing to provide fair and equitable treatment in violation of the India–Mauritius Bilateral Investment Promotion and Protection Agreement (BIPA), Articles 4 & 6. The UNCITRAL tribunal awarded the Mauritian shareholders damages totaling US$111 million, plus interest. These awards are currently being enforced in U.S. District Courts. With interest, the awards now amount to more than US$1.6 billion.

A third arbitration was brought by Deutsche Telekom, another investor in Devas, against the Republic of India in September 2013 before an UNCITRAL tribunal seated in Geneva. The tribunal held that India had violated the Bilateral Investment Treaty between India and Germany by expropriating Deutsche Telekom’s investments in Devas and failing to provide fair and equitable treatment to the company. On May 27, 2020, the tribunal issued a final award to Deutsche Telekom totaling US$132 million plus interest until paid in full.

Indian Government’s Actions to Forcibly “Wind Up” Devas Violates Companies Act

Solicitor General Tushar Mehta, on behalf of the Indian Government, convinced the National Company Law Tribunal (“NCLT”) to appoint a government liquidator to wind up Devas. The intention is to have the liquidator dispose of all the company’s assets, including the arbitration award from the International Chamber of Commerce (ICC), and further sabotage enforcement of the arbitration awards against the Indian Government.

The Companies Act has certain safeguards, and requires the NCLT to “give notice to the company and afford a reasonable opportunity to it to make its representations” before appointing a provisional liquidator pursuant to a wind-up petition. In the case of Devas, the Indian Government egregiously failed to do so. The Companies Act also provides that “where a provisional liquidator has been appointed the provisional liquidator shall take such steps and measures, as may be necessary, to protect and preserve the properties of the company.” In the case of Devas, the Indian Government also failed to do this.

Former Chief Justice V.N. Khare: NCLT Proceedings not “Bona Fide”

Justice V.N. Khare, a former Chief Justice of the Supreme Court of India, has called the proceedings against Devas before the NCLT not “bona fide.” He has commented further that in his “entire legal career and experience,” he has not witnessed a wind-up proceeding as the one leveled against Devas where the “current proceedings [are] unusual and against the fundamental principles of natural justice . . . enshrined in the Constitution of India”.  Khare comments further in his declaration to the U.S. District Court Western District of Washington that he finds it “very shocking that it is the Government of India –  against whose company an Award has been rendered and which thereby has become debtor of Devas  –  has itself authorized the very same company to file a winding up petition against its own creditor, and the Official Liquidator, who is also a Government employee, has taken over the affairs of Devas.”