Dusseldorf High hopes and allegations of fraud, lawsuits against the government and seized earnings overseas: Sounds like a business thriller, but it’s all part of the multi-billion dollar saga surrounding the Indian company Devas Multimedia. Deutsche Telekom also plays a role in this.
The saga is a lesson, a lesson in what can go wrong in government tech deals. And now, after almost 17 years, it is getting another chapter.
In 2005, Devas Multimedia, which was recently founded in the Indian tech metropolis of Bangalore, signed a lucrative contract. The partner was Antrix, the commercial arm of the Indian space research agency ISRO. Devas leased two communications satellites for 12 years to enable Indian multimedia platforms to provide cellular services. Remote areas should also be connected via satellite. The Space Research Agency should lease back some of the bandwidth.
The deal was so lucrative that Devas soon found investors from abroad. First from Mauritius, followed in 2008 by Deutsche Telekom, which holds 20.7 percent of the Indian company. But the deal was apparently too lucrative for Devas, so the Indian government at the time terminated the contract in 2011. Their argument: They need the satellite spectrum for national defense and other things.
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Devas and his international investors, including Telekom, complained to international arbitral tribunals. And got right. In total, they have been awarded nearly $1.3 billion in debt. The government in India is trying to take action against these verdicts.
India’s Supreme Court wants the company liquidated
In 2014 the government at that time was replaced by the current one under Prime Minister Narendra Modi. The Modi government had the Devas deal investigated by the Central Bureau of Investigations. This came to the assessment in 2016 that several representatives from Devas, Antrix and ISRO had joined forces with the intention of using their positions for personal gain.
Many years and trials later, India’s Supreme Court ruled this week that Devas Multimedia should be liquidated. The company was founded on the basis of fraudulent intentions. “A product of fraud is in conflict with the public policy of every country, including India,” the statement said.
The Space Research Agency is just one entity playing a role in the economic drama surrounding communications satellites.
(Photo: ISRO)
Finance Minister Nirmala Sitharaman said the government would fight in every court in the world for taxpayers’ money that would otherwise have to be paid for a “fraudulent” and “scandalous” deal with Devas Multimedia. She was not sparing in criticizing the previous government. The government led by the Congress Party failed to meet important deadlines in the arbitration proceedings at the time.
Nevertheless, the Modi government also knows that the legal disputes and a possible forced liquidation of Devas Multimedia as well as the international court disputes are not good for India’s image as a destination country for foreign investments.
It will now be interesting to see how the conflicting international arbitral awards and the ruling of India’s Supreme Court can be reconciled. And whether the New Delhi judge’s ruling will have any impact on foreign attachments as a result of the arbitration rulings.
Even Air India funds abroad are confiscated
Devas Multimedia is still dealing with it in courts all over the world 17 years after the contract was signed. In France, a court recently ruled that a building owned by the Indian government could be confiscated in order to meet claims for damages by Devas investors.
And before a Canadian court, the airline Air India and the aviation organization Iata are even involved in the deal. In January, judges there ruled that Devas shareholders could seize half of Air India’s funds held by Iata to enforce their debt instrument. After all, Air India is also state-owned – albeit in the process of being sold.
Perhaps it’s more of a war of the roses than a business thriller that grew out of the Indian tech deal. One thing is certain: the last chapter has not yet been written.
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