India could end up paying close to a billion dollars in penalties to a private company for services it never rendered, thanks to a weakly written contract that the company - Devas Multimedia - is now holding against the government and the Indian Space Research Organisation!
An international tribunal in The Hague on Monday ruled against the Indian government's cancellation of a contract between telecommunications company Devas Multimedia and Antrix Corporation, the commercial arm of the Indian Space Research Organisation (Isro), calling it "unfair", "inequitable" and an "ex-propriation" of Devas' foreign shareholders' investments.
Devas and Antrix had entered into a contract in 2005 wherein Devas would provide satellite-based broadband internet services in India on satellite, transponder and spectrum provided by Isro.
In 2011, however, in the midst of the 2G scam revelations, the alleged "sweetheart deal" for the S-band spectrum also came under the spotlight following a leaked draft audit report that said there were irregularities in the agreement, including conflict of interest and non-compliance of standard contractual norms.
In the wake of the report, the then Isro chairman Dr. K. Radhakrishnan declared that the promised S-band spectrum was needed for "larger national and strategic purposes". Isro/Antrix terminated the contract that was signed during Radhakrishnan's predecessor Dr. Madhavan Nair's time.
The annulment was approved by the Union government's Cabinet Committee on Security (CCS) on national security grounds.
In the meantime, Isro had also failed to launch the geo-stationary satellite that would have carried the S-band transponder as its GSLV rocket launch had failed.
Devas Multimedia then initiated international arbitration in the matter. The Hague tribunal's ruling was unanimous and even the arbitrator appointed to the tribunal by India had concurred, Devas said.
The tribunal noted that Antrix had no legal justification to terminate the agreement and that Dr. Radhakrishnan could have prevented the CCS from approving the annulment.
The PCA regularly administers cases involving states, including investment treaty claims brought under arbitration rules of the United Nations Commission on International Trade Law (UNCITRAL).
The Hague tribunal ruling is the second ruling against India in the matter. Earlier, in September 2015, the International Chamber of Commerce's (ICC) arbitration body International Court of Arbitration had asked Antrix Corporation to pay $672 million (Rs 4,432 crore then) in damages to Devas Multimedia for "unlawfully" terminating the deal on grounds of national security.
While Devas has issued a statement on the tribunal ruling, PTI reported that Isro officials on Tuesday said they were yet to get details of the development.
Ironically, Bengaluru-based Devas Multimedia is a creature of former Isro executives. It was founded in 2004 by Isro's former Scientific Secretary Dr. M.G.Chandrasekhar and former Isro director Kiran Karnik is on its board. Its foreign investors include Deutsche Telekom, Columbia Capital and Telecom Ventures.