Pay Devas $ 1.3 billion; close the chapter on Vinod Rai’s imaginary scams
The wages of sin is death, says the Bible. There is no canonical clarity on the wages of the sacrifice of contractual integrity in the face of political opportunism and the uninformed scam by a Comptroller and Auditor General of India seeking fame and the media frenzied more determined to cry for blood than to sift the grain of the straw. The International Chamber of Commerce Arbitration Tribunal estimates damages worth at least $ 1.3 billion, in the case of Devas Multimedia, and courts in the United States and of Canada agree.
The Devas deal dates back to 2005, when Devas Multimedia, a company founded in India with former Indian space administration and information technology bigwigs, entered into a contract with Antrix Corporation, the commercial arm of the ‘Indian Space Research Organization, for a 12-year lease, in return for $ 300 million to be paid over the same period, for space on the transponders on the geostationary satellites GSAT6 and GSAT6A yet to be launched, as well as 70 MHz of the S-band spectrum to be used for communication between the ground and the transponders. The S band comprises an electromagnetic spectrum in the range 2 to 4 GHz, allocated by the International Telecommunication Union for satellite communications. But the spectrum can also be reused for use.
Devas planned to offer mobile broadband via satellite. Now, this plan is unlikely to be perfect by today’s standards. Elon Musk’s Starlink satellite broadband service and others like it, such as One Web, of which Bharti is the main player, use hundreds and thousands of satellites in low earth orbit, while Devas has proposed to use geostationary satellites. For a satellite to remain stable on a particular patch of Mother Earth, it must be at an altitude of 35,786 km. Low Earth Orbits are less than 2,000 km above the earth. The greater the distance the signals must travel from earth to satellite and vice versa, the lower the latency. Low Earth Orbit satellite broadband will not experience the kind of lag that GSAT broadband will have. But, for the time, Devas was out of the ordinary.
In 2010, India’s Comptroller and Auditor General, led by Vinod Rai, released a report alleging a notional loss of up to ??1 76,000 crore to the public treasury, due to the allocation of spectrum to telecommunications operators without auction. Even before the report was submitted, media leaks had filled the speech with allegations of scam that rendered toxic any deal in which spectrum was awarded without an auction. For political reasons, the then UPA government canceled the deal with Devas.
It should be borne in mind that no TV channel using an Indian communication satellite repeater for broadcasting has participated in an auction for the use of the repeater and the associated spectrum. They pay the fees set by Antrix Corporation. In 2005, when Devas entered into its agreement with Antrix, there were no other applicants for the transponder space on GSAT6 and GSAT6A. Devas has entered into an agreement with Antrix for a mutually agreed amount. It is quite conceivable that this was done in good faith, and for an exciting technological feat, satellite broadband far more advanced than what the technology of the Very Small Aperture Terminal offered.
Yet when the frenzy of 2G scams hit public life in India, the allocation of spectrum without auctioning looked like a crime. Instead of defending its position, the government gave in and canceled the deal with Devas, finding some procedural flaws to get it started. It should be remembered that the real 2G scam trial rejected the notion of scam and acquitted Telecommunications Minister A Raja and all other defendants. It’s on appeal. After a bench of two Supreme Court judges overturned 121 telecommunications licenses in 2011, due to alleged irregularities, including the allocation of spectrum, a scarce natural resource. Without auctions, the government demanded presidential clarification from a wider constitutional bench as to the mandatory use of auctions, as the only legitimate method, to allocate natural resources. The court clarified that auctions are not a necessary feature of property and that, with politics being the prerogative of the executive, it could allocate spectrum as needed. But by then the account of the scam had become part of the popular psyche, the government subsequently lost the election.
The cancellation of the Devas deal was not the result of any actual discovery of a scam, but of a preemptive move by a government that had been pissed off by a CAG’s innovation of “notional loss” based on sweeping assumptions and uncritical public opinion swallow this scam story. Devas Multimedia sued the government before the ICC International Court of Arbitration. Two other lawsuits were filed under the Mauritian and German bilateral investment treaties by the shareholders of Devas. India lost all lawsuits and was asked to pay Devas compensation and interest totaling at least $ 1.3 billion.
India challenged the 2015 award. In 2020, a US court agreed to let Devas shareholders seize government-owned properties, other than those held for sovereign purposes, such as embassies and the like, to realize attribution. Now a Canadian court has echoed that decision.
India should pay up and move on, as it did in the retrospective tax disputes of Vodafone and Cairn. Allowing the dispute with Devas to drag on is like reminding investors how investment in India can degrade on the basis of political expediency. We must eliminate this weakness and change the public discourse that surrounds it, not maintain the controversy by forcing one public entity or another to continue fighting court orders to seize their assets abroad for compensation. of the shareholders of Devas.
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