ISRO's Antrix to pay Rs 4,432 crore damages to Devas for unlawfully cancelling contract

NEW DELHI: An international arbitration court has directed Antrix, the commercial arm of Indian Space Research Organisation (Isro), to pay $672 million, or Rs 4,435.20 crore, in damages to Devas Multimedia for “unlawfully” cancelling a contract four years ago. In a statement issued on Tuesday, Bengaluru-based Devas Multimedia said the International Court of Arbitration (ICA) of the International Chamber of Commerce had unanimously ruled in its favour and “found that Antrix is liable for unlawfully terminating the Devas-Antrix agreement in February 2011”.
“The ICC tribunal also awarded damages and pre-award interest totalling $672 million to Devas with post-award interest accruing at 18% per annum on that sum until the award is fully paid,” the satellite communications and technology company said in the statement.

Devas would now need to move a court to get the ruling enforced. It has registered a case in the Delhi High Court, which is likely to come up for hearing on Wednesday, a company official said. The ruling by three neutral arbitrators on the damages that Isro needs to pay is less than the $1.6 billion that was initially demanded by Deutsche Telekom AG along with US investment firms Columbia Capital LLC and Telcom Ventures LLC – all investors in Devas – while moving the ICA in June 2011 after the central government cancelled the deal in February that year.

“With the ICC award having been issued, we hopefully can now move forward to concluding this dispute,” said Larry Babbio, chairman at Devas Multimedia. According to the contract signed in January 2005, Devas was to lease 70 MHz of S-band spectrum from two satellites that were to be launched by Isro. Devas was to pay $300 million for the right to use the airwaves for 12 years, which could be further extended by another 12. The company intended to use the airwaves to provide communication services, using a combination of satellite and terrestrial technology. The government in 2011 cancelled the contract, saying it could not provide an orbit slot in the S-band of frequencies to Antrix for commercial use because of high demand for the spectrum for public use.

The scrapping of the contract, however, came amid concerns that the allotment of scarce and precious bandwidth to Devas could cause a loss to the national exchequer. This, especially as it came in the backdrop of a report by the Comptroller & Auditor General (CAG) that telecom spectrum had been granted to telcos for far below market price, causing a loss of Rs 1.76 lakh crore to the government – now popularly known as the genesis of the 2G scam.

According to the tribunal, “Antrix had no legal justification for terminating the Devas Agreement and, thus, unlawfully repudiated the Agreement in February 2011”, Devas said in its statement. In its ruling, the tribunal noted that the agreement between Devas and Isro concluded after several rounds of discussions and scrutiny, and that for five years, the two parties had cooperated in executing the pact, with Antrix/Isro building the satellites and Devas obtaining licences and capital necessary to deliver the planned services in India.

However, after five years of cooperation, Antrix moved to terminate the pact in February 2011, arguing that it was entitled to do so as it had not been able to obtain the necessary frequency and orbital slot coordination necessary to launch and operate the satellites. Moreover, a decision by the Cabinet Committee on Security in February 2011 approving the annulment of the pact meant that a “force majeure event” had occurred under the agreement, allowing Antrix to scrap the deal, it had argued.

Devas disagreed with Antrix’s reasons for cancelling the deal and sought negotiations, but “Antrix refused to engage”, which forced the company to start arbitration proceedings in June 2011, the Devas statement said.