UPA-2’s scrapped space deal could cost Modi govt $ one b

The decision to annul the deal with Devas was possibly influenced by the 2G scam, which had put the Manmohan Singh government on the backfoot

In a major blow to India and the Indian Space Research Organisation, the Department of Space has lost an arbitration case in an international tribunal over its PSU Antrix Corp annulling a contract with New Delhi based multimedia firm Devas Mulltimedia Private Ltd. As a consequence, India will have to shell out over $1 billion as compensation.

The Permanent Court of Arbitration based in The Hague ruled that the Indian government had acted "unfairly" and "inequitably" in cancelling the contract involving use of two satellites and spectrum. The court also concluded that India had breached its treaty commitments to accord fair treatment to Devas's foreign investors.

But the Union Government has justified the annulment of the contract saying it was taken after considering the "essential security interests" through well-reasoned, valid and proper consultations in the Cabinet Committee on Security.

Antrix was to be paid nearly Rs 600 crores over 12 years. But in 2011, the Centre scrapped the controversial deal and the matter went for arbitration. The decision was possibly influenced by the 2G scam, which had besieged Dr Manmohan’s Singh's government, with allegations of sweetheart deals to telecom firms which were given 2G airwaves at throwaway prices.

The controversial Antrix-Devas deal had caught ISRO in a strange and murky orbit with shadow of doubt falling on former ISRO chief G. Madhavan Nair and three scientists. Nair, who headed ISRO when the Devas deal was signed, was later blacklisted and even investigated for charges of corruption. Nair and the scientists were also banned from taking up government jobs.

Nair told NDTV on Tuesday that the international verdict against India is the "result of thoughtless action and hasty reaction" by the UPA-II government.

The verdict could further reinforce the perception of India as an erratic destination of foreign investment -- a nation which makes policy changes at the drop of a hat. The government will study the ruling and take further legal steps, sources in ISRO said.

The Comptroller and Auditor General had estimated the loss to the exchequer to the tune of Rs.2 lakh crore because of the deal.

The damages awarded by the international court could be in the range of a billion of dollars based on precedents in similar cases, said sources. They said that Devas is likely to get about $750 million, and its US investors, who sued the government separately, are likely to get about $300 million.

The courts in Britain and France have recognised the ICC award and held it to be enforceable.

In an earlier decision, too, an International Chamber of Commerce (ICC) tribunal in 2015 had ruled unanimously that Antrix's repudiation of the contract was unlawful, and awarded Devas damages and pre-award interest of approximately $672 million, plus post-award annual interest accruing at 18 per cent until the award is paid in full. According to Devas Chairman Lawrence Babbio, with the PCA award, two international tribunals have now unanimously agreed that financial compensation should be paid for annulment of Devas's rights.