A Tricolour Waving Verdict from the Top Court                Narasimhan Vijayaraghavan                               On January 17,2022, the Supreme Court had dismissed the petitions of Dewas Multimedia

A Tricolour Waving Verdict from the Top Court

Narasimhan Vijayaraghavan

 

 

 

 

On January 17,2022, the Supreme Court had dismissed the petitions of Dewas Multimedia (DM) and Dewas Employee Mauritius against the orders of winding up by National Company Law Tribunal, upheld by the appellate tribunal also. Devas Multimedia had an agreement with ISRO’s commercial arm Antrix in 2005 to provide multimedia services to mobile phone holders using S-band satellite spectrum on lease.

 

“The Supreme Court is a political institution and undeniably so”, as Justice Oliver Wendell Holmes said and reiterated by another icon in Justice Benjamin Cardozo. Not in the context of playing ‘politics’, as we  ordinarily understand.“ In a constitutional plane”, as Lord Alfred Denning said and okayed by Justice Antonin Scalia. What is the connect to the “Dewas” verdict from the apex court?

 

Contemporaneously,in the pre-budget press conference, Union Finance Minister Nirmala Sitharaman said that the Antrix Dewas case was a fraud against the people of India and it was a fraud against the whole country.She said that the 2005 Dewas Agreement was against the security of the country. The Finance Minister blamed the then UPA government for this whole matter.

 

Dewas Multimedia initiated arbitration proceedings against the termination of agreement between Antrix and DM in 2011 Mauritius Investors and Deutsche Telecom, which had  a stake in DM , had initiated separate arbitration proceedings on the matter. India is facing huge ‘awards’  in all, close to Rs.10,000 crores as the apex court put it.

 

The arbitration tribunal had ordered the Indian government to pay $1.3 billion- over Rs.10,000/- crores as awards . In order to implement the same order, the investors of Dewas had appealed for an order to confiscate the property of the Government of India, in the US of A jurisdiction.

 

In a brilliantly illuminating order  running  to 134  pages, the Bench comprising Justices Hemant Gupta and V Ramasubramanian, have affirmed the orders of the National Company Law Tribunal and Appellate Tribunal, to direct winding up of DM as ‘formed and founded in fraud”.

 

Let me be brutally honest as to what I saw upon reading the  scholarly verdict  penned by Justice V Ramasubramanian. I saw the Indian Tricolour fluttering high and mighty thumbing a nose and more, at the, now concluded to be  ‘tainted’ arbitration awards . Brilliant.

 

It was not a ‘political’ pronouncement from the ‘political’ institution. It was a pure and simple legal one. Imbued  with utmost constitutionality. Answering every facet of challenge – be it in limitation,fraud, absent cross examination, procedural infirmities as lack of advertisement, estoppel and more, the law lords have come down on the appellants,  like a hundred tonnes of bricks plus. Tough to get up.

 

There is so much to highlight. One is at a loss  for words. And space constraints to keep the attention of the would be reader. Thankfully, the learned judges did not throw out the appeal,on a  ridiculously short ground, which they could  well have:

 

“ 12.7 Technically speaking, the appeal before us which is under Section 423 of the Companies Act, 2013, is only on a question of law. When two forums namely NCLT and NCLAT have recorded concurrent findings on facts, it is not open to this Court to re­ appreciate evidence. Realising this constraint, the learned Senior Counsel for the Appellant sought to project the case as one of perversity of findings. But we do not find any perversity in the findings recorded by both the Tribunals. These findings are actually borne out by documents, none of which is challenged as fabricated or inadmissible. Though it is sufficient for us to stop at this, let us go a little deeper to find out whether there was any perversity in the findings recorded by the Tribunals and whether such findings could not have been reached by any reasonable standards.”  Class.

 

After a point by point or punctuation by punctuation  rebuttal, puncturing  of the grounds of appeal: Justice Ramasubramanian has gone ballistic with his tantalising, not prosaic prose:

 

9.3 Factually, the appellants are right in pointing out that the Agreement dated 28.01.2005 was terminated by a letter dated 25.02.2011 only by invoking the force majeure clause and that fraud was not set up as a defence in the arbitral proceedings. The appellants are also factually correct in pointing out from the Auditor’s reports of Antrix dated 15.09.2012, 19.07.2016, 24.07.2017, 19.06.2020 etc., that there was a certification by the auditors to the effect that no fraud on or by the company has been noticed or reported during the course of the audit. In the Annexure to the Auditor’s report dated 15.09.2012, the Auditors have stated:­

 

“According to the information and explanations given to us in the course of our audit, we report that no fraud on or by the Company has been noticed or reported during the course of our audit.”

 

9.4 Similarly, in the Annual Report dated 19.07.2016, for 2015­16, it was reported by the Auditors as follows:­

 

“To the best of our knowledge and belief and according to the information and explanations given to us, we report that no case of fraud has been committed on or by the Company or by its officers or employees during the year.”

9.5 A statement similar to the one extracted above, also finds a place in the Auditor’s report dated 24.07.2017, forming part of the Annual Report 2016­17.

 

9.6 Even in Annexure­B Report dated 19.06.2020, the Auditors have given a statement as follows:­

 

“Fraud by company or its officers and employees According to the information and explanation given to us, there are no frauds reported by the company or any fraud has been noticed or reported during the year. Accordingly, the provisions of clause 3(x) of the said order are not applicable.”

 

The learned judges could not have told off the appellants, any better  than in these  pungent words:

 

1. This is not a case where the company is sought to be wound up on the ground of inability to pay debts or on just and equitable ground. This is a case of fraud and all stakeholders are fully aware of the proceedings and they have even shown extreme urgency in enforcing an ICC Arbitration award and 2 BIT awards, before the conclusion of the winding up proceedings.
2. We must keep in mind the fact that apart from the persons in charge of the management of the affairs of the company in liquidation, the officials of Antrix as well as the officials of the Department of Space are now facing prosecution not only for offences under Section 420 read with Section 120B of the Indian Penal Code, but also for offences under the Prevention of Corruption Act, 1988 and the Prevention of Money Laundering Act. The termination of the Contract on 25.02.2011, was not triggered by an allegation of fraud and corruption. Fraud and corruption were discovered only later and by the time the discovery was made, the attempts to reap the fruits of fraud had reached the pinnacle. These attempts continue even till date.
3. The failure of Antrix to plead fraud in the ICC arbitration proceedings, cannot also operate as estoppel. The arbitral proceedings commenced in the year 2013 and the award itself was passed on 14.09.2015. Antrix cannot be expected to plead fraud in the arbitral proceedings, even before the discovery of fraud.
4. The Chartered Accountants/Auditors are not experts either in Criminal Law or in the technology that formed the subject matter of the Agreement between Antrix and Devas. The statement of Chartered Accountants are always qualified with certain riders such as “according to the information and explanations given to us in the course of our audit” or “to the best of our knowledge and belief and according to the information and explanations given to us”.

 

And the learned judges, truly learned both, reserved their,  best for the last:

 

1. Another contention raised on behalf of the appellants is that the criminal complaint filed for the offences punishable under Section 420 read with Section 120B IPC, has not yet been taken to its logical end. Therefore, it is contended that in case the officials of Antrix and shareholders of Devas are acquitted after trial, the clock cannot be put back, if the company is now wound up. 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 criminal case is different from the standard of proof required in the proceedings before NCLT.
2. 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. Moreover, this argument can be reversed like the handle of a dagger. What if the company is allowed to continue to exist and also enforce the arbitration awards for amounts totalling to tens of thousands of crores of Indian Rupees (The ICC award is stated to be for INR 10,000 crores and the 2 BIT awards are stated to be for INR 5,000 crores) and eventually the Criminal Court finds all shareholders guilty of fraud? The answer to this question would be abhorring.
3. Lastly, it was contended that the actual motive behind Antrix seeking the winding up of Devas, is 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 the two BIT awards 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.
4. 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. 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.
5. 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.

 

Stunning verdict. This is true Atmanirbhar top court. We need no crutches. Fraud and Justice can never dwell together. Commercial considerations be damned. The blow that the top court has delivered is to a punch drunk crony capitalist cause. Stand up India, says the Supreme Court. We have a backbone. We must not have it merely. We must display it. And display it  with the glittering Tricolour as the proud backdrop on the eve of our 72nd Republic Day.

 

Well, legal questions remain? Or do they? What of the executability of the awards in favour of Dewas Multimedia?Do the US courts and jurisdiction yield to our top court’s? Is there a ‘comity’ in the Indo-US jurisprudence lending Antrix the spectacular spectrum it has got  now to carry the seamless message that the awards are non est in the eye of law?

 

Mouth watering questions, as the Antrix-Dewas saga has not culminated yet; do not forget. The Dewas verdict from the Supreme Court is double dose vaccine with a booster shot against the fraudulent virus. But would there be mutations morphing to raise their ugly head again? We need to wait and see.

 

Despite all the welcoming, encomiums and plaudits pouring in  over the verdict, here is my grouse and grievance. Addressed against the law lords? Or against Antrix/Union of India for possibly missing a trick? You read between the lines. Or under or over or through it.

 

Could Antrix/UOI have taken the Companies Act,2013- Sec.241 route straight and narrow – for appropriate ‘orders’ under Chapter XVI,  instead of Sec.271  which has turned out be convoluted and long winding? Or as usual,  I am being clever by half? If the very formation of DM was tainted, what value does a contract made by them can have?

 

Or even now, is nothing lost? . Everything has been gained. Via,  more specifically,  the Sec.290  read with Sec.339 route, as the Official Liquidator is now in place, to make mincemeat of the so called ICC plus BIT awards, premised at the instance of an entity founded in fraud and pursued by them,  as if genuine.

 

Imagine this. What if Dewas Multimedia had succeeded already in ‘executing the awards’ or a willing and complicit government ‘honoured’ it. Mind boggling.

 

Law is an Ass. Law Lords are not. Surely not these two. They have given one huge kick to the fraudsters  who have been stopped in their tracks. The Dewas saga is not over yet. Law and two noble Law Lords have done their bit. It is up to the State/Official Liquidator and We The People to Vaccinate ourselves, for good, against the this Pandemic Virus of the fraudulent variant.

 

Sec.339 could be the panacea vaccine to even  recover all the monies siphoned of, in crores, including those spent by Dewas Multimedia to my advocate brethren and even fees paid to the members of the Arbitral Tribunal, as if ‘personal liability’ of the scamsters. Why not?

 

Even as criminal law, hopefully, takes its logical course: do we have the answer to the question – “ On 28.07.2003, Antrix entered into a Memorandum of Understanding with Forge Advisors, LLC, a Virginia Corporation”. Who is Forge Advisors LLC? Do we need to know? Is it a relevant fact? Or just  another capitalist commercial enterprise? Or shall it remain  a mystery wrapped in enigma despite this verdict. There is  so much  more to unfold or unravel in this saga, as the Official Liquidator gets down to business  to liquidate.

 

( Author is practising advocate in the Madras High Court)