Sat. Jan 22nd, 2022

Shareholders in a $ 1.3 billion satellite company pursuing the Indian government have won a legal victory that would allow them to claim revenue from the national airline Air India, in an escalation of a protracted battle raging in courtrooms across the country the world is fed.

Devas Multimedia, which has been embroiled in a battle with the government since a contract it had to develop broadband wireless in the country was canceled a decade ago, has targeted Indian state assets for possible seizure.

The company was awarded about $ 1.3 billion in international arbitration awards, but India refused to pay, claiming that the original competition for the broadband contract was caught in fraud.

Devas shareholders, which include US investment groups Columbia Capital and Telecom Ventures as well as Deutsche Telekom, include Jay Newman, who led hedge fund Elliott Management’s 15-year battle to force the Argentine government to pay $ 2.4 billion on its defaulted debt. to pay, appointed to direct his legal effort.

In a court ruling in Montreal on Saturday, a judge ruled that Devas shareholders are entitled to half the money the Canada-based International Air Transport Association holds on behalf of Air India. The Iata operates a settlement system for travel agents, which means that its offices worldwide can handle much of an airline’s global revenue.

Devas shareholders claim they can claim the assets from Air India, which is owned by the government but is being sold to the Indian conglomerate, the Tata Group.

Jay Newman
Devas shareholders hired Jay Newman, who led Elliott Management’s fight with the Argentine government, to lead his lawsuit © Patrick Dodson / FT

They submitted an application last month to seize all of Air India’s funds held at the Iata, due to the impending sale to Tata.

Air India argued at last month’s hearing that funds going through the Iata represent about 65-70 percent of its revenue, and that the “continued operation of the airline is therefore endangered”. The Iata, meanwhile, told the trial the seizures had a “cooling effect” on its other customers.

Tata Sons, who did not complete the purchase of Air India, declined to comment. Air India declined to comment.

The Iata confirmed that “as part of a commercial dispute between various parties in India, Iata has served a third party seizure order on funds that Iata may hold for and on behalf of specific Indian entities.” It declined to comment further.

Meanwhile, Devas shareholders have also in fact seized a property in Paris’ luxury 16th arrondissement after obtaining an asset freezing order from a Paris court that allows it to register a mortgage on the property. The building previously served as the residence of the Deputy Head of Mission at the Indian Embassy.

The property, valued at € 3.8 million, is the same as that which Cairn Energy froze in Edinburgh last year as part of its efforts to force New Delhi to pay $ 1.7 billion raised by a international tribunal. The latest freeze of the apartment block has not been reported before.

“India has assets like this all over the world,” Newman told the Financial Times. “It’s just the beginning. We are still planning a lot of seizures.”

The seizures highlight the lengths some companies are willing to go to recover money owed by sovereign states. In August last year, India offered to repay $ 1 billion to Cairn. Cairn, now called Capricorn Energy, announced in January that it was withdrawing “all global enforcement proceedings” against the Indian government.

Devas shareholders have separately filed a lawsuit in the southern district of New York, which, if successful, could allow them to seize Air India’s aircraft.

As its struggle with Devas intensified, India launched legal action within the country to close the company. In November, India’s Supreme Court suspended the collection of Devas’ award from the International Chamber of Commerce after the attorney general said India had discovered “a serious fraud”.

However, in his ruling in Montreal on Saturday, the judge said the measures taken by India had “gone far beyond a legal dispute over the validity” of the arbitration awards.

“We’ve seen this show before,” Newman said, referring to countries’ efforts to prosecute creditors in domestic courts. “It has never affected our ability to pursue assets and cash flows outside the country.”

India’s Department of Revenue, its Ministry of Foreign Affairs, the Indian Space Research Organization and Antrix, the state-owned enterprise that had the original contract with Devas, did not respond to a request for comment.

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