The Indian Space Research Organisation (ISRO) did not inform the cabinet, while seeking approval for two satellites, that they were primarily for the use of the Bangalore-based multimedia firm, Devas.
Isro chairman K Radhakrishnan admitted this on Tuesday even as he declared that the government was, in any case, in the process of scrapping the deal between the agency's commercial arm, Antrix, and Devas.
In 2005, Antrix struck a deal with Devas Multimedia on leasing out of a space segment capacity that would use S-Band spectrum. Now there are allegations that the deal resulted in a huge loss to the exchequer.
"We realised that the S-band spectrum that no one was interested in back in 2005 was now a precious national commodity," Radhakrishnan said, confirming that no bidding was conducted before the deal with Devas.
Sources confirmed that it was Devas that had approached Isro with the project proposal.
Both the Prime Minister's Office and Isro asserted on Tuesday that the country suffered no revenue loss from the deal.
Radhakrishnan, however, said it was not explicitly mentioned to the cabinet that the two satellites, GSAT 6 and GSAT 6A, were primarily going to be used by Devas. He said 90% of transponders on two satellites were to be used by Devas to send out multimedia programmes.
The Isro chief stressed it was the government's own internal checks and balances that led to the move towards annulling the contract with Devas.
In December 2009, Isro decided to review the Devas contract and concluded through the review that the deal must be annulled. In June 2010, the law ministry told Isro to scrap the deal.
Asked why the deal had not yet been scrapped eight months later, Radhakrishnan said the government wanted to ensure all steps were taken to minimise the penalty that Isro would need to pay to terminate the contract.