Corruption in the air(waves)

| Updated on: Feb 11, 2011

February is usually the month when ‘there is romance in the air'. This time, however, it seems, instead, that ‘there is corruption in the air'. Even as the 2G storm continues, the S-Band low pressure trough has intensified over the last few days into another powerful cyclone. Given the fancy for naming such weather events, if the first cyclone in air-waves was called ‘Spectrum', the second one is already being referred to as ‘S-Band'.

At a recent press meet ISRO officials were pained to declare that termination of a contract is a complicated process and takes time. The Hindu has made available the text of the contract between Antrix Corporation and Devas Multimedia dated January 8, 2005. Media reports indicate that statements have been issued by the PMO's office to the effect that there has been no revenue loss to the Government of India and that the issue is being blown out of proportion.

Just as an Income Tax Tribunal decision referred to the commission in the Bofors deal, the Karnataka High Court, in a VAT case, had occasion to examine another contract executed by Antrix. A reading of this decision prompted this article since there are certain glaring differences between the two contracts.

VAT case

Antrix challenged an assessment order passed by the Karnataka VAT Authorities questioning the levy of VAT on the lease of transponders. The decision went against the company and, on appeal, the Supreme Court directed the parties to agitate the matter through the normal course of appeal on the ground that the Writ is not maintainable.

The tax angle is totally irrelevant to this article. However, what is relevant is the affidavits filed by the Company before the Court as well as certain contract clauses extracted in the decision of the Karnataka High Court which and reported in 2010 TIOL 510-HC-KAR-CT. In the affidavit it is stated by the Company that the control of transponder is always with the Department of Space and it should not be given to the customers. The configuration, control and the possession of the satellite always remains with the Department of Space. Interestingly, in the Devas contract, a team from Devas is permitted to enter Antrix's location (except classified areas) for project monitoring and coordination. It is very strange that a Government contract, and that too one involving a sensitive agency such as ISRO, is providing a private customer access to its facility. The Court has also extracted certain clauses from the contract with Bombay Stock Exchange and the differences are reflected in the Table.

Debatable issues

The following key questions arise with reference to the contract with Devas, which is now the subject matter of debate and concern:

When right of sub-lease and right of assignment was not granted for a small portion of capacity in respect of Bombay Stock Exchange, why was such largesse displayed in the Devas contract?

When Antrix is proclaimed as a Government of India company, how is it that the contract does not have adequate recitals explaining the decision-making process and the resolutions of the Government?

Normally, when two Indian companies enter into a contract with an arbitration clause, the reference would be to the Arbitration and Conciliation Act, 1996. Why does this contract refer to International Chamber of Commerce or UNICITRAL Procedures?

How did the Company take a decision to execute a lease for a period of 12 years, and that too to commence after delivery of the leased capacity?

Is it common practice for a sensitive body such as ISRO to provide office space and customer personnel access to their locations for project management and coordination?

Apparently, there are a number of questions and the common man fighting his lone battle with food inflation at 13 per cent is increasingly getting upset with the simple numbers that are being discussed in both these raging debates. Generally, cyclones cause damage and leave a path of destruction. These two cyclones are unlikely to be different. It is only hoped that the S-Band issue does not eclipse the Spectrum issue which is still under investigation.

(The author is a Chennai-based Advocate. >blfeedback@thehindu.co.in )

Published on February 12, 2011

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