Devas’ shareholders find success in Canadian court against India

Even as the domestic courts have directed liquidation of Devas Multimedia Pvt., the company’s overseas shareholders are continuing their fight against the Indian government.

Most recently, Devas Mauritius Ltd., Devas Employees Mauritius Pvt. And Telcom Devas Mauritius Ltd. have got a favourable order from the Superior Court in the district of Montreal, Quebec. The court allowed the shareholders’ plea to seize property belonging to Airport Authority of India held by International Air Transport Association.

BloombergQuint has reviewed a copy of this document. AAI and Ministry of Civil Aviation’s response is awaited.

They have been granted the right to garnish property belonging to AAI held by IATA which is headquartered in Montreal, a spokesperson for Devas’ shareholders told BloombergQuint in an emailed statement. This will require IATA to garnish air navigation charges and aerodrome charges collected by it on behalf of AAI.

The AAI collects air navigation charges, incurred during flights through India’s air space, and aerodrome charges, which include use of airport, ground or navigation facilities etc. These charges are payable by airlines and countries to AAI to be allowed to fly over India’s air space and to use its airport or navigation facilities. AAI has entrusted IATA, an international trade association, to collect and remit aviation charges from airlines to it, the shareholders detailed in their application before the Montreal court.

Spokesperson for Devas’ shareholders:
“More than $30 million has been seized to date under the IATA action. These actions represent the first fruits of a globally focused effort to attach assets of the Indian government to satisfy the Devas Multimedia’s awards.”

The arbitral awards have been granted in the shareholders’ favour by the Permanent Court of Arbitration and International Chamber of Commerce. The Montreal court action by Devas’ shareholders was on the basis of the PCA award which had directed India to pay $111 million plus interest and costs.

The court found AAI to be an organ of the State of India inseparable from India or an alter ego of India. As a result, it found the PCA award enforceable in Quebec and that it can be executed on AAI’s assets.

The dispute dates back to 2005 when Devas Multimedia and Antrix Corporation Ltd., commercial arm of ISRO and wholly-owned by the Indian government, entered into a contract to lease space segment capacity on two satellites. The contract was later annulled by Antrix.

Consequently, Devas had invoked the India-Mauritius Bilateral Investment Protection Agreement and won both at the PCA and ICC.

But back home, the government has resisted the enforcement of these awards on grounds of fraud. It has contended before courts that Devas Multimedia was incorporated in a fraudulent manner to siphon funds to dubious foreign accounts.

In the last round, the National Company Law Appellate tribunal dismissed Devas shareholders’ challenge to the liquidation order passed in May this year. The NCLAT concluded that every benefit or advantage that has accrued to Devas has been through acts of fraud or suppression or fraudulent misrepresentations. It also found that the Devas’ shareholders failed to do any due diligence and aided the company in perpetuating their fraudulent activities by controlling the board and taking all the key decisions. BloombergQuint