More reports on: Indian Space Research Organisation

Isro's Antrix to pay Rs4,432-cr damages to Devas for breach of contract

30 September 2015

An international arbitration court has directed Antrix, the commercial arm of Indian Space Research Organisation (Isro), to pay $672 million (about Rs4,435.20 crore) in damages to Devas Multimedia for "unlawfully" cancelling a contract four years ago.

The scrapped contract, which is another example of official ineptitude, could cost the commercial arm of Isro more than it gained so far.

In a statement issued on Tuesday, Bengaluru-based Devas Multimedia said the International Court of Arbitration (ICA) of the International Chamber of Commerce (ICC) has unanimously ruled in its favour.

''Devas Multimedia and its shareholders, including highly regarded international investors, are pleased that the ICC Tribunal unanimously ruled in its favor 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 totaling $672 million to Devas with post-award interest accruing at 18 per cent per annum on that sum until the award is fully paid,'' the satellite communications and technology company stated in a release.

''Devas is hopeful that Antrix will now live up to its legal obligations and pay the award so that this dispute that arose during the prior government can be brought to a swift close,'' it added.

Devas is reported to have registered a petition in the Delhi high Court to get the ruling enforced. The case 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 half the amount the petitioners demanded.

Devas, which has Deutsche Telekom AG along with US investment firms Columbia Capital LLC and Telcom Ventures LLC as investors, had demanded $1.6 billion in damages 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 years.

The company had proposed to use the airwaves to provide communication services services, using a combination of satellite and terrestrial technology.

However, the government cancelled the contract in 2011, 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.

The decision came in the backdrop of a report by the Comptroller and Auditor General (CAG), which had pointed out that the allocation of telecom spectrum to telcos far below market price had caused a loss of Rs1,76,000 crore to the government (the 2G scam).

"Antrix had no legal justification for terminating the Devas Agreement and, thus, unlawfully repudiated the Agreement in February 2011", the tribunal noted while awarding the damages.

The tribunal noted that Devas and Isro concluded the agreement 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 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.

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