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2022 (9) TMI 1298 - HC - Companies LawValidity of Arbitral Award - seeking winding up of company (Devas) - it was alleged that Devas was formed for a fraudulent and unlawful purpose and its affairs had been conducted in a fraudulent manner - Section 271(c) read with Section 272(1)(e) of the Companies Act, 2013 - HELD THAT - An independent but concurrent opinion was authored by the other member of the NCLAT, Mr. V.P. Singh, Member (T). Mr. V.P. Singh in his judgment inter alia held Devas could not have delivered Devas Services in India due to the lack of policy framework and licensing regime for a new service like Devas Services - Devas conceded before the NCLAT that the design of DMR and CID was at a conceptual level and were to be developed at a future date. It was also not disputed that DMR and CID were portions of the Devas Device and not the Devas Device itself. It was held that even in 2021 and especially during 2005-2011, Devas did not develop the Devas Device. A product of fraud is in conflict with the public policy of any country including India. The basic notions of morality and justice are always in conflict with fraud and that allowing Devas and its shareholders to reap the benefits of their fraudulent action, would send another wrong message namely that by adopting fraudulent means and by bringing into India an investment in a sum of INR 579 crores, the investors can hope to get tens of thousands of crores of rupees, even after siphoning off INR 488 crores. The objections filed by the Petitioner under Section 34 of the Act are allowed and it is held that the Impugned award dated 14.09.2015 suffers from patent illegalities and fraud and is in conflict with the Public Policy of India - Petition allowed.
Issues Involved:
1. Setting aside of the Arbitral Award dated 14.09.2015. 2. Allegations of fraud and unlawful conduct by Devas. 3. Termination of the contract by Antrix under Articles 7(c) and 11. 4. Legal implications of the Cabinet Committee on Security's decision. 5. Judicial notice of judgments by NCLT, NCLAT, and the Supreme Court. 6. Application of the IBA Rules on Taking of Evidence. 7. Grounds for judicial interference with arbitral awards. Comprehensive, Issue-wise Detailed Analysis: 1. Setting Aside of the Arbitral Award: Antrix Corporation Limited sought to set aside the Arbitral Award dated 14.09.2015, which directed Antrix to pay US$ 562.2 million to Devas Multimedia Private Limited for wrongful termination of the contract. The High Court found the award to suffer from patent illegalities and fraud, and thus in conflict with the Public Policy of India, setting it aside. 2. Allegations of Fraud and Unlawful Conduct by Devas: Antrix alleged that Devas was formed for a fraudulent and unlawful purpose, conducting its affairs fraudulently. The NCLT and NCLAT upheld these allegations, and the Supreme Court affirmed these findings, noting that Devas was incorporated with the fraudulent intention to secure a prestigious contract from Antrix through collusion with officials. The Supreme Court held that the entire commercial relationship and subsequent arbitral awards were tainted by fraud. 3. Termination of the Contract by Antrix: Antrix terminated the contract citing Articles 7(c) and 11 of the contract, following the Cabinet Committee on Security's decision to annul the contract due to national security needs. The Arbitral Tribunal held that Antrix's termination was wrongful, but the High Court found this to be a patent illegality, noting that the CCS decision amounted to a Force Majeure event, which should have allowed Antrix to terminate the contract lawfully. 4. Legal Implications of the Cabinet Committee on Security's Decision: The CCS decided to deny the orbital slot in S-band to Antrix for commercial activities, prioritizing national security and strategic needs. The High Court recognized this decision as an act of a governmental authority acting in its sovereign capacity, which should have been considered a valid ground for termination under the contract's Force Majeure clause. 5. Judicial Notice of Judgments by NCLT, NCLAT, and the Supreme Court: The High Court took judicial notice of the judgments by NCLT, NCLAT, and the Supreme Court, which established the fraudulent nature of Devas's incorporation and conduct. These findings were held to operate as res judicata, precluding Devas from contesting the fraud allegations. 6. Application of the IBA Rules on Taking of Evidence: The Arbitral Tribunal excluded evidence of pre-contractual negotiations based on the IBA Rules, which the High Court found to be a patent illegality. The IBA Rules were deemed inapplicable as the arbitration was domestic, not international, and the exclusion of this evidence contradicted the Tribunal's own findings. 7. Grounds for Judicial Interference with Arbitral Awards: The High Court referenced the Supreme Court's judgment in Delhi Airport Metro Express (P) Ltd. v. DMRC, emphasizing limited grounds for judicial interference with arbitral awards, such as patent illegality and contravention of public policy. The High Court found the Arbitral Tribunal's award to be perverse and based on no evidence, thus justifying its annulment. Conclusion: The High Court allowed Antrix's objections under Section 34 of the Arbitration and Conciliation Act, 1996, and set aside the Arbitral Award dated 14.09.2015 due to patent illegalities and fraud, affirming that the award was in conflict with the Public Policy of India.
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