Big win for MCA, NCLT orders winding up of Devas Multimedia

NCLT  Bengaluru has ordered winding up of Devas Multimedia Private Limited, on account of fraudulent activities. The Tribunal has found the very incorporation as fraudulent, to enter into an agreement with ISRO for a technology which Devas  Multimedia never had and was not even available  at that time.  

NCLT says in its order” Facts clearly establish that even the idea to incorporate Devas was with fraudulent intentions coupled with malafide objects to enter into an agreement with Antrix with no responsibility at all”. Order further  states that “It is unknown to law that such a prestigious agreement with government owned company was got signed by a clerk, paying remuneration for the same. Therefore the agreement in question would become void abinito and its name should be struck from register of RoC”.  The order further said that the unlawful object of Devas is to bring foreign funds into India and then siphon of the same by diverting those funds to foreign countries into dubious accounts. Tribunal  observed that  Devas has successfully taken arbitration out of the country contrary to the agreement and continued to misuse the process of law before courts in India and abroad to its advantage.  

Background 

Antrix Corporation Ltd is a wholly owned Government of India Company under the administrative control of the Department of Space. Devas Multimedia Pvt. Ltd., (DMPL) is a Company incorporated on 17.12.2004. Antrix, had executed a contract dated 28.01.2005  in favour of DMPL. The agreement was entered into to render Satellite Based Digital Multimedia Broadcasting Services and the same was terminated by letter dated 25.02.2011. DMPL invoked arbitration against the termination of the agreement and obtained an Arbitral Award dated 14.09.2015,  comes to more than a billion dollars today. Antrix, after obtaining due sanction from the Government of India, has filed the petition seeking to wind up the company. 

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NCLT had directed the Liquidator to take all action as per provisions for winding of  Devas expeditiously to prevent Devas from perpetuating its fraudulent  activities and abusing tbe process of law in enforcing the ICC award and submit a report by July 7. Antrxi has been directed to advertise the winding up order within 14 days from the date of order i.e. 25th May.  

Contention of Antrix Corporation in NCLT 

In NCLT Antrix highlighted on main issue that, the contract was callously and corruptly awarded to Devas, which was incorporated merely two months prior to the award of contract, the creation of Devas as a corporate entity, just a month before the agreement dated 28.01.2005, is a sham, with the objective of committing fraudulent and illegal activities including money laundering for the benefit all the shareholders of Devas Multimedia. Antrix said existing judgments of the SC in awarding of Govt contracts was not followed. It alleged that existence of the contract was suppressed by few ex officials from government authorities before approval. Also Devas Multimedia had no commercial antecedents and hardly in existence of more than six months, Devas sold its shares at exorbitant rates, as high as Rs.1.26 Lakhs per share, to foreign investors. Antrix pointed that the investment of Rs.579 Cr was brought in but instead of being used to render internet services, was used in creating a wholly owned subsidiary in the US, making payments towards business support services, without receiving any services and in the guise of litigation services. 

Devas Multimedia’s Contentions   

Devas Multimedia contested the Antrix petition on multiple grounds like that Tribunal has no jurisdiction to determine whether the Devas Agreement is fraudulent or not, further contested that no material has been placed on record by Antrix before the tribunal to form an opinion that the affairs of the company have been conducted in a fraudulent manner and for unlawful purposes. It also opposed the petition on the ground that petition is mala fide and ought not to be entertained, said its  inconceivable and untenable in law that a debtor is allowed to seek a winding up of its creditor and this action of the debtor to prevent the creditor,to pursue its remedies in law in India is untenable and wholly malafide.  Devas Multimedia raised that being a tribunal of summary jurisdiction cannot form any opinion unless the allegations of fraud are adjudicated upon by a court of law.  

After hearing pleas of all the sides bench comprising Rajeshwara Rao Vittanala (Member-Judicial) and Ashutosh Chandra (Member-Technical) allowed the winding up of Devas Multimedia.  Antrix Corporation and Ministry of Corporate Affairs was represented by N.Venkataram , ASGI , Manmohan Juneja,  DG, MCA (OSD) and Sanjay Shorey , Director Legal  and Prosecution, MCA. Devas was represented by Senior Counsel  Rajiv Nayyar who vehemently opposed the petition but NCLT did not find any  merit his defences.