Commercial Arm of ISRO Seeking for the Winding Up of the DEVAS Due to New Policy on SBand by Government of India

DEVAS MULTIMEDIA PRIVATE LTD. 

V/S 

ANTRIX CORPORATION LTD. & ANR.  

CIVIL APPEAL NO.5766 of 2021 

Issue  

Appeal filed before the Supreme Court to challenge the order passes by the National Company Law Tribunal under Section 271(c) of the Companies Act, for winding up the Company in liquidation. 

Facts  

• The first respondent in the appeals, namely, Antrix Corporation Limited, is the commercial arm of the Indian Space Research Organization (ISRO for short) which is wholly owned by the Government of India and coming under the administrative control of the Department of Space.  
• On 28.07.2003, Antrix entered into a MoU with Forge Advisors, LLC, a Virginia Corporation to make both parties become “strong and vital partners in evaluating and implementing major   new   satellite   applications   across diverse sectors including agriculture, education, media and telecommunications”. 
• On 22.03.2004, Forge Advisors made a presentation proposing an Indian joint venture, to launch what came to be known as “DEVAS” (Digitally Enhanced Video and Audio Services). 
• The proposal contemplated the formation of a joint venture and an obligation on the part of ISRO and Antrix   to invest in one operational SBand satellite with a ground space segment to be leased to the joint venture. In return, ISRO and Antrix were to receive lease payments of USD 11 million annually for a period of 15 years. 
• On   17.12.2004 Devas   Multimedia Private Limited, was incorporated as a private company under the Companies Act, 1956. Immediately thereafter, Antrix entered into an Agreement with the said company on   28.01.2005.  The Agreement was titled as “Agreement for the lease of space segment capacity on ISRO/Antrix SBand spacecraft by DEVAS. 
• However, the Agreement dated 28.01.2005 was terminated by Antrix, in accordance with Article 7(c) of the Agreement, which provides for termination on the ground of force majeure. It was stated in the said letter that the Government of India had taken a policy decision not to provide orbital slots in S­Band for commercial activities. 

Findings  

The Companies Act, 1956 spoke about two categories of winding up, namely,  

(i) winding up by the Tribunal; and  

(ii) voluntary winding up. The circumstances in which a company could be wound up by the Court, were enlisted in Section 433 of the 1956 Act.  

This Section contained a list of nine circumstances in which a company may be wound up. Fraud  

(i) either in the formation of the company or  

(ii) in the conduct of affairs of the company or  

(iii) on the part of persons concerned in the formation of or the management of its affairs, was not one of the circumstances stipulated in Section 433 of 1956 Act. 

Though Section 433 of the 1956 Act did not include fraud as one of the circumstances in which a company may be wound up, there was still an indirect reference to fraud. Section 439(1) of the 1956 Act provided a list of seven persons who were entitled to file an application for the winding up of a company. Under clause (f) of subsection (1) of Section 439, an application for winding up shall be presented by “any person authorized by the Central Government in their behalf” in a case falling under Section 243.  

Judgement  

Supreme Court held that the action of Antrix in seeking the winding up of Devas may not send a wrong message, to the community of investors. But allowing Devas and its shareholders to reap the benefits of their fraudulent action, may nevertheless 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. 

Therefore, all the grounds of attack to the concurrent orders of the NCLT and NCLAT are unsustainable. 

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