Delhi High Court: In a case wherein an appeal was filed under Section 37 of the Arbitration and Conciliation Act, 1996 (“Act”) against the judgment passed by the Single Judge, wherein the ICC Award was set aside on the grounds that it suffered from fraud, patent illegality and was in conflict with the public policy of India, the Division Bench of Satish Chandra Sharma, C.J. and Subramonium Prasad, J.* upheld the decision of the Single Judge to set aside the ICC Award of $562.5 million, in favour of Devas Multimedia (P) Ltd. for a failed satellite agreement on the grounds of fraud and that it was in conflict with the public policy of India.
Background
The appellant company incorporated under the laws of Mauritius was a shareholder of Respondent 2, Devas Multimedia (P) Ltd. (“Devas Multimedia”), a company incorporated under the Companies Act, 1956 which had been wound up under the Companies Act, 2013. Respondent 1, Antrix Corporation Ltd. (“Antrix”), a company incorporated under the Companies Act, 1956 was the commercial arm of the Indian Space Research Organisation (“ISRO”) which was wholly owned by the Government of India.
Antrix entered into a MoU with Forge Advisors, LLC, who made a presentation to Antrix proposing an Indian Joint Venture known as “DEVAS” (Digitally Enhanced Video and Audio Services) and it was projected that in the said proposal, DEVAS platform could deliver multimedia and information services via satellite to mobile devices tailored to the needs of various market segments. Later, Antrix entered into an agreement with Devas Multimedia and the agreement was titled “Agreement for the lease of space segment capacity on ISRO/Antrix S-Band spacecraft by DEVAS” (“DEVAS Agreement”). Thereafter, the DEVAS Agreement was terminated by Antrix stating that the Government of India had taken a policy decision not to provide orbital slots in S-Band for commercial activities. The termination of the DEVAS Agreement by Antrix was disputed by Devas Multimedia, who invoked Article 20(a) of the DEVAS Agreement to refer the dispute to the senior management of both the parties. However, Antrix wrote to Devas Multimedia referring to the letter of termination of the DEVAS Agreement and gave a cheque of $13 million as reimbursement of the Upfront Capacity Reservation Fee already paid by Devas Multimedia under the DEVAS Agreement. Devas Multimedia returned the cheque stating that Antrix failed to state a proper basis for termination of the DEVAS Agreement.
Devas Multimedia initiated arbitration proceedings against Antrix under the rules of the International Chambers of Commerce (“ICC”) seeking damages for repudiatory breach of the DEVAS Agreement by Antrix. The Arbitral tribunal published the ICC Award in favour of Devas Multimedia for damages amounting to $562.5 million for wrongful repudiation of the DEVAS Agreement by Antrix. During the pendency of proceedings before the ICC Arbitral Tribunal, CBI registered an FIR alleging criminal conspiracy, criminal misconduct, cheating and other corrupt practices on the part of Devas Multimedia and its officers. After publishing of the ICC Award, Antrix filed a petition under section 34 of the Act challenging the ICC Award. While the proceedings under Section 34 of the Act were pending, Antrix moved an application before the NCLT under Section 271(c) read with Section 272(1)(e) of the Companies Act, 2013 for winding up Devas Multimedia on the grounds that it was incorporated for fraudulent and unlawful purposes and the affairs of the company were being conducted in a fraudulent manner. The NCLT allowed the petition for winding up preferred by Antrix, declaring that Devas was formed for fraudulent and unlawful purposes and its affairs were conducted fraudulently. This Order was challenged by Devas Multimedia before NCLAT, which upheld the Order passed by the NCLT. Later, the Supreme Court also upheld the Order passed by the NCLAT and further held that “the seeds of the commercial relationship between Antrix and Devas Multimedia were a product of fraud perpetrated by Devas Multimedia and every plant that grew out of those seeds, including an arbitral award, would be infected with the poison of fraud”.
On the other hand, the Single Judge had pronounced the impugned Judgment under Section 34 of the Act by which the ICC Award had been set aside on the grounds that the ICC Award suffered from patent illegality, fraud and was in conflict with the public policy of India. The Single Judge also held that since the issue of fraud had been established by the judgment of the Supreme Court, it would operate as res judicata between the parties. The judgment passed by the Single Judge was the subject matter of the present appeal.
Analysis, Law, and Decision
The issue before this Court was “whether the findings of the Supreme Court were binding on the Single Judge under Article 141 and 144 of the Constitution of India and Principle of Res Judicata?” and “whether the Single Judge was correct in setting aside the ICC award by primarily relying on the findings of the Supreme Court?”.
The Court noted that the appellants before this Court had submitted that the Single Judge erred by relying upon the decision of the Supreme Court and submitted that the decision of the Supreme Court was not binding upon the High Court while deciding the petition under Section 34 of the Act as the decision of the Supreme Court would constitute obiter dicta and not ratio decidendi.
The Court relied on Peerless General Finance & Investment Co. Ltd. v. CIT, (2020) 18 SCC 625, wherein it was held that “in a judgment of the Supreme Court, even pronouncements which might not strictly be construed to be ratio, would be binding upon the High Court”. The Court relied on State of Orissa v. Sudhansu Sekhar Misra, (1968) 2 SCR 154; Quinn v. Leathem, [1901] A.C. 495; Laxmi Devi v. State of Bihar, (2015) 10 SCC 241; State of Gujarat v. Utility Users’ Welfare Assn., (2018) 6 SCC 21 and laid down the following principles pertaining to the contours, connotations, meaning, ambit, scope, and binding nature of ratio decidendi and obiter dicta:
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It was the ratio decidendi of a judgment which had the binding force of law under Article 141 of the Constitution of India and not obiter dicta. Further, an observation on facts by a Court could not be considered the ratio of the judgment, but every point raised in issue before the court, argued and decided by the Court, would form part of the ratio of the decision.
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An obiter dictum might constitute the opinion or viewpoint of a Judge which was not necessary for the final determination of the issue and statements that did not constitute the ratio of a decision would be considered to constitute obiter dictum.
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Judicial propriety, dignity and decorum demanded that even an obiter dictum, or pronouncements and observations of the Supreme Court that did not strictly constituted the ratio of a judgment delivered by the Supreme Court of India, although not strictly binding, ought to be accepted as binding by courts subordinate to the Supreme Court.
The Court opined that a perusal of the judgment of the Supreme Court showed that all the documents were analyzed by the Supreme Court, and it was only after analyzing the documents that the Supreme Court had upheld the findings recorded by the NCLT and NCLAT that the incorporation of Devas Multimedia was done with the fraudulent intention to grab the prestigious DEVAS Agreement. The Court noted that the Supreme Court even upheld that the finding of the NCLT that at the time of entering into the DEVAS Agreement, Devas Multimedia did not have the technology, infrastructure or experience to perform their obligations under the DEVAS Agreement and that the incorporation of Devas Multimedia was with a fraudulent motive and an unlawful object, to bring money into India and divert it by dubious methods. Thus, the Court opined that “observations made by the Supreme Court were an application of law to the facts of the case and thus, in the nature of ratio and were binding on the Single Judge under Article 141 of the Constitution of India”.
The Court further opined that the Supreme Court had heard and finally decided the issues pertaining to fraud, fundamental policy of Indian law, notions of morality or justice in its Judgment, thus, the principle of res judicata would apply in the present case and was binding upon the parties and therefore could not be brought into question in the present proceedings. The Court while justifying the stand of Single Judge, said that after such a finding had been rendered by the Supreme Court, it was not open for the Single Judge to come to the conclusion that the award, which had been held to be a product of fraud and which was in contravention of the fundamental policies of India and which was also in conflict with the most basic notions of morality or justice, would still be enforceable in the country. The Court opined that such a finding by the Single Judge would have been against the spirit of Article 144 of the Constitution of India.
The Court relied on State of Maharashtra v. Hindustan Construction Company Ltd., (2010) 4 SCC 518 and State of Chhattisgarh v. Sal Udyog, (2022) 2 SCC 275 and opined that “nothing prevented the Single Judge from relying on specific amendments to Section 34 of the Act and using them for the purpose of setting aside the ICC Award on the ground that the agreement itself was a product of fraud and, therefore, the making of award was automatically induced by fraud and corruption”. The Court opined that “the findings of the Supreme Court, which was the highest Court of the land, could not have been ignored by the Single Judge and those findings would automatically become the findings of the Single Judge while considering an application under Section 34 of the Act for which there was no necessity of a specific pleading”. The Court noted that the Singe Judge had applied its mind to the amendment applications and had taken them into consideration while deciding the petition under Section 34 of the Act. Thus, this Court held that there was no perversity in the decision of the Single Judge wherein the Single Judge had relied on the judgment of the Supreme Court to set aside the ICC Award on the grounds of fraud and that it was in conflict with the public policy of India.
[Devas Employees Mauritius (P) Ltd. v. Antrix Corporation Ltd., 2023 SCC OnLine Del 1608, decided on 17-3-2023]
Advocates who appeared in this case:
For the Appellant: Senior Advocate Suhail Dutt, Advocate Anuradha Dutt, Advocate Lynn Pereira, Advocate Ekta Kapil, Advocate Priyanka M.P., Advocate Chaitanya Kaushik, Advocate Amber Bhushan, Advocate Shivangi Sud, Advocate Azhar Alam, Advocate Sankalp Goswami and Advocate Srishti Prakash;
For the Respondents: ASG N. Venkataraman, ASG Chetan Sharma, Advocate V. Chandrashekara Bharathi, Advocate Ajay Bhargava, Advocate Arvind Kumar Ray, Advocate Karan Gupta, Advocate S. Ram Narayan, Advocate Vanito Bhargava, Advocate Rahul Vijay Kumar, Advocate Aman, Advocate Varuna Bhamral, Advocate Aubert Sebastian, Advocate Angelika Awasthi and Legal Officer Chinmoy Roy.
*Judgment authored by: Justice Subramonium Prasad
