Antrix Corp, the commercial arm of the Indian Space Research Organisation (Isro), has lost a case at an arbitration court at the Hague regarding the cancellation of its deal with Devas Multimedia, a satellite firm to which the former had leased two satellites. In September last year, the International Court of Arbitration, Paris, had asked Antrix to pay Devas $672 million as compensatory damage for having annulled the deal. This can create doubts among international investors about the ability of the Indian government, which is in direct charge of Isro, to honour international deals and treaties. Why it did not do the due diligence before making the contract is another question.
There are two aspects to the question: One is that why the deal was signed in the first place, and the second is why was it annulled. As regards the first question, the answer is that the deal was done in a manner that forced the then Isro chairman, K Radhakrishnan, to admit that Isro had not informed the government about the deal, which was about leasing two satellites to Devas for a quicker telecommunication service. Even the Space Commission wanted the deal rescinded. And all this happened just after the 2G spectrum scam, which, the Comptroller and Auditor said, cost the exchequer Rs 1.76 lakh crore, came to light, and the Devas deal began to mimic the 2G scam in various ways, such as the absence of competitive bids. In this situation the government was cornered into scrapping the deal.
But as regards the second question as to why it was annulled, it is not that international contracts have never been cancelled. For example, in the case of Enron, had the Maharashtra government had stuck to its original decision to abrogate the deal, much of the later embarrassment could have been avoided. Hence the government, in the Devas case, acted within its rights.