Tata's Takeover of Air India: Settling the claims of Devas Multimedia to end $1.2-bn US case

Tata's Takeover of Air India: Settling the claims of Devas Multimedia to end $1.2-bn US case

On January 27, Tata's takeover of Air India was finally concluded as the Government of India received the final consideration of Rs 2,700 crore from the Strategic Partner (M/s Talace Pvt Ltd, a wholly owned subsidiary of M/s Tata Sons Pvt Ltd). As per the press release of Ministry of finance, Government of India the total debt of Rs 15,300 crore was retained in Air India and AIXL and "transferring shares of Air India (100% shares of Air India and its subsidiary AIXL and 50% shares of AISATS) to the Strategic Partner". So, this deal was given to tata who were the highest bidder as they agreed to close the deal for Rs 18000 crore.

Time Line of Government's approval

On 8th October 2021: It is important to mention that, Tata group was selected by the government of India for offering the maximum price bid. The government's approval was granted to M/s Talace Pvt Ltd (owned by Tata Group) as stated above for the strategic disinvestment of Air India.

On11 October 2021: Further, after three days later that is on 11th october the Letter of Intent was granted to the Tata Group.

On 25 October, 2021: As a consequence, the Share Purchase Agreement (SPA) was signed between Tata Group and the Government.

Thereafter, M/s Talace Pvt Ltd and administrator of Government owned Air India worked towards fulfilling all the prerequisite and essential conditions as demarcated in the Share Purchase Agreement including approvals from anti-trust bodies, regulators, lenders, third parties, etc. These circumstances have fulfilled all the mentioned conditions precedent.

On 27th January, 2022: M/s Talace Pvt Ltd. (Tata Group) have taken final control over the management of Air India and two of its other subsidiaries.

Claim of Devas Media

Devas Multimedia has filed the case in USA and in other jurisdictions as well for acquiring the property of Air India. According to the claims of Devas Multi Media, they are demanding $1.2 billion from the government of India after winning three international awards in their favour.

Dispute:

The dispute concerns the termination of a contract of Devas Multimedia. They were entitled for Agreement for the Lease of Space Segment Capacity on ISRO/ANTRIX S-Band Spacecraft (the "Devas Agreement"), which was concluded on January 28, 2005 between Devas Multimedia Private Limited ("Devas"), an Indian company, and Antrix Corporation Limited ("Antrix"). The cancellation of the Devas Agreement followed a policy decision taken by the Government of India to reserve a part of the electromagnetic spectrum known as the S-band "for national needs, including for the needs of defence, para-military forces, railways and other public utility services as well as for societal needs, and having regard to the needs of the country's strategic requirements. This cancellation was challenged by Devas at three international arbitration forum and they won the award in their favor against the government of India. The arbitration found that the Respondent has breached its obligation to accord fair and equitable treatment to the Claimants that is Devas Muti media.

Legal Battle with Air India

Now Tata owned Air India has to file the reply in all the jurisdiction where the case is filed against seizure of the property of Air India that it is now owned by a private company so to dispose of the petition. Tata will have to face this legal battle and sort out the issue as soon as possible. It seems prima facie that they are the victim of this fraudulent cancellation by the government agencies.

According to Finance and Corporate Affairs Minister, Nirmala Sitharaman the present Narendra Modi government will fight the case against Devas in all the courts so that they won't get away with this fraud. She also said that "The previous UPA government headed by Congress is responsible for committing a "fraud" on the people of India". Because the money will go from the taxpayer's account. The 2005 agreement signed between Devas Multimedia and Antrix which was the part of the Indian Space Research Organisation (ISRO) was a big scam which even led to the arrest of minister in previous government.

Supreme Court order upholding wind up of Devas by NCLAT

Recently on 17th January, 2021 bench of Justices Hemant Gupta and V Ramasubramanian dismissed the appeal filed by Devas against the NCLAT order to wind up Devas under section 271(c) of Companies Act, 2013. The apex court held that it is a case of "fraud of a huge magnitude which cannot be brushed under the carpet, as a private lis (suit)".

Message to Investors

This message of winding up of devas and its approval by NCLAT followed by final endorsement by Supreme Court of India may send the wrong message to the group of investors. Having said that, definitely this would immensely save the huge money of the exchequers. Government of India has to find the pragmatic approach to deal with the investors and especially with Devas group. Tata group who has newly acquired the Air India will be giving their own justifications against the pending recovery suit in US against the assets of Air India. In any state of affairs, the Devas and its shareholders should not reap the benefits of their fraudulent action. Indian government needs to learn a lesson out of this situation and frame the robust policy and legal mechanism while entering into governments projects. The district court in US subsequently dispose of the claim of devas multimedia as the situation has changed completely after tata's takeover of Air India.