TMI Blog2022 (9) TMI 1298X X X X Extracts X X X X X X X X Extracts X X X X ..... ways 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. - O.M.P. (COMM) 11/2021 & I.A. 3035/2021, I.A. 3037/2021, I.A. 4940/2021, I.A. 12541/2021 & I.A. 2507/2022 - - - Dated:- 29-8-2022 - HON BLE MR. JUSTICE SANJEEV SACHDEVA Advocates who appeared in this case: For the Appellants: Mr. N. Venkataraman, Additional Solicitor General with Mr. Chetan Sharma, Additional Solicitor General with Mr. V. Chandrashekar, Mr. Ajay Bhargava, Mr. Arvind Ray, Mr. Karan Gupta, Ms. Varsha S. Suneja, Mr. Ram Narayan, Advocates and Mr. Bhasker Singh, Legal Officer For the Respondent : Mr. Maninder Singh, Senior Advocate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iquidator respectively denied that the official liquidator was not acting in the interest of Devas, however they without prejudice did not oppose the impleadment of DEMPL. 7. Accordingly, DEMPL were permitted to oppose the petition. Mr. Suhail Dutt, learned Senior Advocate appeared for DEMPL and made detailed submissions spread over several days and has also referred to various documents filed along with their applications and other pleadings and has also filed written submission and compilation to oppose the petition. 8. By the Impugned award dated 14.09.2015, the Arbitral Tribunal has held that the termination of the Contract on the part of Antrix amounted to wrongful repudiation of the contract and accordingly Article 7(b) of the contract did not limit Devas entitlement to alleged damages that it suffered by reason of Antrix s repudiation of the Devas Agreement. The Tribunal thus directed Antrix to pay US$ 562.2 million to Devas besides interest. 9. Though largely the submissions of the Parties focused on the findings returned by the National Company Law Tribunal, National Company Law Appellate Tribunal and the Supreme Court on the question of Fraud on the part of Devas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... experience in satellite manufacturing and launch program management expertise, and satellite network expertise. WHEREAS ANTRIX is a marketing arm of Department of Space and is the entity through which ISRO engages in commercial activities. WHEREAS, DEVAS is developing a platform capable of delivering multimedia and information services via satellite and terrestrial systems to mobile receivers, tailored to the needs of various market segments. WHEREAS, DEVAS has requested from ANTRIX space segment capacity for the purpose of offering a S-DMB service, a new digital multimedia and Information service, including but not limited to audio and video content and information and interactive services, across India that will be delivered via satellite and terrestrial systems via fixed, portable, and mobile receivers including mobile phones, mobile video/audio receivers for vehicles, etc. ( Devas Services ). WHEREAS, ANTRIX has agreed to the request of DEVAS and has decided to make available to DEVAS, on a lease basis, part of a space segment capacity on Primary Satellite 1 ( PS1 ) and an option to gain additional capacity on Primary Satellite 2 ( PS2 ) to be manufactur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not fulfill the needs of DEVAS for Additional Satellite Capacity, DEVAS may seek the support of ANTRIX to procure the services from a third-party on such terms which are mutually agreeable to Parties and ANTRIX shall, either by itself or through ISRO, make best efforts to support DEVAS in this regard. ....... 18. Article 7 of the Contract refers to Termination of the Contract and reads as under: Article 7. Termination a. Termination for convenience by DEVAS DEVAS may terminate this Agreement in the event DEVAS is unable to get and retain the Regulatory Approvals required to provide the Devas Services on or before the completion of the Pre Shipment Review of PS1. in the event of such termination, DEVAS shall forfeit the Upfront Capacity Reservation Fees made to ANTRIX and any service or other taxes paid by DEVAS and those outstanding to be paid to ANTRIX till such date. Upon such termination, neither Party shall have any further obligation to the other Party under this Agreement. b. Termination by DEVAS for fault of ANTRIX DEVAS may terminate this Agreement at any time if ANTRIX is in material breach of any provisions of this Agreement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l part of the assets of DEVAS have been finally confiscated by action of any Governmental Authority, against which no appeal or judicial redress lies. It is expressly agreed that ANTRIX shall have no right to terminate this Agreement if DEVAS enters into any scheme or arrangement with its creditors, a corporate reorganization or restructuring of its debt and liabilities as long as DEVAS continues to make the Annual Lease Payments to ANTRIX. In the event of such termination, DEVAS shall forfeit the Upfront Capacity Reservation Fees made to ANTRIX and DEVAS shall be liable to pay any outstanding dues to be paid to ANTRIX by DEVAS. Upon such termination, neither Party shall have any further obligation to the other Party under this Agreement nor be liable to pay any sum as compensation or damages (by whatever name called). e. Termination under Special Circumstances In the event of two successive Launch Failures of PS1 by ANTRIX, DEVAS shall have the option, exercisable in its sole discretion, to (a) either terminate this Agreement, In which event ANTRIX agrees to Immediately reimburse DEVAS all the Upfront Capacity Reservation Fees for PS1 received by ANTRIX t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of such inability, the obligation of such Affected Party to perform the obligations so affected shall be suspended. d. The Affected Party shall give written notice of the Force Majeure Event to the other party (the Unaffected Party ) as soon as practicable after such event occurs, and not later than 7 days after such event, which notice shall include information with respect to the nature, cause and date of commencement of the occurrence(s), and the anticipated scope and duration of the delay. Upon the conclusion of a Force Majeure Event, the Affected Party shall, with all reasonable dispatch, take all necessary and effective steps to resume the obligation(s)previously suspended. e. Notwithstanding the foregoing, an Affected Party shall not be excused under this Article for (1) any non-performance of its obligations under the Agreement having a greater scope or longer period than is justified by the Force Majeure Event, or (2) the performance, of obligations that arose prior to the Force Majeure Event. Nothing contained herein shall be construed as requiring an Affected Party to settle any strike, lockout or other labor dispute in which it may be involved. f. No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mage, liability or expenses arising from the following: i. ANTRIX s exercising use. control or operation of the PS1 and PS2 spacecrafts or from any use by ANTRIX s users, customers, contractors, agents, assignees, employees, or lessees other than DEVAS; ii. Infringements of third-party patents or Intellectual Property rights arising from, combining with, or used in connection with ANTRIX s design, manufacture, launch and operations of the PS1 or PS2 satellites where DEVAS exercises no control. d. Each Party undertakes to notify the other Party in writing of any matter or thing of which it becomes aware which is or may be a material breach of, or materially inconsistent with, any of its warranties and representations. e. The right of either Party under this clause shall be in addition to the right to damages or any other rights available at common law or equity In respect of any breach of the warranties, representations and undertakings of the other Party. Provided however, that no right or claim of any nature whatsoever shall arise by virtue of or under this clause, for matters specifically provided for elsewhere in this agreement including matters relating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , including but not limited to such Party s attorneys fees, if any, and the expenses and fees of the member of the Arbital Tribunal appointed by such party, provided, however, that the expenses and fees of the third member of the Arbital Tribunal and any other expenses of the Arbital Tribunal not capable of being attributed to any one member shall be borne in equal parts by the Parties. 23. Another Article of the contract which has though been overlooked by the Arbitral Tribunal but is important for the present purpose is Article 25 and it reads as under: Article 25. Full Agreement This Agreement constitutes the full understanding and agreement of the Parties concerning the subject matter hereof, and any prior oral or written agreements and understandings of the Parties concerning the subject matter of this Agreement are hereby superseded and terminated by this agreement. However it is made clear here by ANTRIX and agreed by the Parties that the Agreement shall not be binding on DEVAS or ANTRIX until and unless ANTRIX receives all the requisite governmental and other regulatory approvals. Including those referred to in this Agreement. 24. As per the contr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it had nominated its arbitrator in terms of Article 20 of the Contract. However the International Chamber of Commerce declined to accept the same. 30. Antrix accordingly approached the Supreme Court of India by way of a petition under section 11(4) read with 11(10) of the Act for a direction to Devas to nominate its arbitrator as per UNCITRAL Rules. 31. In the meantime the ICC disregarding the nomination of Mrs. Justice Sujata V. Manohar by Antrix, appointed Dr. Justice A.S. Anand as a co-arbitrator on behalf of Antrix. The two arbitrators informed the ICC that pending the proceedings before the Supreme Court of India, they would not be in a position to appoint a presiding arbitrator. 32. Devas opposed the extension of time till the conclusion of proceedings before the Supreme Court and requested ICC to appoint a presiding arbitrator, which the ICC did on 10.11.2011 by appointing Dr. Micheal Pryles. It may be noticed that the two arbitrators did not have any disagreement upon the presiding arbitrator but only wanted to await the decision of the Supreme Court as such the nomination of the presiding arbitrator by the ICC was also not warranted. 33. The Supreme Court of I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to repudiation expressly. However it held that the parties intention was to ensure that they did not terminate the agreement in the event of any breach of, or disputes concerning the agreement. Rather, the parties were to make all attempts to resolve their differences and ensure that the agreement remained on foot. It held that construing Article 7(b) so that it permitted Antrix to refuse to perform the agreement at will without discussion or negotiations with Devas, and without incurring any liability for Devas loss or damage, would be entirely contrary to that intention. 40. The Tribunal has recorded that in reaching the above conclusion about the intention of the parties with regard to their understanding of Article 7(b), it has not relied upon any precontractual negotiations. 41. The Tribunal has relied upon Article 9.1 of the IBA Rules ([t]he Arbitral Tribunal shall determine the admissibility. relevance, materiality, and weight of evidence), to disregard any evidence on precontractual negotiations. Relying upon the said Article, Tribunal has held that in its view pre-contractual negotiations are generally an unreliable guide to the meaning of a contract and should no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rounds of special political or institutional sensitivity (including evidence that has been classified as secret by a government or a public international institution) that the Arbitral Tribunal determines to be compelling; or (g) considerations of procedural economy, proportionality, fairness or equality of the Parties that the Arbitral Tribunal determines to be compelling. 3. The Arbitral Tribunal may, at the request of a Party or on its own motion, exclude evidence obtained illegally. 4. ......... 45. Tribunal has not recorded any finding that the evidence of precontractual negotiations was covered by any of the conditions or circumstances stipulated in Article 9(2) and 9(3) that permit exclusion of the evidence and further it has not recorded that there was any request from Devas that said evidence was liable to be excluded. On the other hand the pre-contractual evidence was not disputed by Devas. 46. At this juncture it may be relevant to examine as to what was the evidence that has been excluded by the Tribunal from consideration incorrectly. 47. As per Antrix, Devas on 12.09.2004, sent an initial term sheet to ISRO, hoping at that time that ISRO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 04 in addition to the agreed upon Article 7 proposed that in the case of material breach, in addition to termination and refund of fees, the terminating party reserves the customary rights and remedies provided by Indian law against the defaulting party. . Thereby dispensing with the liquidated damages provisions but sought to preserve the parties remedies for material breach under Indian contract law. 53. This propose of Devas was also rejected, thereby stipulating that the only consequence of termination would be the refund of the UCRF as provided in Article 7. 54. The note sheets and the evidence of pre-contractual negotiations clearly show the intention of the parties. Devas had proposed not once but repeatedly the option of liquidated damages and damages beyond refund of the UCRF, which was specifically rejected by Antrix and what was finally agreed upon was refund of UCRF. 55. The Tribunal thus clearly misdirected itself in rejecting the evidence of pre-contractual negotiations. In arriving at its interpretation of Article 7 the Tribunal incorrectly excluded from consideration the evidence of pre-contractual negotiations. Said interpretation is clearly contrary to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in frequencies 25552635 MHz, for downlink only and only for broadcast satellite, services (BSS, i.e., the transmission of one-way signals from the satellite to earth to multiple recipients, all of which can receive the signals provided that they have the necessary antenna). 64. From the outset of India s space program, the S MSS frequencies were utilised solely for non-commercial, national strategic and societal purposes, including, for example, military communications and educational and medical interactions. The S BSS band has been used only for non-commercial national interest purposes, including at the outset by the national television corporation, Doordarshan / Prasar Bharati, the national radio corporation. All India Radio, national weather forecasting and national emergency warnings and communications. 65. In the early 2000s, 40 MHz of the S-MSS capacity (frequency ranges 2535-2555 MHz and 2635-2655 MHz) were assigned by the Government for use in the terrestrial telecommunications industry, leaving 80 MHz of S-BSS and 70 MHz of S-MSS capacity for satellite services. 66. Subject Contract provided for the lease of five C x S transponders and five S x C transponders ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial growth in the required mobile briefcase terminals, stating that 60 MHz would be needed by 2010, an additional 15 MHz would be required by 2015 and an additional 45 MHz would be required by 2029. 73. In August 2007, an expert committee on S-band was constituted to assure adequate access in the national interest as opposed to commercial usages. In September 2007, a report issued by the Expert Committee on Spectrum and Satellite Uses of Frequency Band 2.5 to 2.69 GHz (S-band) by Defence Services stated that Satellite services in S-band could not coexist with the terrestrial services and if the spectrum was not safeguarded against the bid by the commercial operators in India, said spectrum would not be available for any future utilization for the military applications. 74. Several meetings and task force was constituted to examine the said issue leading to the Joint Communications Electronics Staff of the HQ Integrated Defence Staff of the Ministry of Defence reiterating the requirement of the S-band satellite bandwidth for the Army, Navy and Air Force up to year 2022 as totalling 120 MHz. 75. These discussions regarding the strategic requirements for S - band capacity wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Respondent Devas itself would not be permitted to use the S-BSS frequencies for terrestrial transmission under existing policy, even though this was precisely its objective. 79. The disclosure of potential irregularities and the information developed by the preliminary internal investigation led to the establishment by the Department of Space of a single man committee, Dr. B. N. Suresh, a former member of the Space Commission. 80. In his Report on GSAT-6, that was delivered to Dr. Radhakrishnan, the Secretary of the Department of Space, on 07.06.2010, Dr. Suresh noted that only 10% of the capacity of the transponders to be leased to the Respondent under the Contract would be available for ISRO, which would bring in certain limitations on the availability of spectrum for any essential demands in the future. 81. Dr. Radhakrishnan directed that the Suresh Report be examined inter alia by the Satellite Communications Navigation Program Office. 82. Following the receipt of the Suresh Report, the Department of Space consulted the Ministry of law and justice and the Department-of Telecommunications. 83. By opinion dated 18.06.2010, the Ministry of Law and Justice stated t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rincipal Secretary to the Prime Minister; (v) the National Security Advisor; (vi) the Principal Scientific Advisor to the Government of India; (vii) the Secretary, Department of Economic Affairs; (viii) the Director, ISRO Satellite Centre; (ix) Finance Member, Space Commission; and (x) a Professor of Aerospace Engineering. 87. The Minutes dated 02.07.2010 of the Space Commission inter alia state: Focusing on the issue. Chairman stated that ISRO holds, in S band spectrum, 80 MHz in BSS and 70 MHz in MSS. The Antrix-Devas lease agreement on GSAT-6 and 6A would take away 70 MHz of the total S band spectrum available. Shri Shivshankar Menon, NSA [National Security Advisor] stated that S band spectrum is crucial for several strategic and societal services. The Integrated Space Cell of IDS [Integrated Defence Staff], Ministry of Defence have projected a need for 17.5 MHz in S band for meeting the immediate requirements of Armed Forces, another 40 MHz during the 12th plan period and an additional 50 MHz during the 13th plan period. Armed Forces have also projected the need to build S band satellite capacity ... for national security rela ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... will not be able to provide orbit slot in S band to Antrix for commercial activities, including for those which are the subject matter of existing contractual obligations for S band. In the light of this policy of not providing orbit slot in S Band to Antrix for commercial activities, the Agreement for the lease of space segment capacity on ISRO/Antrix S-Band spacecraft by Devas Multimedia Pvt. Ltd. entered into between Antrix Corporation and Devas Multimedia Pvt. Ltd. on 28th January, 2005 shall be annulled forthwith. 92. In accordance with the decision of the Cabinet Committee on Security, the Department of Space, on 23.02.2011, directed Antrix to notify Devas of the decision of the Government of India regarding termination of the Contract. 93. Antrix, accordingly, on 25.02.2011 notified Devas that the Contract was terminated inter alia citing Article 11 and Article 7(c) of the Contract and thereafter tendered the UCRF paid by Devas till that date. 94. It is submitted by Antrix that on 27.08.2015, after reconfiguration of the GSAT-6 satellite for military use, the satellite was launched and is now operating in S-band, dedicated to the military. It is further co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion as to was there any Force Majeure Event as defined in Article 11 of the Devas Agreement? 103. The Tribunal has returned a finding that the Cabinet Committee on Securities decision to annul the agreement was an act of governmental authority acting in its sovereign capacity for the purpose of Article 11(b) of the Contract. 104. However, after holding that the decision of the Cabinet Committee on Security was an act of a government authority acting in its sovereign capacity and covered under Article 11(b), it holds that Antrix cannot rely upon it because as per the Tribunal it was brought about by Antrix s own actions. 105. The reasoning of the Tribunal is self contradictory and as such also the award suffers from patent illegality on the face of it. 106. On the one hand the Tribunal rejected the contention of Devas to disregard Antrix s distinct legal entity merely because it was the government s marketing arm or performed commercial activities for government benefit and it also rejected the contention that Antrix itself instigated the Force Majeure Event. However, on the other hand holds the CCS decision was beyond Antrix s control once it was made but it could ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quirements. This decision has been recognised by the Tribunal as a decision taken by a government authority acting in its sovereign capacity. 113. Returning these erroneous perverse findings, the Tribunal further goes on to hold that the termination on the part of Antrix amounts to a repudiatory breach on its part. 114. Repudiatory breach presupposes a breach on the part of one party. Breach of the Contract would arise when one party by its conduct commits a fundamental breach of the contract. To establish breach, it must be first established that a party is able to perform its obligations under the contract but is refusing to do so. Breach cannot be held to be committed if the party is prevented from performing its obligations on account of factors beyond its control. 115. The Supreme Court of India in HPA International v. Bhagwandas Fateh Chand Daswani, (2004) 6 SCC 537 referred to the observations of Lord Reid in the House of Lords decision in Suisse Atlantique [Suisse Atlantique Soci t D Armement Maritime S.A. v. N.V. Rotterdamsche Kolen Centrale, (1966) 2 All ER 61 : (1967) 1 AC 361 (HL)]: (All ER pp. 70 I 71 A) I think that it would be open to the arbi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the said contention. 120. Under Section 57 of the Evidence Act, 1872, Courts have to take judicial notice of all laws in force in the territory of India. The Judgment of the Supreme Court of India has the force of law in terms of Article 141 of the Constitution of India. 121. As noticed hereinabove, Antrix sought winding up of Devas under Section 271(c) read with Section 272(1)(e) of the Companies Act, 2013 before the NCLT alleging that Devas was formed for a fraudulent and unlawful purpose and its affairs had been conducted in a fraudulent manner. 122. NCLT by its judgment dated 25.05.2021 while allowing the petition seeking winding up of Devas specifically noticed the fraudulent activities on the part of Devas. 123. NCLT held that the incorporation of Devas itself was with fraudulent intention to grab prestigious contract in question from Antrix in connivance and collusion with the then officials of Antrix. 124. It noticed that Devas was incorporated on 17th December, 2004 and was able to obtain the Contract on 28th January, 2005 in less than 45 days from the date of its inception. NCLT held that it is a matter of fundamental economics, rather common sense tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eign funds into India and then siphon off the same by diverting those funds to foreign countries, into dubious accounts. Further, it did not have any commercial antecedent to enter into such prestigious. 132. NCLT had also referred to the statement of financial position and working results of Devas from 2010-11 to 2018-19. It has noticed that as per Balance Sheets and Annual Reports filed with Registrar of Companies, Karnataka, revenue (sale of services) for the years 2011 to 2014 are a mere Rs. 79,115/-, Rs. 58,429/-, RS. 36,489/- and Rs. 7,566/- respectively and nil for the years 2015 to 2019. Its fixed assets were negligible and totally nil for the years 2018 19. 133. Both Devas and DEMPL impugned the Judgment dated 13.11.2020 of the NCLT before the NCLAT. Both the members of the Bench of NCLAT dismissed the appeals but rendered separate concurrent judgments both dated 08.09.2021. 134. The Judicial Member, Mr. Justice M. Venugopal in his judgement dated 08.09.2021, held that the Agreement dated 28.01.2005 entered into between Devas and Antrix is mired with controversy. 135. It is noticed that the Agreement was signed by an Article Clerk Mr. Gururaj of a Chartere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to use any such technology to deliver the Devas Services. It is noticed that Devas had admitted that none of the hybrid technologies that existed prior to 28.01.2005 could deliver the Devas Services. 142. 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. 143. It is further held that on 28.01.2005, when the Agreement was signed, none of the procedures prescribed by the SATCOM Policy were followed or complied with and the Agreement was signed in complete contravention to the SATCOM Policy. 144. The NCLAT further noticed a stark contradiction between the Note for the Space Commission and the Note for the Cabinet. The expression employed in the note for the Space Commission was a service provider and the expression employed in the Cabinet is was several firm expressions of interest by service providers. 145. NCLT noticed that from a single service provider before the Space Commiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmenced in the year 2013 and the award itself was passed on 14.09.2015. Antrix cannot be expected to plead fraud in the arbitral proceedings, even before the discovery of fraud. 9.10 The Chartered Accountants/Auditors are not experts either in Criminal Law or in the technology that formed the subject matter of the Agreement between Antrix and Devas. The statement of Chartered Accountants are always qualified with certain riders such as according to the information and explanations given to us in the course of our audit or to the best of our knowledge and belief and according to the information and explanations given to us . 9.11 In fact, the Companies (Auditor s Report) Order, 2015 which was superseded by another order in 2016 was issued by the Central Government in exercise of the power conferred by Section 143(11) of the Companies Act, 2013. Section 143(12) obliges the Auditor to report to the Central Government, if he has reason to believe that an offence of fraud of a particular dimension was being committed in the company by its officers or employees. Subsection (13) of Section 143 also provides immunity to the Auditors for furnishing a report to the Central Gov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompanies Act, 2013 also defines fraud, but for the purposes of Section 447. What is covered by Section 271(c) of the Companies Act, 2013 is a fraud that goes beyond what lies in the realm of contract or in the realm of the penal provisions of the Companies Act, 2013. Hence the contention that Antrix was estopped from pleading fraud, was rightly rejected by the Tribunal and we see no reason to taken a different view. 151. The plea of estopple on the ground that same was not raised by Antrix either at the time of termination of the contract or as a defence before the Arbitral Tribunal has been specifically rejected by the Supreme Court. 152. With regard to the plea that erroneous and perverse findings of fraud have been returned by the NCLT and NCLAT, the Supreme Court culled out the findings recorded by the NCLT and NCLAT as under: 12.4 On the basis of the pleadings, the documents produced and the submissions made, NCLT recorded the following findings namely, (i) that the incorporation of Devas was with fraudulent intention to grab the prestigious contract in question, in connivance and collusion with the then officials of Antrix; (ii) that it is not in dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that after objections about the manipulations, the original minutes of the meeting came to be restored, on 20.11.2009, but this happened only after the grant of experimental licence on 07.05.2009; (ix) that in any case the experimental licence was to establish Wireless Telegraph Station in India under the India Telegraph Act, 1885, without which experimental trials could not have been conducted; (x) that Devas obtained IPTV licence as part of ISP licence, which has nothing to do with what was offered as DEVAS services; (xi) that the agreement dated 28.01.2005 made no reference of IPTV; (xii) that undeniably, Devas services cannot be provided with ISP licences; (xiii) that after bringing an amount of Rs 579 crores into India, a major portion was taken out of India; (xiv) that the only business activity carried on by Devas was to provide ISP services in a particular locality in Bangalore for a few residents and that too for a short duration, which made Devas earn a revenue of Rs. 80,000/; (xv) that the diversion of Rs. 489 crores and Rs. 58 crores for non ISP purposes is violative of ISP licence, which comes squarely within the ambit of Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Devas had sought to project the case as one of perversity in the finding recorded by both the tribunals, it held that there was no perversity in the finding recorded by both the Tribunals and said findings were borne out by documents, which as noticed by the Supreme Court, had not been challenged as fabricated or inadmissible. 154. The Supreme Court thereafter decided to go a little deeper to find out whether there was any perversity in the findings recorded by the Tribunals and whether such findings could not have been reached by any reasonable standards. 155. The Supreme Court thereafter held as under: 12.8 The following undisputed facts emerge from the documents placed before the Tribunal. The authenticity of these documents were never in question or denied: (i) An agreement of a huge magnitude, for leasing out five numbers of C X S transponders each of 8.1 MHz capacity and five numbers of S X C transponders each of 2.7 MHz capacity on the Primary SatelliteI (PSI), was surprisingly and shockingly entered into by Antrix with Devas, without same being preceded by any auction/tender process. It appears from the letter dated 27.09.2004 sent by DEVAS LLC, USA to Sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of nearly the entire space of such satellite to a joint venture, should have come to the public domain, to see, (a) if the technology existed; and (b) if the proposal was commercially viable. But it was not done; (iv) On 14.05.2004, a Committee headed by one Dr. K.N. Shankara, Director, Space Applications Centre was constituted purportedly to examine the technical feasibility, risk management including possibilities of alternate uses of space segment, financial and market aspects and time schedule. According to the Report submitted by this Committee, DEVAS was conceived as a new national service expected to be launched by the end of 2006 that would deliver video, multimedia and information services via high powered satellite to mobile receivers in vehicles and mobile phones across India. The catch here lies in the fact that while it was possible to deliver some of these services via terrestrial mode, it was not possible at that point of time to provide this bouquet of services via satellite. Even today satellite phones are beyond the reach of a common man. Mobile receivers or devices which can simply receive audio and video content are different from mobile phones, which a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e discussions held thereafter. The ground work was clearly done during the period from March-2003 to December-2004 before the company was formally incorporated. Immediately after incorporation, the Agreement dated 28.01.2005 was signed. Therefore, the first ingredient of Section 271(c) of the Companies Act, 2013, namely, the formation of the company for a fraudulent and unlawful purpose was clearly made out; (x) The kind of licenses obtained such as ISP and IPTV licenses and the object for which FIPB approvals were taken but showcased as those sufficient for fulfilling the obligations under the Agreement dated 28.01.2005 demonstrated that the affairs of the company were conducted in a fraudulent manner. This is fortified by the fact that a total amount of Rs.579 crores was brought in, but almost 85% of the said amount was siphoned out of India, partly towards establishment of a subsidiary in the US, partly towards business support services and partly towards litigation expenses. We do not know if the amount of Rs.233 crores taken out of India towards litigation services, also became a part of the investment in a more productive venture, namely, arbitration. The manner in whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Agreement on 06.03.2006 for Devas services. The Share Subscription Agreement discloses that they were aware of the false statements contained in the Agreement dated 28.01.2005. Therefore, the shareholders, who now want to reap the fruits of a tree, fraudulently planted and unlawfully nurtured, cannot feign ignorance and escape the allegations of fraud. 12.9 An argument was advanced by the learned senior counsel for the appellants, on the basis of a statement contained in the order of NCLAT that the allegations are prima facie made out, that a company cannot be ordered to be wound up on the basis of prima facie findings. The standard of proof required for winding up of a company cannot be prima facie. 12.10 But we do not think that the appellants can take advantage of the use of an inappropriate expression by NCLAT. The detailed findings recorded by the Tribunal show that they are final and not prima facie. Merely because NCLAT used an erroneous expression those findings cannot become prima facie. 156. Supreme Court not only declined to interfere with the concurrent findings of fraud recorded by the NCLT and NCLAT but reaffirmed the same and further held that there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ores of rupees, even after siphoning off INR 488 crores. (underlining supplied) 159. After affirming the concurrent finding of fraud the Supreme Court has held that if the seeds of the commercial relationship between Antrix and Devas were a product of fraud perpetrated by Devas, every part of the plant that grew out of those seeds, such as the Agreement, the disputes, arbitral awards etc., are all infected with the poison of fraud. 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. Further, 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. 160. The Judgments of the NCLT, NCLAT and the Supreme Court are inter party and as such the finding returned therein would operate as res judicata. Since the Judgments are admissible and court is bound to take judicial notice of the sam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i.e. the fundamental policy of Indian law would be relegated to Renusagar understanding of this expression. This would necessarily mean that Western Geco [ONGC v. Western Geco International Ltd., (2014) 9 SCC 263 : (2014) 5 SCC (Civ) 12] expansion has been done away with. In short, Western Geco [ONGC v. Western Geco International Ltd., (2014) 9 SCC 263 : (2014) 5 SCC (Civ) 12] , as explained in paras 28 and 29 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204], would no longer obtain, as under the guise of interfering with an award on the ground that the arbitrator has not adopted a judicial approach, the Court s intervention would be on the merits of the award, which cannot be permitted post amendment. However, insofar as principles of natural justice are concerned, as contained in Sections 18 and 34(2)(a)(iii) of the 1996 Act, these continue to be grounds of challenge of an award, as is contained in para 30 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] . 35. It is important to notice that the ground for interference insofar as it concerns interest of India has since been del ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amely, a mere contravention of the substantive law of India, by itself, is no longer a ground available to set aside an arbitral award. Para 42.2 of Associate Builders [ Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] , however, would remain, for if an arbitrator gives no reasons for an award and contravenes Section 31(3) of the 1996 Act, that would certainly amount to a patent illegality on the face of the award. 40. The change made in Section 28(3) by the Amendment Act really follows what is stated in paras 42.3 to 45 in Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] , namely, that the construction of the terms of a contract is primarily for an arbitrator to decide, unless the arbitrator construes the contract in a manner that no fair-minded or reasonable person would; in short, that the arbitrator s view is not even a possible view to take. Also, if the arbitrator wanders outside the contract and deals with matters not allotted to him, he commits an error of jurisdiction. This ground of challenge will now fall within the new ground added under Section 34(2-A). 41. What is important to note is that a de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the scope of the expression patent illegality . What is prohibited is for Courts to reappreciate evidence to conclude that the award suffers from patent illegality appearing on the face of the award, as Courts do not sit in appeal against the arbitral award. The permissible grounds for interference with a domestic award under Section 34(2A) on the ground of patent illegality is when the arbitrator takes a view which is not even a possible one, or interprets a clause in the contract in such a manner which no fair-minded or reasonable person would, or if the arbitrator commits an error of jurisdiction by wandering outside the contract and dealing with matters not allotted to them. An arbitral award stating no reasons for its findings would make itself susceptible to challenge on this account. The conclusions of the arbitrator which are based on no evidence or have been arrived at by ignoring vital evidence are perverse and can be set aside on the ground of patent illegality. Also, consideration of documents which are not supplied to the other party is a facet of perversity falling within the expression patent illegality . 30. Section 34(2)(b) refers to the other grounds on w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... angyong Engg. Construction Co. Ltd. v. NHAI, (2019) 15 SCC 131 : (2020) 2 SCC (Civ) 213] 165. Supreme Court in Delhi Airport Metro Express (P) Ltd.(supra) has held that the grounds for setting aside an Arbitral Award are limited. If a domestic award is contrary to the fundamental policy of Indian law, and if there is a patent illegality in the award an award may be set aside. However, Patent illegality should be illegality which goes to the root of the matter and every error of law committed by the Arbitral Tribunal would not fall within the expression of patent illegality . Similarly, erroneous application of law cannot be categorised as patent illegality. A contravention of law not linked to public policy or public interest is beyond the scope of the expression patent illegality . 166. It is further held that it is impermissible for the Courts to reappreciate evidence to conclude that the award suffers from patent illegality appearing on the face of the award, as Courts do not sit in appeal against the arbitral award. However, if an arbitrator takes a view which is not even a possible one, or interprets a clause in the contract in such a manner which no fair-mi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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