Centre in talks to address legal hurdles in liquidating Devas Multimedia

The government is considering multiple legal options to preclude challenges while proceeding with winding up Bengaluru-based Devas Multimedia and seizing the company’s and its promoters’ assets abroad.

In a recent meeting at North Block, officials of the finance ministry, corporate affairs ministry, and investigative agencies discussed legal strategies and a road map on this, said two people privy to the discussion.

Officials discussed the Companies Act and its implementation under the mutual legal assistance treaty (MLAT).

“The legalities and scope of the MLAT are wide and it is important to check as to whether the treaty recognised fraud as a criminal offence,” one of the two persons said.

Under the MLAT, which was ratified by India in 2005, two countries help each other in criminal law matters with the sanction of their respective central authorities – the home ministry in the case of India.

Legal grounds are being prepared ahead of the Delhi High Court order, the hearing of which is likely to be concluded on June 1.

Devas had approached the Delhi High Court for enforcing a $562-million international arbitration tribunal award against Antrix.

The high court order is significant because it would pave the way for India to liquidate Devas and also take action against the offenders.

“We have sought legal opinion in the case, particularly on invoking Section 339 of the Companies Act, which allows the seizure of the personal assets of individuals associated with corporate fraud. However, it was suggested we wait for the Delhi High Court order, expected next month,” a senior government official told Business Standard.

Early this year, the finance ministry had said it would oppose the international award given to Devas Multimedia, following the Supreme Court on January 17, which had quashed the company’s appeal challenging the National Company Law Appellate Tribunal’s (NCLAT’s) order to liquidate it.

“Section 447 of the Companies Act recognises fraud — which is a criminal offence and in order to investigate there is a Section 211. Section 212 talks about the procedure to investigate fraud. So, the MLAT could be used if there is an established fraud by the government,” said a public prosecutor.

Meanwhile, the government has plans to use the fugitive economic offender’s Ordinance against the Devas promoters to recover dues.

In 2015, the government asked the Central Bureau of Investigation to look into the agreement. The Enforcement Directorate (ED) is also involved in the investigation, which is still on. The ED had in 2017 attached assets worth Rs 79 crore of the company under anti-money laundering laws.

The issue
In 2005, Devas and Antrix signed an agreement under which the former would lease spectrum from two satellites that the Indian Space Research Organisation (Isro) would launch. Devas agreed to pay Antrix, the commercial arm of Isro, $300 million for the use of the spectrum for 12 years. The agreement was extendable by another 12 years.

In 2005, Antrix had agreed to develop and operate two satellites and lease 90 per cent of the satellite transponder capacity to Devas.

However in 2011, during the UPA regime, the deal had been cancelled, though Devas challenged the decision in international arbitration forums and was awarded Rs 15,000 crore as damages. Business Standard