CAG Report on Antrix-Devas Deal

7/31/2019 CAG Report on Antrix-Devas Deal

1/76

ReportoftheComptrollerandAuditorGeneralofIndia

on

hybridsatellitedigitalmultimedia

broadcastingserviceagreementwithDevas

UnionGovernment

DepartmentofSpace

ReportNo.4oftheyear201213


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Contents

Page

Number

Preface

iii

Chapter1 Introduction 1

1.1 RoleofDepartmentofSpace(DoS) 11.2 HowDoSisstructured 11.3 Thedifferenttypesofcommunicationservices 2

1.4 WhatareSDMBservices 3

1.5 WhatwasDevasoffering 3

1.6 Auditapproach 4

1.6.1 Auditobjectives 4

1.6.2 Auditscopeandmethodology 4

1.6.3 Organisationofauditfindings 4

1.7 Chronologyofevents 5

Chapter2 Violationofpoliciesandprocedures 9

2.1 Theprocedurelaiddownforintroductionofanewcommunicationservice

wasviolated

9

2.2 Multipleservices(broadcastingandtelecommunications)wereallowedonthe

sameplatform

12

2.3 ApprovaloftheINSATCoordinationCommitteewasnottaken 12

2.4 TheSATCOMpolicywasflouted 14

2.5 DoSguidelineswerecontravened 16

2.6 FactswereconcealedfromtheUnionCabinet 16

2.7

DoSavoided

the

financial

sanction

of

Union

Cabinet

for

GSAT

6A

satellite

18

2.8 DoSdidnotbringcrucialfactstothenoticeoftheSpaceCommission 20

2.9 DoSfloutedITUconventionsandbypassedDoT 22

2.10 DoSdidnotgettheAntrixDevasAgreementvettedbyMinistryofLawandby

MemberFinance(SpaceCommission)

24

2.11 Devasdidnotpossesstherequisitepermissionstooperatetheservicefor

whichtheAntrixDevasagreementhadbeensigned

25

Chapter3 UnduefavourstoDevas 26

3.1 Introduction 26

3.2 DoSnegotiatedexclusivelywithDevas 26

3.3 DoSignoredthepotentialbenefitsof2.6GHzbandtoGovernment 27

3.4

Allocationof

avaluable

orbital

slot

for

an

indefinite

period

to

Devas

29

3.5 DevascapitalisedontheagreementsignedwithAntrix 30

3.6 DoSdevisedthecostingofGSAT6andGSAT6AsatellitestohelpDevas 33

3.7 WhatwasuniqueabouttheDevasagreement 35

3.8 HowdidtheAntrixDevasagreementconditionsbenefitDevas 37


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Chapter4 GovernanceandConflictofinterestissues 41

4.1 Introduction 41

4.2 Subversionofthegovernanceframework 41

4.3 Concentrationofmanyrolesinoneofficial 43

4.3.1 Dr.G.MadhavanNairperformedmultipleroles 44

4.3.2

Thedisparate

roles

of

Director

(Contract

Management

and

Legal

Services)

46

4.3.3 ShriA.Bhaskaranarayanasrole 47

4.4 HowISROofficialsabettedDevas 49

4.5 Otheractsofcommission 50

4.5.1 FailingtocirculateminutesofDr.ShankaraCommittee 50

4.5.2 AlterationofminutesofTechnicalAdvisoryGrouptoobligeDevas 51

4.6 CurrentstatusofactiontakenbytheGovernment 52

Chapter5 Conclusions 54

Annexures 57

Annexure1: ShareholdingpatternofDevasMultimediaLimited,Bangalore 59

Annexure2:

Comparison

of

Antrix

Devas

contract

with

other

transponder

lease

agreements60

Annexure3: ListofINSATcontractsselectedfordetailedaudit 65

Annexure4: InstancesofdisadvantagestoDoSreportedinpreviousAuditReports 67

Annexure5: NotegeneratedbyManagingDirectorofACLdated14April2009

regardingapprovaloftourprogrammeofShriA.Bhaskaranarayana

70

Annexure6: AletterfromDevasdated7August2009regardingtheDevassystem

updatereview

71

Glossary 73


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PREFACE

This Report of the Comptroller andAuditor General of Indiafor theperiod ended March 2012 has beenpreparedfor submission to thePresidentunderArticle151oftheConstitution.TheReportcontains the resultsofexaminationof the hybridsatellitedigitalmultimediabroadcastingserviceagreementwithDevasenteredintobyM/sAntrixCorporationLimitedonbehalfoftheDepartmentofSpaceandM/sDevasMultimedia Limited. The auditwas conductedbetweenJuly2010andJune2011.


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ReportonhybridsatellitedigitalmultimediabroadcastingserviceagreementwithDevas 1

Chapter1 Introduction1.1 RoleofDepartmentofSpace

TheDepartment

of

Space

(DoS)

is

the

department

responsible

for

administration

of

the

Indian space programme. Under its overall management, the Indian Space Research

Organisation (ISRO) executes a variety of programmes through different organisations

located across the country. Itdevelops satellites, satellite launch vehicles and associated

groundsystems.

Its commercialarm,AntrixCorporation Limited (ACL)provides avarietyof space services

notjustnationally,butalsotoothercountries.Theseservicesincluderemotesensingdata

services, transponder lease services, launch services through operational launch vehicles

(PSLVand

GSLV),

mission

support

services

as

well

as

consultancy

and

training

services.

1.2 HowDoSisstructured

*Secretary,DoShassincevacatedthispositionandaseniorscientisthasbeenappointedasChairmancumManaging

Director,ACL


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TheSpaceCommission isresponsibleforformulatingandguiding implementationofspace

programmesandpolicies.Itsmembersconsistofthefollowingseniorfunctionaries:

ChairmanofSpaceCommissionandSecretaryDoS, MinisterofStateinchargeofPrimeMinistersOffice, NationalSecurityAdvisor, CabinetSecretary, FinanceSecretary, Member(Finance)ofSpaceCommission, Director,ISROSatelliteCentre,and PrincipalSecretarytoPrimeMinister.1.3 Thedifferenttypesofcommunicationservices

Thedifferenttypesofcommunicationservicesaregivenbelow:

*BroadbandWirelessAccess


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DigitalSatelliteNewsGathering

1.4

Whatare

SDMB

services?

The satellite digitalmultimedia broadcasting service (SDMB) is basically a digitalmobile

broadcasting service (mobile TV service) using satellites. Broadcasting satellite service

transpondersareusedinsatellitestoprovideonewaySDMBservices.

SDMB isused fora satellitebasednational service fordeliveryofvideo,multimediaand

informationservicesviasatellitetofixedandmobilereceiversinvehiclesandmobilephones

acrossIndia.

1.5

Whatwas

Devas

offering?

AntrixenteredintoanagreementwithDevasMultimediaLimited(Devas)inJanuary2005to

introduceanewSDMBservice (Devasservice) in thecountryby launching twosatellites,

PS1 and PS2. TheDevas servicewas to be a hybrid system delivering internet services

includingmultimedia, information services via landline aswell as satellite and terrestrial

wirelesssystems to fixed,portableandmobile terminals, tailored to theneedsofvarious

market segments.SDMB technologyprovided twowayaudio/videoservicesand internet

services,bothforfixedandmobilereceiverswithinthecoverageareaofthesatellites.

Apictorial

representation

of

the

range

of

services

offered

by

Devas

proposed

is

depicted

in

Figure1below:


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ThemultipleservicesofferedbyDevaswere4Gservices,mobileTVservices,boththrough

satellite and terrestrial routes andDTH services in the sameplatform. Thiswas tobe a

hybrid

of

one

way

and

two

way

services,

both

through

satellite

and

terrestrial

routes

in

the

sameplatform.

1.6 AuditApproach

1.6.1 Auditobjectives

To evaluatewhether policies, rules, orders, instructions issued by the competentauthoritywerecompliedwithintheagreementbetweenDoS/AntrixandDevas.

To evaluate whether the agreement between DoS/Antrix and Devas served theinterests

of

the

Government.

ToevaluatetheadequacyofthecontrolsystemsinDoS.1.6.2 Auditscopeandmethodology

TheauditwasconductedfromJuly2010toJune2011,coveringtheperiodfromMarch2003

toJune2011. TheauditcoveredtheexecutionoftheagreementbetweenAntrix(onbehalf

ofDoS)andDevas.WestudiedthecontractualproceduresrelatedtoDevasaswellasthe

existingclientsofAntrix/DoS.Theauditwasconductedonthebasisofrecords/information

totheextentmadeavailablebyDoS.AStatementofFactswasissuedtoDoSinNovember

2010andtheirreplywasreceivedinMarch2011.ThereviseddraftreportwasissuedtoDoS

in July2011,ameetingwasheldwith Secretary,DoS in July2011and their replieswere

received in August 2011. A meeting was held with DoS on 30 January 2012, wherein

SecretaryDoSfurnisheda listofactionstakenwithregardtotheAntrixDevasagreement.

ThesereplieshavebeenappropriatelyincludedinthisReport.

1.6.3 Organisationofauditfindings

Auditreviewed

the

contract

between

Antrix

and

Devas

and

its

observations

are

discussed

in

Chapters2to4ofthisReport.

Chapter2ofthisReportdealswithviolationofpoliciesandproceduresintheAntrixDevas

agreement.

Chapter3discussestheunduefavoursextendedtoDevasMultimediaLimited.

Chapter 4 highlightsthegovernanceandconflictofinterestissueswithinDoS.

Chapter 5 containstheConclusion.


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1.7 Chronologyofevents

Date Event

June1972

The

Space

Commission

and

DoS

are

created.

1977 TheGovernmentconstitutestheINSATCoordinationCommittee(ICC).

June1997 TheUnionCabinetapprovestheSATCOMpolicyframework.

1997 WorldRadioCommunicationconference(1997)makeschangesinfilingof

orbitalslots,theircoordinationandnotification. Introducesduediligence

andfilingchargestoavoidnonseriousfilings.

January

2000

TheINSATCoordinationCommitteeprescribespracticesandproceduresto

be followed in the allocation of satellite capacity to nonGovernment

users.

January2000 Government of India approves the SATCOM policy laying down norms,

guidelinesandproceduresforimplementationofthepolicyframeworkfor

satellitecommunicationinIndia.

June2001 DoS prescribes guidelines to be followed by DoS/ISRO in carrying out

commercialprojectsofAntrix.

2002 Based on the International Telecommunication Unions allotment of

frequencies to various countries for various applications, the Wireless

Planning and CoordinationWing of Department of Telecommunications

formulatesaNationalFrequencyAllocationPlan.

June2002 DoS creates aPricingCommittee, consistingof theAdditional Secretary,

Director, Satellite Communication and Navigational Programme

Office (SCNPO), Executive Director, Antrix, Director, Contract

Management and Legal Services (CMLS) and a representative of the

Member (Finance) to decide theminimum price and review themarket

strategyperiodicallyinrespectofvarioustypesofINSATtransponders.

March2003 M/s Forge Advisors, USA makes a presentation to DoS/ISRO officials

regardingopportunitiesintheglobalsatellitemarket.

July2003 AbroadMOU issignedbetweenAntrixandM/sForgeAdvisors,USA for

partnershipand

positioning

Antrix

in

the

global

satellite

market.

April2004 M/sForgeAdvisorsmakeasecondpresentationtoDoS/ISROofficialsand

proposesconstitution ofanIndianCompanytolaunchDevasservices.

May2004 Secretary,DoS,who isalsoChairman, ISRO,constitutes theDr.Shankara

Committee to examine technical and financial feasibility, risk

management, organisational aspects and time schedule of the proposal

submittedbyM/sForgeAdvisor.


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June2004 68th

(last)meetingofICC.

November

2004

TechnicalAdvisoryGroup(TAG)isinformed inits122nd

meetingthatISRO

hasplans toenter intoacontractwithDevasand thecommitteewillbe

informedoffurtherdevelopments.

December2004 The Antrix Board, in its 57th

meeting, decides that instead of a jointventure, Devas services could be supported by it through leasing of

capacityfromanSbandsatelliteofISRO.

December2004 M/s Forge Advisors, USA promotes an Indian Company, namely, Devas

MultimediaLimited.

January2005 Dr.ShankaraCommitteesubmitsitsreport.

January2005 TheAntrix Devasdealissigned.

May2005 TheSpaceCommissionapprovestheproposalofDoStolaunchGSAT6by

incurringexpenditure

from

the

DoS

budget.

August2005 DoSsubmitsaproposalseekingfinancialsanctionoftheMinisterincharge

forGSAT6toincurexpenditurefromtheINSATbudget.

September2005 DoSinformsMinistryofFinancethatrevenuesareestimatedtobe`51.70

croreperannum,totalling`620.40crore,duringtheexpected12yearlife

periodoftheGSAT6satellite.

November2005 The Union Cabinet approves the proposal to undertake design,

developmentandlaunchoftheGSAT6multimediamobilesatellitesystem

atacostof`269crore.

February2006

TAG

is

informed

in

its

124th

meeting

that

the

GSAT

6satellite

is

being

madeforaspecificcustomerandwillnotbeapartoftheINSATcapacity.

August2007 TRAI recommends that all spectrum for terrestrial operations in India

should beauctioned.

January2008 TRAIfurnishesrecommendationsonmobileTVservices.

December

2008

The129th

meetingof TAG isheldon26December 2008.Under agenda

itemno.7, itdiscussesthegroundsegmenttestrequirementstovalidate

withtheDevasutilisationconcept.

January2009

A

TAG

sub

committee,

deliberating

the

issues

relating

to

the

Devas

experimental plan, observes that terrestrial transmission is not to be

permittedintheportionofSBandproposedtobeallocatedtoDevas.

October2009 DoSseeksfinancialapprovaloftheSpaceCommissiontoincurexpenditure

of `147 crore from the INSAT budget for GSAT6A development and

fabrication.


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December2009 ISRO constitutes the Dr. Suresh Committee, a oneman committee, to

examinethelegal,commercial,proceduralandtechnicalaspectsrelatedto

licensing of spectrum/frequency and leasing of transponders with

referencetotheAntrixDevasagreement.

June2010 Dr.SureshCommitteesubmitsitsreport.

June2010 DoS seeks the opinion ofMinistry of Law andDoT to annul the Antrix

Devasagreement.

July2010 The Space Commission approves annulment of the AntrixDevas

agreement.

December2010 ISROrepliesthatbasedonthedirectionoftheSpaceCommissiontoannul

the Devas contract, thematter has been discussedwith the Additional

Solicitor General and a note submitted to the Cabinet Committee on

Security(CCS)foritsdecision.

February2011

CCS

gives

directions

to

annul

the

agreement

with

Devas.

February2011 DoSdirectsAntrixtoannultheagreementwithDevas.

February2011 Antrix sends aletteroftermination toDevas.

February2011 A HighPoweredReviewCommittee(HPRC)isformed.

March

2011

HPRCsubmitsitsreport.

April2011

Reportof

HPRC

is

examined

by

the

Cabinet

Secretary.

April

2011

ReturnofupfrontpaymenttoDevasbyAntrix.Devascancelsthecheque

andreturnsittoAntrix.

May

2011

HighLevelTeam(HLT)isformedwithformerCVCasChairman.

June2011 SeniorManagementTeam issetupwithofficialsfromDoS/ISROAntrixto

resolvetheissuewithDevas.

June2011 Devas files an arbitration demand before the International Court of

Arbitrationof

the

International

Chamber

of

Commerce.

July2011 Antrix issues notice of arbitration appointing retired Justice Sujata

VManoharasarbitrator.

August2011 DepartmentofSpacefurnishesitsreplytoAudit.

August2011 AntrixfilesanarbitrationpetitionbeforeHonbleSupremeCourt.


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September2011 HLTsubmitsitsreport.

December2011 AntrixfilesanarbitrationapplicationbeforeCityCivilJudgeofBangalore.

January2012 DoSfurnishestheActionTakenonthereportofHPRCandHLT.

February2012

Devas

files

Statement

of

Claim

before

ICC

seeking

either

performance

of

the agreement by Antrix, or a compensation ofUSD 1.6 billion (` 8240

crore) plus interest at a rate to be decided by the tribunal, cost and

attorneysfeesetc.


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Chapter2 ViolationofPoliciesandProcedures2.1

The

procedure

laid

down

for

introduction

of

a

new

communication

service

wasviolated

TheAllocationofBusinessRules,1961detailtheallocationofbusinessoftheGovernment

of IndiaandspecifysubjectstobedealtwithbytheMinistries/Departments.Accordingto

these Rules, the Department of Telecommunications (DoT) is responsible for policy,

licensingandcoordinationmatters relatingtotelecommunicationservices,theMinistryof

Information & Broadcasting (MIB) is responsible for matters relating to broadcasting in

India, the DoS is responsible for all activities connected with space applications and the

Ministry of Finance is responsible for financial sanctions relating to all Ministries of the

GovernmentofIndiaandappraisalandapprovalofPlanInvestment/expenditureproposals

ofCentralMinistries/PublicSectorUndertakings.

AspertheTransactionofBusinessRules,1961,whenthesubjectofacaseconcernsmore

thanonedepartment,nodecisionistobetakenororderissueduntilallsuchdepartments

haveconcurred,or,failingsuchconcurrence,adecisionthereonhasbeentakenbyorunder

theauthorityoftheCabinet.

Given the fact thata new communication service could be for telecommunications or for

broadcasting and could either be satellitebased or terrestrialbased, several

Ministries/Departments were involved in the process of introduction of such a service.

WhenthenewcommunicationserviceofDTHwasintroducedinthecountryin2000,itwas

observed that the following procedure was adopted by the Ministry of Information &

Broadcasting:


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Table1:StepsfollowedbytheMinistryofInformationandBroadcasting

WhatwastheviolationintheDevascase?

TheproposedDevasserviceswhichwereahybridoftelecommunicationandbroadcasting

services,wereunderthepolicydomainofDoTandMIBandnotunderDoS.TheroleofDoS,

which related to activities connected with space applications, was to come into play only

after the policy and regulatory frameworks for the new services which were under the

domainof

DoT

and

MIB

were

in

place.

InthecaseofDevas,weobservedthat:

InterdepartmentalconsultationswerenotinplacebeforeenteringintothecontractfortheDevasservices.


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ApprovalfromtheUnionCabinettointroducetheDevasservicesinthecountrywasnotobtained.

Guidelinesand licensingconditionswerenot inplacebeforeentering intothecontractfortheDevasservices.

DoSstated

in

August

2011

that

the

actual

procedure

was

as

follows:

1. DoS allocates transponders, i.e. the space segment capacity to the users at pricesstipulated by the department, based on the recommendations of the pricing

committeesetupaspertheSATCOMpolicy.1

2. The users are then expected to seek operating licences from the Department ofTelecommunications.

3. Theusershavetoprocureservice licences fromDoTorMIBbasedonthetypesofservices.

4. The users have to obtain spectrum allocation from the Wireless ProgramCoordinatorofDoTatchargesthatarespecifiedbythem.

5. TheusersalsohavetoobtainnetworkclearancefromtheNetworkOperationsandControlCentreofDoT.

DoSfurtherstatedthateventhoughthetranspondersareallocated,itisonlyafterallthese

licences and clearances are obtained that the services can become operational. In the

instant

case,

only

the

transponders

were

proposed

to

be

allocated

to

Devas

under

the

agreement. They were expected to obtain the licences and permissions from the other

authoritiesbeforetheycouldcommencetheirservices.

1Thishasbeendescribedinpara2.4.

In transponder lease agreements related to DTH

services,DoSallocatedsatellitecapacityonlyafterStep

1toStep4,asdetailedinTable1,wereinplace.

InthecaseofDevas,DoSstraightawayallocatedsatellite

capacitywithoutfollowingSteps1to4.


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ThereplyofDoS isnotacceptablesinceDoSoutlinestheprocedurefollowed inrespectof

existing communication services. Devas services, however, were new communication

servicestobeintroducedforthefirsttimeinthecountry,forwhichsteps1to4indicatedin

Table1werenotinplace.

ThecontentionofDoSthatDevaswasexpectedtoobtainalllicencesandpermissionsfrom

the concerned authorities is to be seen in lightof Article 3Clause (c) of the AntrixDevas

agreementwhichspelledoutthatAntrixwouldberesponsibleforobtainingallnecessary

Governmentaland regulatoryapprovals relating toorbitalslotsand frequencyclearances,

and funding for the satellite for Devas services. The clause further provided that Antrix

would provide appropriate technical assistance to Devas on a besteffort basis for

obtainingtherequiredoperatinglicencesandregulatoryapprovalsfromvariousMinistries.

These terms were, therefore, fairly unambiguous with reference to the handholding

offeredto

Devas

by

Antrix.

2.2 Multiple services (broadcasting and telecommunications) were allowed on the

sameplatform

The Union Cabinet, in March 2001, approved DTH guidelines which, interalia, stipulatedthatDTHfacilitieswhichwerebroadcastingservices,werenottobeusedforothermodes

of communication including voice, fax, data communication, internet, etc.

(telecommunication services) unless specific licenses for these valueadded services had

been

obtained

from

the

competent

authority.

The

context

in

which

a

particular

communicationservicewastooperatewasclearlyspeltoutintheapprovalofthaCabinet.

Inthisregulatoryscenario,AntrixsignedanagreementwithDevas,authorisingnewservices

which were to be a hybrid of telecommunication and broadcasting services offering 4G

services, mobile TV services, DTH services etc., on the same platform. This was done

withoutgoingbacktotheCabinetforapproval. Suchamoveclearlycontravenedthepolicy

approvedbytheUnionCabinetin2001.

2.3

Approval

of

the

INSAT

Coordination

Committee

not

taken

The INSAT Coordination Committee (ICC) is a highlevel multidepartmental control

mechanism instituted by the Government in 1977. It coordinates and monitors the

implementation of space and ground segments of INSAT projects. ICC consists of

Secretaries of six departments, viz., DoS, Department of Economic Affairs, DoT, MIB,

Department of Science & Technology and Department of Information Technology. In


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addition,Member(Finance)ofDoSisalsoamemberoftheCommitteeandtheProgramme

DirectorofSCNPOofDoSistheMemberSecretaryoftheCommittee.

ThiswasaCommitteethroughwhichinterestsofthesealliedsectors,aslistedabove,were

not only being articulated, but also protected. This mechanism was also in line with

procedures laid down under the Transaction of Business Rules, 1961 requiring

interdepartmentalcoordination.

ThefunctionsofICCwereasfollows:

Coordinate and monitor the implementation of INSAT projects, both space andgroundsegments,toensureefficientandtimelyexecution.

Coordinationattheoperationalstagewithaviewtoachievingmaximumefficiencyandutilisation.

Planningfuturedevelopments. Considerationofproblemsrelatingtoorbitfrequencycoordination. SettingupaTechnicalAdvisoryGroup(TAG)toconsiderandadviseonalltechnical

mattersinfluencingmorethanonecomponentofthesystem.

Inits61stmeetingin2000,ICChadstipulatedproceduresforallotmentofINSATcapacity

toprivateusers. Thesewereasfollows:

INSAT capacity to the nonGovernment sector should be allotted on nonexclusivebasis.

ICC Secretariat should receive applications for transponder capacity from nonGovernmentusers.

ICCshouldearmarktransponders inINSATsatellitesfornonGovernmentalusersasprovidedundertheSATCOMpolicy.

ViolationsofprocedureinDevascase

The matter of earmarking the transponders of GSAT6 and GSAT6A was never placed

beforethe

ICC

as

the

Director,

SCNPO

did

not

convene

any

ICC

meeting

after

June

2004.


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The transponders of INSAT satellites, GSAT6 and GSAT6A were allocated to Devas on

exclusive basis, in January 2005, not on the basis of ICC approval, but on the

recommendationoftheDr.K.N.ShankaraCommittee2appointedbyChairman,Antrix/ISRO.

Thecapacityofthe20transponders(10eachofGSAT6andGSAT6A)wasallocatedentirely

toDevas.

This

was

in

contrast

with

the

extant

practice

where

every

client

was

allocated

only

aportionofthesatellitecapacity.

DoSconfirmed inAugust2011thattheearmarkingoftransponderswasnotplacedbefore

ICC. Itfurtherstatedthattheallocationoftranspondersonthetwosatellites,GSAT6and

GSAT6A was such that 90 per cent of the capacity was allocated to Devas under theagreement.

The reply of DoS that 90 per cent of the capacity was allocated to Devas under theagreement

is

not

acceptable

for

the

reason

that

the

satellites

were

planned

exclusively

for

Devas. The Space Commissions observation in its 117th

meeting held in July 2010, that

therewasviolationofICCsprincipleofnonexclusiveness,confirmsthispoint.

DoS,while furnishing informationon theaction taken,stated (January2012) that ICChad

beenreconstitutedandhadheldtwomeetings.

2.4 TheSATCOMPolicywasflouted

ThepolicyframeworkforsatellitecommunicationsinIndia(SATCOM)wasapprovedbythe

UnionCabinet

in

June

1997

and

its

Norms,

Guidelines

and

Procedures

for

implementation

of

the policy were approved by the Union Cabinet in January 2000. Some of the enabling

provisionsoftheSATCOMpolicywereasunder:

Article2.3.1:INSATcapacitywastobemadeavailabletothecommercialsectoronsound business lines. i.e., on a for profit basis consistent with the Government

policiesintheconcernedusersectors.

Article2.3.2:AllthepoliciesregardingtheINSATsystemweretobedeterminedbythe ICC, keeping in view the Cabinetapproved policy framework for satellite

communicationsinIndia.

2M/sForgeAdvisors,USA,an Internationalbusinessconsultancyfirm,submittedaproposal inApril2004to

DoSproposingtoformoneIndianCompany,namelyDevasMultimediaLimitedfortheintroductionofDevas

services in the country. Chairman ISRO/ Antrix constituted Dr. K.N. Shankara Committee in May 2004 to

examinethisproposal, itstechnicalfeasibility,riskmanagement,financialandmarketaspects,timeschedule

andorganisationalaspects.


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Articles 2.5.2 & 2.5.3: ICC was to earmark a certain percentage of capacity in theINSATsystemforusebynonGovernmentusersandevolveproceduresforallocation

oftranspondercapacitytononGovernmentusers,taking intoaccountthecapacity

availableandtheprevailingsituationinthesatellitecommunicationmarket.

Article 2.6.2: DoS was to evolve suitable, transparent procedures for allottingtransponder capacity to the nonGovernment users in the form of auction, good

faith,negotiation,firstcomefirstserved,oranyotherequitablemethod. ICCcould

reviewthisarrangementatanytimeasrequired.

Article 2.6.5: The use of INSAT capacity by nonGovernmental parties was to bebasedonaformalleaseagreementsignedbetweenDoS/INSATandtheparty,which

wouldspelloutthetechnical,financial,contractualandmanagementclauses.

Article2.7:DoS/ INSATcouldbuild incapacityforanonGovernmentalparty,at itsrequest, based on commercial considerations and if technically feasible, without

adversely affecting the capacity for already projected, accepted and funded

Governmentneeds. Theadditionalcapacitycouldbeforprovidingservices inIndia

orabroad. SuchcapacitywasnottobedeemedaspartoftheINSATcapacityfrom

the Indian regulations points of view unless ICC specifically declared it to be so.

However, DoS/ INSAT were to ensure that providing additional capacity to foreign

agencieswasinaccordancewiththepoliciesoftheGovernmentofIndia. ICCwasto

be kept informed of such steps. The commercial and other terms were to be

determinedbyDoS/INSAT.

ViolationsofprocedureinDevascase

The satellite capacity of two satellites, viz. GSAT6 and GSAT6A was allocated to Devas

withoutfollowingasoundbusinesslineandnotonaforprofitbasis.

Therewasnoevidence thatDoSallocated transponders toDevas, taking intoaccountthe

capacityavailableandtheprevailingsituationinthesatellitecommunicationmarket.

Audit foundnoevidenceofawrittendown,transparent,equitabletransponderallocation

policyinplacepriortosigningoftheAntrixDevasagreement.

DoS flouted the SATCOM Policy and did not follow

soundbusinessprincipleswhileallocatingtransponders

toanon

Government

user.


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Article 2.6.5 of the SATCOM policy was flouted as the transponder lease agreement was

signed by Antrix instead of DoS. Antrix replied in March 2011 that Antrix Board had the

Secretary,DoSasitsChairmanandtheAdditionalSecretary,DoSasoneofitsmembers.The

reply is not acceptable because DoS represented the Government while Antrix was a

commercialentity.

DoS,confirmedinAugust2011thattheallocationoftranspondersonGSAT6andGSAT6A

hadbeendonewithoutplacingthematterbeforeICC.

2.5 DoS guidelineswerecontravened

In June 2001, DoS prescribed the procedure for executing Antrix contracts. According to

this,DoScouldexecute Antrix contracts based onMOUssigned between DoS and Antrix.

Theseguidelinescontaineddetailedcontrolprocedures forestimationandexpenditureof

fundsonce

the

MOUs

had

been

signed.

ThecustomerenteringintoacontractwithAntrixwastoplacefundsatitsdisposal.DoS,on

receipt of these funds from Antrix, was to credit the same under the deposit head of

account(8443 CivilDeposits)toexecutetheworkofthatentity.

Thus,inrespectofAntrixcontracts,theexpenditurewasincurredfromtheDepositfund.In

all projects where Antrix was a signatory to contracts with customers, the costs of the

projectswererecoveredbyitthroughavarietyofchargesleviedonthecustomers.

Violationsof

procedure

in

Devas

case

The above guidelines, which laid down the standard operating procedures, were being

followedbyDoS in respectofallcontractsentered intobyAntrix.However,anexception

wasmadeinthecaseofDevas.

DoSwasplanningtospend`1254.52crorefromtheirbudgetforthisAntrixproject.

2.6 FactswereconcealedfromtheUnionCabinet

FundswereprovidedfromtheGovernmentbudgetfor

the

manufacture

of

a

satellite

which

was

to

be

used

exclusivelybyanonGovernmentcustomer.


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DoS submitted a detailed note to the Union Cabinet in November 2005, seeking its

approval3 for realisation of GSAT6 (for providing multimedia mobile S Band satellite

services)atanestimatedcostof`269croreunderthe INSATprogramme. Secretary,DoS

concealedandmisrepresentedthefollowingfactsfrom/totheUnionCabinetwhileseeking

financialsanction

to

incur

expenditure

from

the

INSAT

budget

in

November

2005:

DoS did not indicate in the Cabinet note that it was planning to construct GSAT6satelliteasacustomerspecificsatelliteforDevas. Scrutiny inauditrevealedthatthe

project report of GSAT6 prepared by the ISRO Satellite Centre in March 2005

specificallymentionedthatthesatellitewasbeingdevelopedforDevas. However,the

summary project report submitted by DoS along with the proposal to the Union

CabinetforapprovaldidnotcontainthenameofDevas.

The

note

submitted

by

Secretary,

DoS

to

the

Union

Cabinet

in

November

2005

indicated that ISRO was already in receipt of severalfirm expressions of interest byserviceproviders for utilisation of GSAT6 satellite capacity on commercial terms. Inreality, DoS had acted upon the proposal of M/s Forge Advisors only. Hence, the

statementofseveralfirmexpressionswasincorrect.

The total cost of the GSAT6 satellite, including the launch vehicle and other operational

expenditurewasestimatedat `524.40crore.Theentirecostalongwithappropriatereturn

on investment should have been realised from Devas instead of from the INSAT budget,

sinceitwasacustomerspecificsatellite.

Further,whileprocessingtheCabinetNote,theMinistryofFinancesoughtdetailsofexpected revenue from DoS in respect of the GSAT6 satellite before clearing the

3Beingthecompetentauthoritytoapproveprogrammescostingmorethan`100crore(revisedto`150crore

fromNovember2007).

Antrix had already entered into a transponder lease

agreementwithDevasinJanuary2005foralltransponders

of this satellite well before Secretary, DoS submitted the

noteto

the

Union

Cabinet,

seeking

its

approval.

Customerspecific satellites are, as per extant practice, to

befinancedbythecustomer.InthecaseofDevas,theDoS

managementwas

planning

to

incur

the

costs

from

the

DoS

budget,thatistosay,fromthenationalexchequer.


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proposal to incur expenditure from the INSAT Programme. DoS replied to the

FinanceMinistry inSeptember2005thattherevenueexpectedbytheDepartment

byleaseoftranspondersfromGSAT6,aspertheexistingMOUswithuserssofar,was`51.70croreperannum,totalling`620.40croreduringtheexpected12yearlife

periodof

the

satellite.

Thefactthat launchofthetwosatellites, i.e.GSAT6andGSAT6Awouldentailanexpenditure of`1254.52 crore, against which the realisation of revenue would be

`1120.76crore,wasalsonotbroughttothenoticeoftheUnionCabinet,though it

wasenvisagedintheagreementbetweenAntrixandDevas.

2.7 DoSavoidedthefinancialsanctionoftheUnionCabinetfortheGSAT6Asatellite

Asper

the

guidelines

for

approval

of

Plan

projects

issued

in

November

2007

by

the

Ministry

of Finance, approvals for projects involving a cost of over`150 crore are to be obtained

from the Cabinet. SCNPO submitted a detailed note in October 2009 to the Space

Commissionseekingitsapproval4fortakingupamultimediamobileSBandsatellitemission

(GSAT6A)atanestimatedcostof`147crore,underthe INSATprogramme. DoSjustified

the launch of this satellite by indicating that in view of the increase in demand for

multimediaservices,afollowonsatellitewasproposedtoaugmentGSAT6tocatertothe

demandinthesector.

Detailedscrutiny

of

the

costing

of

the

GSAT

6A

satellite

at

`147

crore

by

Audit

revealed

that

theproposedexpenditureofGSAT6AwasnotlikeforlikewhencomparedtothatofGSAT

6 (`269 crore), even though both the satellites had similar configurations. As such, it

appears that DoS had reduced the cost of GSAT6A satellite to avoid obtaining the

4TheSpaceCommissionisthecompetentauthoritytoapproveprogrammescostinglessthan `150crorew.e.f

November2007.

By using the words severalfirm expressions of interest byservice providers and existing MoUs with users DoSconveyed the impression to the Cabinet and the Finance

MinistryrespectivelythatithadsignedMoUswithdifferent

usersforuseofthissatellite.

Inreality,ithadsignedanagreementwithonlyoneuser,i.e.

Devas,foralltranspondersofthesatellite.


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approval of the Union Cabinet. Component wise differences in the cost of GSAT6 and

GSAT6Ahasbeendetailedbelow:

Table2:CostcomparisonofGSAT 6andGSAT 6A( incrore)

No Description GSAT6 GSAT6A Difference Remarks

(1) (2) (3) (4) (5)=(3)(4) (6)

1 Payload 64 58 6 6A was to be realised subsequently.

Therefore, given inflationary trends the

cost of payload of GSAT6A should have

beenhigher.

2

Structure

4.5

4.5 0

3 Thermal 5 5 0

4 Mechanism 3.5 3.5 0

5 Composites 3 3 0

6 TTCBB 2 2 0

7 AOCE 5.5 5.5 0

8 TTCRF 1.5 1.5 0

9 Power

Electronics

2.5 2.5 0

10 Battery 6 4 2 6A was to be realised subsequently.


costofbatteriesofGSAT6Ashouldhave

beenhigher.

11 SolarArray 8 8 0

12 Inertial

Systems

10 8 2 6A was to be realised subsequently.


cost of inertial systems of GSAT6A

shouldhavebeenhigher.

13

Sensors

3

3 0

14 Propulsion 2 2 0

15 AIT 5 5 0

16 Mission 3.5 3.5 0

17 R&QA 2 2 0

18 MCF 4 4 0


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ReportNo.4of201213


19 Project

Management



cost of project management of GSAT6A


20 Salary&

Administration


Therefore,

given

inflationary

trends

the

cost of salary component of GSAT6A


21 Insurance 34 34 Thecostofinsurancewasdeletedonthe

pleathatDevaswouldbearthesame.Itis

evident that a selective approach was

applied towards bearing the cost of

insurance in the case of the two

satellites.

22 Preinvestment

forcritical

componentsof

groundspare

65 65

23 Total 269 147 122 Total under costing of GSAT6A worked

outtobeatleast 122crore.

Ascanbeseenfromthetableabove,thelowercostofGSAT6Awasmainlyduetoexclusion

of costs relating to: insurance (`34 crore) and lower cost on account of project

management (`8 crore), salary and administration (`5 crore), payload (`6 crore) and

battery/inertialsystems(`4crore).ThegrossexpendituretobeincurredforGSAT6Awould

have

been

well

above`

150

crorehad

all

the

elements

been

included.

DoSrepliedinAugust2011thatatotalsumof`65crorewasprovidedforGSAT6forpre

investmentofcriticalcomponentsforgroundspares.DoSaddedthatthisamountincluded

componentsforGSAT6Asatellitealso.

The reply of DoS needs to be viewed in the light of the fact that even if the critical

components for ground spares of `65 crore are excluded, the cost of GSAT6A would

nevertheless still remain undercosted by a sum of`57 crore and approval of the Union

Cabinetwasmandatoryinthiscase.

2.8 DoSdidnotbringcrucialfactstothenoticeoftheSpaceCommission

Byexclusionofcertaincostcomponents,DoSwasableto

avoid the mandatory financial sanction of the Union

CabinetfortheGSAT6Asatellite.


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The Space Commission is responsible for formulating the policies relating to the

developmentandapplicationofspacescience.ItoverseestheimplementationoftheIndian

space programme in its meetings, where members discuss issues based on reports

submittedbytheChairmanoftheSpaceCommission(who isSecretaryDoSandChairman,

ISRO).

Most

importantly,

it

formulates

policies

for

space

programmes

under

(i)

satellite

communication(ii)earthobservation(remotesensing)and(iii)spacescience.

A crucial aspect of the Space Commissions role is its financial oversight over the DoS

budgetandofprovidingspecific financialsanctionsto individualprojectsof ISRO. It isthe

competent authority for approval of all projects whose values are less than `150 crore.

Projects costing higher than `150 crore are routed through the Space Commission and

requiretheapprovaloftheCabinet.

Issues

in

the

approval

of

GSAT

6

and

GSAT

6A

from

Space

Commission

TheGSAT6Projectproposalwasapprovedinthe104th

meetingoftheSpaceCommissionin

May2005.Extractsoftheminutesofthatmeetingrevealedthattheproposalpresentedby

DoShighlightedthecapabilitiesofGSAT6,itsbenefitstousersanditstotalcost.

Areviewoftheagendanoteforthe104thmeetingoftheSpaceCommissionrevealedthat

DoSdidnotbringtothenoticeoftheSpaceCommissionthatGSAT6wasasatellitebeing

realisedfortheuseofDevas,asingleprivatecustomerforcommercialpurposes,andthat

its cost was being borne, not by the customer, as per the extant rules, but from the

Governmentbudget.

DoS

did

not

bring

to

the

notice

of

the

Space

Commission

the

fact

that

fourmonthsbeforethematterwasplacedbeforetheCommission,ithadalreadysigned

an agreement with Devas in January 2005, wherein it had committed space segment

capacityoftwosatellitestoDevas.

In the case of GSAT6A, SCNPO submitted a detailed note in October 2009 to the Space

Commission,seekingitsapprovalfortakingupamultimediamobileSBandsatellitemission

(GSAT6A)at an estimatedcostof`147croreunder the INSATprogramme. DoSjustified

the launch of this satellite by indicating that in view of the increase in demand for

multimediaservices,afollowonsatellitewasproposedtoaugmentGSAT6tocatertothe

demandinthesector.

Itwasnoticedfromtheagendanotepreparedforthe114th

meetingandtheminutesofthe

saidmeetingthatDoShadfailedtoinformtheSpaceCommissionthattheGSAT6Asatellite

wasbeingdesignedandmanufacturedforthesoleuseofDevas.


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DoS misled the Space Commission by stating that In view of the increasing demand for

multimediaservices, it isproposed tohaveone moremultimedia satelliteGSAT6A which

will augment themultimediaservicesoffGSAT6and tocater to the increasingconsumer

requirementsofprovidingentertainmentandinformationservicestomobileunits.

TheagendanotedidnotcontainanycomparisonofthecostsofGSAT6andGSAT6Asince

suchacomparisonwouldhaverevealedhowthelatterhadbeeningeniouslycostedastobe

broughtwithintheambitoftheSpaceCommission'sfinancialcompetence.

Whilefurnishingaresponseontheactiontaken,DoSstated(January2012) thatmeetings

oftheSpaceCommission wouldbeconvenedatleastonceinaquarterand agendanotes

wouldbesenttwoweeksinadvanceofthemeetings,afterincorporatingthecommentsof

theMember,Financeof theSpaceCommission. DoSalsostatedthatmattersrelatingto

Antrix

would

be

reviewed

by

the

Commission

at

least

twice

in

a

year

and

all

project

proposals put up for the approval of the Space Commission would be reviewed by a

StandingProjectAppraisalCommittee.

2.9 DoSfloutedInternationalTelecommunicationUnionconventionsand

bypassedDoT

Internationally,aspertheITUconvention(WorldRadioConference2000),towhichIndiais

asignatory, itwasdecidedtousethe2.6GHzband(2.5GHzto2.69GHzof190MHz)for

mobile broadband services, considering the worldwide importance of this band for

terrestrialfixedandmobileservices.Thebandprovidesanopportunitytomeettherapidly

rising

demand

for

capacity

to

deliver

mobile

broadband

services

on

a

widespread

and

commonbasisacrosstheworld.Thishelpstoachievethefollowing:

Thedirecteconomicbenefitsofeconomiesofscale Easeofroaming Interoperabilityofservicesonaglobalbasis Asubstantialamountofspectrum(190MHz)

The Space Commission approved two satellite missions

at a cost of 416 crore. It is, however, not on record

whether the Commission was aware that the two

satelliteswerebeingdesigned,developedandlaunched

fromGovernmentfundsforasinglecustomer.


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WRC2007imposestechnicalconditionsbecauseitseekstorestricttheusageofthe2.6GHz

band for terrestrialmobile broadbandservicesonly. Hence, the2.6GHzband isnow in a

unique position to be exploited as a common band for commercial terrestrial mobile

broadbandaccessservicesonaglobalbasis.

Most of the developed economies in the world had auctioned or were in the process of

auctioningthisvaluable2.6GHzbandforthemobilebroadbandservices. In India,dueto

theheavydemandfor3Gspectrum inthemarket,theGovernmentof Indiaauctioned3G

spectrum inAprilMay2010,rangingfrom1959MHzto1979MHz andearnedrevenueof

nearly`67,719 crore towards entry fees for 20 MHz. Further, in theBroadband Wireless

Accessspectrumauction,DoThadearnedarevenueof`38,543crore.

FortheDevasservice,DoSearmarked70MHzofSBandspectruminthefrequencybandsof

2560

2590

MHz

5

,

2600

2630

MHz

and

2670

2680

MHz

for

both

telecommunication

and

broadcastingservices.DoS/Antrixcommittedthisfrequencyspectrumwithoutobtainingthe

approvaloftheWirelessPlanning&Coordination(WPC)wingofDoT,whichisthecustodian

forterrestrialbasedtelecommunicationservicesinthecountry.

AccordingtotheITURadioRegulations,theuseofMobileSatelliteServiceinthe26552690

MHzand 25002535MHzbands is restricted tonational transmissiononly. Thiswas also

reiteratedbyDoTin itsreplyofJuly2010toDoS,wherein itwasstatedthatthespectrum

plannedbyDoSforstrategicuse,wasnottobesharedwithcommercialapplications. Outof

this10

MHz,

2670

2680

MHz

was

earmarked

for

Devas

against

this

regulation.

DoS/

ISRO

is

yettofurnishreasonsfortheearmarkingofMSSspectrumreservedforstrategicpurposes

toDevas.

DuetopressureformoreSBandspectrumformobilebroadbandservices,DoThadrequestedDoS inJuly2008toconsiderprovidingthefrequencyspectrumavailable

with the latter. Director, SCNPO indicated to the WPC in September 2008, that 5

MHzbroadcastsatelliteservicespectrumintherange25502555wasalreadyinuse

byAll IndiaRadio(AIR). Inreality,25502600MHzhadactuallybeenearmarkedfor

Devasin

2005

itself.

Similarly,

the

Chairman

ISRO

had

also

indicated

to

DoT

in

August

2008 that the SBand satellite of ISRO would be used for different applications by

differentcustomerswhenthesamehadalreadybeenearmarkedonexclusivebasis

toDevas.

5ThefrequencybandearmarkedintheAntrixDevasagreementwassubsequentlychangedto25502600MHz

intheproposalseekingfinancialsanctionofUnionCabinetforGSAT6satellite.


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DoSstatedinAugust2011,thatitdidnotallocatespectrumandthatthiswasdoneonlyby

DoT.Asindicated,theonusforobtainingfrequencyclearancesintheagreementrestedwith

Antrix. The fact, however, remained that 70 MHz of the Sband spectrum had been

earmarkedforDevasintheAntrixDevasagreement.

2.10 DoS did not get the AntrixDevas Agreement vetted by Ministry of Law and by

MemberFinance(SpaceCommission)

Itwasseenthatthetermsofthetransponderleaseagreements(TLAs)weretobespecificto

theservicesforwhichtransponderswereleased,whetheritwasforVSAT,TV,DSNGorDTH

services. This was so because the services, licensing and regulatory arrangements/

mechanismswerepeculiartoeachservice.TheseTLAsweretobeapprovedspecificallyfor

each

service

by

the

Ministries

of

Law

and

Finance.

The agreement template used in the AntrixDevas agreement was different. It was not

approvedbytheMinistryofLaworbytheMember(Finance)ofSpaceCommissionwho is

therepresentativeoftheMinistryofFinance inDoS. SCNPOrepliedinApril2011thatthe

templateapprovedbyMinistryofLawinthetransponderleaseagreementforthe leaseof

thesatellitecapacityofINSAT2EtoINTELSAT,aninternationalorganisationfor itsservices

aroundtheglobe,wasbeingusedforotherleaseagreements.Thisreplymustbeviewedin

lightofthefactthattheformatsoftransponderleaseagreementswereservicespecificand

were to be formulated differently for different satellitebased communication services.

Moreover,

reference

to

the

Ministry

of

Law

was

notjust

a

pro

forma

procedure

but

a

controlmechanismtoguaranteeprotectionofnationalinterest.

DoS confirmed in August 2011 that the AntrixDevas Agreement was not vetted by the

MinistryofLaw.

DoS misled DoT regarding actual use of spectrum in the S

Band. In July 2008, it stated that the spectrum was in use by

AIR. InAugust2008, itstatedthatthespectrumwasreserved

fordifferentusers.

The truth was that DoS concealed the name of Devas from

DoT,asalsothefactthatinbothinstances,spectrumhadbeen

reservedforDevas,aprivateoperator.

DoSbypassedimportantcontrolsintheformofvettingofthe

transponder leaseagreementbytheMinistryofLawand the

Member(Finance)oftheSpaceCommission.


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2.11 Devasdidnotpossess the requisitepermissions tooperate theservice forwhich

theAntrixDevasagreementhadbeensigned

DoT is the authority for granting licences for operating internet services. TRAI as the

regulator also grants clearances for this activity. Uplinking/ downlinking guidelines for

internet(data,audioandvideo)ofIndiansatelliteshavenotyetbeenframedinthecountry.

Assuch, approvals/ licencescanbeobtained/ issuedonlywhen theguidelineshave been

framed.

Devas secured an AllIndia Internet Service Providers Licence in May 2008. This licence

could be used for internet access and internet telephony but not to uplink/downlink

through satellite. This licence in the possession of Devas was not specific to the hybrid

SDMBserviceproposedbyDevas.

ThispositionwasreiteratedbytheTAGsubcommitteeinits129th

meetingofJanuary2009

which went into the issues relating to the Devas experimental plan. The subcommittee

observedthatVoiceandVirtualPrivateNetworksproposedintheDevasserviceswouldnot

bepermittedunderthelicencecurrentlyheldbyit.

Devas was ineligible to provide the hybrid services

plannedby it as it possessedneither a licence from the

approvingauthority,noraclearancefromtheregulator.


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Chapter3 UnduefavourstoDevas3.1

Introduction

ThefeaturesoftheAntrixDevasagreementareasunder:

The AntrixDevas agreement allowed Devas to provide multiple services such as 4G

services (improvement in 3G services), mobile TV services both through satellite and

terrestrialroute,DTHservices,etc.,onthesameplatform.

Itprovided for the launchof twocustomerspecificsatellites forDevasby leasingall20

transpondersofthesetwosatellites.

70MHzof SBandwasearmarked for spectrum in 2.6GHzband toDevasasapartof

leasingoutthetranspondersofthetwosatellites.

OrbitalslotwastobeallocatedforanindefiniteperiodtoDevas.

It indicated a sublicensing clause which would enable Devas to sublease satellite

transponderstoothers.

3.2 DoSnegotiatedexclusivelywithDevas

ISRO generally conducts meetings with INSAT users/ service providers to ascertain the

demand in thematic sectors such as (i) telecommunications through VSAT operations; (ii)

broadcasting through TV/DTH Operations; (iii) educational and developmental

communications;

(iv)

security

communications

for

Defence

Ministry/

Services

and

(v)

meteorologicalapplications. Therealisationandlaunchofsatellitesisplannedbasedonthe

needsofbothGovernmentandnonGovernmentusers.

ISRO did not furnish any document to Audit by which we could arrive at a reasonable

assurancethatithadconductedanyusersmeettoassesstherequirement/demandforthe

SDMBservices.ISROrepliedinAugust2010thatGSAT6proposalswereformulatedbased

onassessmentoftheneedtointroducemultimediamobileservicesinthecountryandonly

oneparty(M/sForgeAdvisors)hadcomeforwardtocarryouttheservices.

The reply of ISRO is to be seen in the context that the new SDMB service had not been

approvedby theUnionCabinet,and that therewas no regulatory framework inplace for

launching Devas services in the country. DoS invited no public offers for SDMB services

beforelaunchingthesatellites.


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Further,enteringintotheagreementwithDevaswasbasedonexclusivenegotiationswith

M/sForgeAdvisors,whichhad floatedDevas for thisverypurpose.Later, inMarch2011,

DoSagreedthatithadnotcarriedoutanyneedassessmentbeforethelaunchoftheGSAT6

&GSAT6Asatellites.Itqualifiedthisfactbystatingthatusermeetswerenotscheduledfor

eachsatellite.

DoS confirmed in August 2011 that a need assessment was not conducted before the

proposals in respect of GSAT6 and GSAT6A were formulated and it was also true that a

usermeetwasnotheldforthetwosatellites.

3.3

DoSignored

the

potential

benefits

of

2.6

GHz

band

to

Government

SeventyMHz of the2.6GHzspectrum was intended tobe madeavailable to Devas. The

marketvalueofspectrumdependsonthevolumeofitscustomerbase/potentialcustomer

base (future utilisation potential), telephone density, population, area covered, etc. The

value of a telecom and broadcasting service depends upon its demand and business

potential in the market. While the target group for the business opportunities of 3G was

only the mobile population, the Devas services aimed at vehicles, TV households and

broadband users, in addition to the mobile phone population in India. The breadth of

servicesin

the

downlink

of

the

hybrid

S

DMB

was

to

be

more

than

24

MHz

(8

MHz

for

three

services) for broadcasting services with a flexible option to interchange between three

services (video, audio and data) and 8 MHz for twoway services in return link6. These

facilities would make the Devas services better comparable to alternate and existing

technologies/ services such as 3G, DTH etc. in India. The table below brings out a

comparisonoftheservicesintermsofsomeparameters.

Table3:Comparisonof3G,DTHandSDMBservices

No Services MHzavailable

forterrestrial

operations

MHzavailablefor

Spaceoperations

Potential

customer

basein

Million

Numberof

service

providers

Revenue

receivedby

Governmentfor

theentryinIndia

(` incrores)

1 3G 20 Nil 851.707 8 67,719

2 DTH Nil 2700 35.568 7 Nil

6Areturnlinkisthetransmissionlinkfromauserterminaltothecentralhub.

7ReportedbyTRAIasof30June2011,basedonwhichtransitionto3Gusersisassumed.

BeforetheofferofSDMBservices,DoSdidnotascertainneeds

nordiditinviteapplicationsfrominterestedserviceproviders.


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3 SDMB 70(onreuse) 70 1008.40 1 Nil

ThefuturebusinesspotentialofDevasservicesisevidentfrom itspotentialcustomerbase

of 1008.40 million. The Devas services aimed at 851.70 million mobile population, 23.70

million vehicle population and 133 million9 TV households in India. The Devas services

proposed to provide telecom and broadcasting services in the mobile and fixed

environment. This potential was to be utilised by one service provider, viz., Devas alone.

Considering the above business opportunities in India, Devas estimated to be cash flow

positiveintwotothreeyearstime,consideringtheinvestmentincomparisontotheseven

to10yearsrequiredforalternateservicessuchas3G.

Due to heavy demand for the 3G spectrum in the market, the Government of India had

auctionedinMay2010,20MHzin3Gspectrumrangingfrom1959MHzto1979MHz and

earnedrevenueof`67,719croretowardsentryfees. Further,intheBWAspectrumbandof

23002400MHzauctioninMay2010,Governmenthadearnedrevenueof`38,543crorein

theauctionoftwoblocksof20MHzspectrumonpanIndiabasis.

In the cases of all new broadcasting or telecommunications services introduced by the

Government, specific Cabinet approvals were obtained. Necessary clearances from the

concernedauthoritieswerealsoreceived.InthecaseofDTH,forexample,MIBinitiatedthe

proposal; the Cabinet approved the service; MIB then stipulated guidelines and licencing

conditions;

the

WPC

wing

allocated

the

required

spectrum;

the

licences

for

the

service

were

grantedbyMIBandthetranspondercapacitywasallocatedbyDoS.Duringthisprocess,the

service was evaluated in terms of its parameters, including the benefit streams for the

Government.GiventheuniquenessoftheSBand intermsof itsversatilityandavailability

forbothbroadcastingandmobilesatelliteservices,theDevasserviceshouldalsohavebeen

evaluatedthoroughlytoderivethebestinterestoftheGovernment.

It ispertinent tomentionthattheSecretary,DoT inareferencetoDoS,emphasised (July

2010) the need for ensuring a level playing field for service providers using terrestrial

spectrum.Pointing

to

the

auction

of

BWA

spectrum,

he

stated

that

the

commensurate

amountmustbeleviedasspectrumchargesforprovidinganycommercialservicesincluding

digital multimedia. The Wireless Adviser of DoT stated (March 2012) that the price

discoveredinthecourseoftheBWAauctioncouldbetakenasvalueofspectrumintheS

Bandsince the BWA spectrum was from this band. The BWA auction generated` 38,543

8Source:TRAI

9Source:TRAI.


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croreinrevenuesfortheGovernmentforabandwidthof60MHz.Asagainstthis,70MHzof

spectrumwasbeingearmarkedforDevas.

It isnoteworthy thatBWAwasawireless internetbroadcastingservicethroughterrestrial

towers. The proposed Devas service was a superior service since it sought to provide

continuous wireless services to consumers who used fixed as well as mobile receivers

throughsatelliteandterrestrialsystems.Thusitcouldcatertotheneedsofcustomerseven

atremote locationswhereterrestrialtowerscouldnotbesetup.Thisbeingthecase, it is

evident that the service being offered by Devas had considerable fiscal potential for the

Government.Bynotfollowingthedueprocessforthisnewservice,therevenueinterestsof

theGovernmentseemedtohavebeentotallyignored.

DoS stated in August 2011 that it did not allocate spectrum to any user. DoS only leased

satellite

transponders,

i.e.,

space

segment

capacity

to

users

at

prices

stipulated

by

the

department,basedon recommendationsof the pricingcommitteeset upby itas per the

SATCOMpolicy.

The reply of DoS needs to be viewed in the background of the fact that the requisite

licencingconditionsandregulatoryframeworkforSDMBservicesshouldhavebeeninplace

priortosigningthetransponderleaseagreementwithDevasbytheGovernment.Thereply

of DoS confirms the position that DoT was the authority with regard to allocation of

spectrum, which was instead committed by DoS to Devas. Further, in the agreement

enteredinto

with

Devas,

the

onus

for

obtaining

all

regulatory

approvals

rested

with

Antrix.

ThereplyofDoSdoesnotaddresstheissueofearmarkingofvaluablespectrumtoaprivate

party.

3.4 AllocationofavaluableorbitalslotforindefiniteperiodtoDevas

ITUallotsorbitalslotsforsatellitesofindividualcountries.ThechangesmadebyITUinthe

year1997makeorbitalslot filingsa longdrawnandcriticalactivity,which requiresvision

and careful coordination as ITU allows only the administration of each country to file for

orbital slots. It is important for each country to prepare orbital slot filings for country

specificslotsandoccupytheallocatedslotswithintheduediligenceperiod.Thelongdrawn

processoffilingandcoordinationwithITUandtheduediligenceprinciple,therefore,make

DoSvirtuallygiftedavaluableandpotentiallyhighprofit

earningbandtoDevas.


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filingsfor Indiaspecificorbitalslotsacrucialprocess.Thedecisionmakingprocessshould,

therefore,beobjective,transparentandwelldocumented.

In addition to assigning orbital slots,

spectrum planning and coordination are

very important in planning and

implementing space projects. A large

number of colocated satellites can

potentially result in collisions and

polarisation interference10

in spectrum.

Therefore, the strategy of colocation of

satellites has to be considered before

planning a satellites movement in an

orbitalslot.

DoSdecidedtouseitsscarceorbitalslotat83oEastforthetwocolocatedsatellites(GSAT6

&GSAT6A),tobeusedexclusivelybyDevas.Further,therelatedSBandspectrumwasalso

earmarkedforanindefiniteperiodforusebyDevas.

DoSstatedinAugust2011thattheorbitalslotsandthespectrumremainedthepropertyof

Indiaandtheagreementforleaseoftransponderswasforadefiniteperiod.

ThecontentionofDoSneedstobeviewedinthecontextoftheagreementwhichprovided

foraperiodofleasewhichcoveredtheentireexpectedlifeofthetwosatellites(PS1andPS

2)of12years.Additionalcapacitywastobeprovidedbasedonathree yearnoticesubject

toenteringintoafreshleaseagreementandregulatoryapprovals.

3.5 DevascapitalisedontheagreementsignedwithAntrix

DevasMultimediaLimitedwasregisteredbyformeremployeesofISRO/DoSinDecember

2004undertheIndianCompaniesAct,1956,initiallywith10,000shareswithafacevalueof

`10each.Thenumberofsharesincreasedto1,81,824sharesbyMarch2010asindicatedin

Table5below. ThedetailedinformationisgiveninAnnexure1.

10Interferencewhichcausesachangeintheorientationofelectromagneticwaves.

Location of Geo-stationary Satellites of ISRO

GSAT-2 (480E)

INSAT-3E (550E)

INSAT-3C (740E)Kalpana-1 (740E

GSAT-3 (740E)INSAT-4CR (740E)

INSAT-2E (830E)INSAT-3B (830E)INSAT-4A (830E)

INSAT-3A (93.50E)INSAT-4B (93.50E)

Co-located

GSAT-6 (830E)GSAT-6A (830E)

ProposedlocationsforGSAT6,6A

DoS earmarked a valuable and prime orbital slot

forDevasforanindefiniteperiod.


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Table5:StatusofsharesatthetimeofincorporationandasofMarch2010

We observed that Devas issued capital at par to its employees and the employees of

M/sForge

Advisors

at

a

substantial

premium.

The

shareholding

pattern

along

with

share

premiumraisedason31March2010isgiveninTable6.

Table6:ShareholdingpatternofDevas

No

Particulars

Statusof

the

investor

At

time

of

incorporationAt

the

end

of

March2010

(1) (2) (3) (4) (5)

1 D.Venugopal Ex.ISROofficial 9000 9622

2 UmeshM Ex.ISROofficial/LDC 1000 267

3 CC/DevasMauritusLtd ForeignInvestor 0 31350

4 TelecomDevasMauritius ForeignInvestor 0 31350

5 Deutsche TelekomAsiaPvtLtd ForeignInvestor 0 36749

6 M.G.Chandrasekhar Ex.ISROofficial 0 35223

7 RamchadranViswanathan EmployeeofM/sForgeAdvisors 0 9623

8 PareshShah EmployeeofM/sForgeAdvisors 0 9622

9 JamesFox EmployeeofM/sForgeAdvisors 0 4179

10

DNatraj

Ex.

World

Space

employee

0

267

11 Abhishek Jain EmployeeofM/sForgeAdvisors 0 267

12 ClarenceIrving EmployeeofM/sForgeAdvisors 0 267

13 AmiraliHudda EmployeeofM/sForgeAdvisors 0 533

14 GarryMParson ColumbiaCapitalemployee 0 798

15 LawrenceBabbioJunior TelecomDevasemployee 0 798

16 DevasEmployeeMauritiusLtd Mauritiuslimitedcompany 0 4511

17 MurugappanA. Ex.Defencepersonnel 0 6400

18 Miscellaneous transfer 0 2

Total 10000 181824

Description ExISRO/DoS

/Defence

employee

Persons

associatedwith

M/sForge

Advisors

Investment

byforeign

investors

Others Total

Totalnumbersofsharesof 10

each held

51512 24758 101043 4511 181824

Totalsharepremiumpaid( in

lakh)

57566.04 316.34 57882.38

Totalamountpaid( inlakh) 5.15 2.48 57576.14 316.79 57900.56

Averagesharepremiumpaid

pershareof 10each(in )

56972 7013 31834

Rangeofsharepremiumpaid 21446to

126821

7013 7013to

126821

Valueofsharesbasedon

highestpremium( incrore)

653.28 313.98 1281.44 57.21 2305.91


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Devas, without engaging in any trading, manufacturing, or ground segment development

activity,couldraiseanamountof`575.76crorefromthesaleofits1,01,043shares,having

face value of `10 each, to three foreign investors at premia ranging from `21446 to

`126821pershare.Thevalueof51,512sharesallottedtoexISRO/DoS/Defenceemployees

atpar

increased

from

`5.15

lakh

to

`653.28

crore

even

before

the

commencement

of

activitiesbyDevas.

InanoteputupbytheExecutiveDirector,Antrix,Sh.K.Sridharamurthy,inJuly2006,itwas

proposedtoamendArticle3(i)oftheAntrixDevascontracttoreadastheleasedcapacity

was to be put up for renewal at least two years before the end of 12year period or

anticipatedlifeofthesatelliteforanother12yearsatareasonableleasefeetobemutually

agreedupon.

ThenotewasapprovedbyChairman ISROandSecretary,DoS,Dr.GMadhavanNair.Such

supportprovidedbyDoShelpedDevas, a privateCompany, to raisesubstantialpremium.

Therealisationof`1,26,821pershareintheyear200910tookthevalueoftheCompanyto

`2305.91crore,increasingthevalueofDevassharestomorethan12682timesinthe2005

10period. Thevalueofthesharesofamarketleaderintelecommunicationservices such

asBhartiAirtel inthesame fieldhad risenbyonly25timesduringtheperiod20032010.

ThiswasindicativeoftheembeddedvaluegrantedtoDevasbyDoSinthiscontract.

DoS, in its replyofAugust2011,confirmed the factsbroughtout inaudit. Further,while

furnishing information on the action taken, DoS stated (January 2012) that the interim

reportoftheMinistryofCorporateAffairs(MCA)indicatedmanyviolationsofCompanylaw

"Such amendment would reassure the investors of thecontinuityofthenewserviceunderreasonabletermsandconditions". ExecutiveDirectorofAntrix,July2006.

Devascouldsecuresubstantialforeigndirect investment

on thebasisof thebusinesspotentialof thedeal ithad

made with Antrix. The three Principals of M/s Forge

Advisorsviz.,Sh.RamchandranViswanathan,Sh.Paresh

Shahand

Sh.

James

Fox

are

also

shareholders

of

Devas

as

ondate.


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byDevas,warrantingaction.Investigationforpossibleactsofomissionandcommissionby

DevaswereunderprocessbytheMCAandtheDepartmentofRevenue(DOR). DoSadded

thataninvestigationreportofMCAandfeedbackfromDORwereawaited.

3.6 DoSdevisedthecostingofsatellitesGSAT6andGSAT6AtohelpDevas

TheSATCOMpolicystipulatedthatDoSwastofixpricesforthetransponders. Accordingly,

DoS constituted a Standing Pricing Committee for fixing the prices of transponders

consideringtheactualcosts,reasonablereturnoninvestment,andthemarketconditionsin

the year 2002. DoS did not fix the transponder lease charges for GSAT6 and GSAT6A

throughamechanismoftheStandingPricingCommitteeaswasdone inthecaseof INSAT

3A,3BandsatellitesoftheINSAT4series.InthecaseofDevas,itwasobservedthat:

(a) TheStandingPricingCommitteedidnotfixthepriceofthetransponderlease;

(b)

Chairman,ISRO/

Antrix

mandated

this

task

to

the

Dr.

Shankara

Committee

for

financial evaluation and negotiation. This committee did not incidentally have any

financialexpertinit.

(c) TheCommitteedidnot work out the totalcosting for theprojectsof GSAT6and

GSAT6A,consideringtheextentofriskbeingundertakenundertheagreementand

return on investment as well as marketing expenses and commission payable to

Antrix. It negotiated with M/s Forge Advisors on the offer made by them and

plannedtoincreasetransponderleasechargesonceDevassoperationsbecamecash

positive.

DoSestimated

the

cost

of

GSAT

6

and

GSAT

6A

as

detailed

below.

Table7:CostofGSAT6andGSAT6A

No Description Amount

( incrores)

1 DoScostforGSAT6(includinginsurance) 269.00

2 LaunchServicescost 175.00

3 Total(1)+(2) 444.00

4 Overheads11

(administrative)onprojecttobechargedat10%of(3) 44.40

5 Totalprojectcost(3)+(4) 488.40

6

Operational

cost

towards

operation

and

maintenance

of

satellite

by

MCF

for

the

designedlifeofsatelliteviz.,12years36.00

7 TotalCost(5)+(6) 524.40

8 DoScostforGSAT6Asatellite12

424.20

11 According to DoS instructions in order No. B31012/6/2006Sec.3 dated 27 October 2006, administrative

overheadsof10percentweretobecharged.12

Cost of GSAT6A included satellite cost of `147 crore, launch service cost of `175 crore, administrative

overheadsof`32.20crore,insurancecostof`34crore andoperationandmaintenancecostof`36crore.


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9 DoScostforboththesatellites(7)+(8) 948.60

10 ReturnoninvestmentforDoS@15%of(9) 142.29

11 CommissionforAntrix@15%of(9)and(10) 163.63

12 TotalcosttoDoS(9),(10)and(11) 1254.52

DoS

worked

out

the

cost

as `

1254.52

crore.

In

reality,

it

would

have

received `

1120.76

crore.Thiswas thesum totalof (a)annual leasecharges receivable@US$9 millionper

yearfor12yearspersatelliteand(b)upfrontcapacityreservationfeeofUS$20millionper

satellite.Thetotalcharges fortwosatellitesthusamountedtoUS$256million. InRupee

terms,thisamountedto`1120.76crore.TheAntrixDevasagreement,therefore,couldnot

haverecoveredthetotalcostincurredbyDoS.

DoS,initsreplyofAugust2011,statedthataspertheAntrixDevasagreement, anincrease

inleasechargesduetoyearly changesinthewholesalepriceindexworkedoutas`1310.29

crore

as

against`

1120.76

crore

as

estimated

by

Audit.

The reply of the department is not tenable since the benefit stream was indexed to the

wholesale price index and not to the cost stream. Further, the total cost to DoS of

`1254.52 crore was worked out without considering other revenue operations and

maintenanceexpenditureincurred,suchasexpenditureonspaceconsumablesheldintheir

stock, launch service cost, insurance, etc., which on an average worked out to `452.98

crore13.

ISRO had incurred an expenditure of `223.41 crore (as of February 2011) towards the

development of these two satellites developed as per the requirement of Devas to suit

Devasservices.

Whilefurnishingareportontheactiontaken,DoSstated(January2012)thatappointment

of a Directorlevel officer for costing was under process. The Chief Advisor (Cost) in the

MinistryofFinancewasconsultedforthecostingofINSATtransponders.

13 Revenue Operation and Maintenance (OM) expenditure of DoS for the 11 communication satellites in

operation during 200409 is`1203.08 crore. The OM cost per satellite per year therefore would be`21.87

crore. TheOMcostfor12yearsforonesatellitewouldbe`262.49crore. Therefore,fortwosatellites,the

OM cost works out to `524.98 crore. The underestimated OM cost excluding the expenditure of MCF

indicatedbyDoSfortwosatelliteof`72croreworkedoutto`452.98crore.

DoS fixed substantially lower transponder lease charges

forDevas.


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3.7 WhatwasuniqueabouttheDevasagreement

Until it signed the Devas agreement in January 2005, DoS had pursued two contractual

models in its interfacewithcustomers. Thehighlightsofthesetwoformsofrelationships

wereasfollows:

Table8:Customerspecificsatelliteagreementsagainsttransponderlease

agreements


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The Devas agreement was a combination of the above two types of commercial

arrangements

DoS

had

hitherto

entered

into

with

other

customers.

There

were

in

built

checksandbalancesinthetwoformsofcontracts,whichcreatedalevelplayingfieldforthe

customerswithoutcompromisingonthe interestsofDoS. It is interestingtonotethatthe

model created for Devas picked elements from both forms of agreements in a manner

whichwouldbenefitDevas.

Benefitswhichwereofcustomerspecificsatellitemode

1. NoneedforICCapprovals2. NorequirementtoapplyDoSadministrativeandfinancialcontrolproceduressuchas

vetting/approvalby

Ministry

of

Law

or

Member

(Finance)

of

Space

Commission.

3. Customer'sinvolvementindesign,development,launchandoperationofsatellite.4. Satellitecapacityexclusivelyearmarkedforcustomer.Benefitswhichwereoftransponderleasemode

1. SatellitetobefundedfromDoSbudget.2. Noneedtoestablishsatellitecontrolcentre.3. Nopaymentfororbitalslots.4. DoStoassistinobtainingregulatorypermission,frequencyallocation,licenceetc.DoS, while accepting the facts of the paragraph, contended that the objective of this

exercise was to ensure that certain technology that would otherwise not be available to

Indiawouldbeobtainedunderthisagreementand inreturn,theagreementwouldprovide

foraproperbusinessreturnforDevas.

ThereplyofDoSisuntenablesinceitdoesnotaddressthefactthattheSDMBservicewas

an untested technology, an unlicenced activity and a business proposition whose market

feasibilityhad

not

been

assessed

in

a

systematic

manner.

There

was

also

nothing

on

record

to establish the technical competence of Devas to roll out the new service. The business

returnstoDevas referred to inthe replyappeared tobeskewed in theCompanysrather

thanthenationsfavour.

The Devas agreement was a cherrypicking exercise in

whichDoS picked and chose those elements from two

contrasting forms of contractual agreements which

benefittedDevasandnottheGovernment.


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3.8 HowdidtheAntrixDevasagreementconditionsbenefitDevas

Accordingto

the

SATCOM

policy,

the

transponders

of

the

INSAT

system

were

to

be

allocated

tononGovernmentalusersbysigning leaseagreementsbetweenDoSandthecustomers,

spellingouttechnical,financial,contractualandmanagementclauses.

ThesystemofchecksandbalancesfailedinthecaseofthecontractwithDevasforleasing

outall transpondersofGSAT6and6A. Adetailedcomparisonof the termsof theDevas

contractwiththatofothertransponder leaseagreementstohighlighttheextentofundue

advantagetoDevasisplacedinAnnexure2.

WhatwerethetermsbeneficialtoDevas?

Thetermsoftheagreementweresuchthat inthecaseoffailureofsatellites,allrisksand

losseswere

to

be

borne

by

DoS.

Even

in

the

case

of

success

of

satellites,

DoS

was

to

bear

substantial financial load (difference between costs and receipts towards lease charges).

Audit testchecked 25 transponder lease agreements entered into by DoS and compared

these with the Devas contract to find deviations/ modifications in the Devas contract.

(Details in Annexure3). The terms of the AntrixDevas agreement were not precise and

contained conditional clauses, generally onesided, in most cases openended and

advantageoustoDevasasdetailedbelow:

1.Leased

capacitiesAllocation

of

satellite

capacity

exclusively

to

Devas

was

against

the

principle of "nonexclusive allocation" of satellite capacity stipulated

byICC.2. Periodoflease

andtermsand

conditions

Devaswasallowedanopenendedleasefortheentireexpectedlifeof

the two satellites. Additional satellite capacity was to be provided

based ona threeyear notice. Therefore,satellite capacity, valuable

The termsof theAntrix Devascontractwereonesided

and advantageous to Devas as compared to other

transponderleaseagreements.


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70MHzspectrumandanorbitalslotwereearmarkedforanindefinite

periodtoDevaswithoutanyfinancialconsideration.

3. Interruptionin

theprovisions

ofleased

capacity

The clauses relating to interruptions extended a big advantage to

Devas in cases of interruptions, instead of the smaller onehour

discountofferedtoothercustomers.

4. Board

Participation

Antrix was offered a position for one of its officials on the Devas

Board,whichitaccepted. Thiswasapparentlytocreateanimpression

to the international investors of Devas that the project was a

collaborativeproject.

5. Assignment Devas was permitted to sublicense, assign or sell all its rights

including scarce and valuable spectrum without any approval from

Antrix. In other transponder lease agreements, sub

licensing/assignmentswerenotallowed.

6. GoverninglawThe arbitration clause of the contract recognised Devas as an

international customer though their registered address as per the

contract was Bangalore. International agreements binding on a

department of the Government of India i.e. DoS involving

internationalcustomers,arbitrationproceedings,etc.,requiredunder

international law were to be cleared by the legal cell of DoS and

vettedby the MinistryofLaw.Thiswasnot done in thecase of this

contract.

7. Liabilityfor

damage

Devaswasuniqueinthatitwastobecompensatedfordelayinlease,

and for an amount as much as $ 5 million without approval of the

MinistryofLaw.

The

above

brings

out

how

the

contract

agreement

with

Devas

was

unique

in

that

it

accordedspecialbenefitstotheprivateentityand loadedupontheGovernment,risksand

liabilitiesthatexistedinnoneoftheothercontracts.

As events turned out, exploiting the provisions of the onesided contract, M/s Dua

Associates,AdvocatesofDevas,servedChairman,Antrixwithalegaldemandnoticeon11

February2011intermsofparagraph2.1.2.2ofExhibitBoftheAntrixDevasagreementfor


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INRequivalenttoUS$5millionwithin14daysofreceiptofthenoticeasapenaltyforthe

delayinthelaunchofspacecraftfrom22June2009to21June2010.

The AntrixDevas agreement was terminated by the Government on 23 February 2011.

Devas filed an arbritation demand on 29 June 2011 before the International Court of

Arbitration of the International Chamber of Commerce. Devas was able to file the

arbitration demand before the International Court, since unlike other transponder lease

agreements,whichprovidedthatdisputesbetweenpartiesweretobesettledbyarbitration

inaccordancewithrulesofarbitrationoftheIndianCouncilofArbitrationandawardsmade

in pursuance thereof, in the case of Devas, the agreement was crafted to provide this

specialdispensationtoit.

DoSstated inAugust2011,that theagreementwas terminated inFebruary2011. In June

2011,

Devas

filed

an

application

before

the

International

Court

of

Arbitration

and

this

petition was opposed by Antrix on the ground that the seat for adjudication under the

agreementwasNewDelhiandtheapplicablelawswerethelawsofIndia.

ThereplyofDoSconfirmsAuditscontentionthatthebeneficialclausesoftheAntrixDevas

agreement were now being invoked by Devas to bolster its legal position, to the

disadvantageofDoS.

Developments inrespectofthearbitrationpetitionfiledbyDevasbeforethe International

Court ofArbitrationof the International ChamberofCommerceconfirm theviewheld by

AuditthatthearbitrationclauseoftheAntrixDevasagreementsingularlybenefitedDevas.

SubsequentdevelopmentsontheAntrix Devasdeal,interalia,revealedthefollowing:

Basedonthepeti

CAG Report on Antrix-Devas Deal

Documents

Transcript of CAG Report on Antrix-Devas Deal