The following is the legal opinion given on July 12, 2010 by Additional Solicitor-General Mohan Parasaran on annulment of the Antrix-Devas agreement of January 28, 2005.
The core of the legal advice is to invoke force majeure to terminate the agreement, with the direction coming from the Department of Space on the basis of a decision “taken by the Government of India, as a matter of policy, in exercise of its executive power or in other words, a policy decision having the seal and approval of the Cabinet and duly gazetted as per the Business Rules of the Government of India.”
Querist: The Department of Space, through its Secretary.
Sub: Agreement dated 28.1.2005 between M/s. Antrix Corporation Limited and M/s. Devas Multi Media Private Limited.
M/s. Antrix Corporation Limited (hereinafter referred to as ‘ANTRIX') is a Public Sector Undertaking and is an arm of the Department of Space, Government of India. It entered into a commercial contract, after nearly two years of negotiation, on 28.1.2005 with M/s. Devas Multi Media Private Limited (hereinafter referred to as ‘DEVAS'), for lifetime lease of 90% capacity of S Band Transponder of 2 satellites, built by the Indian Space Research Organisation (ISRO) [GSAT — 6 and 6A]. However, after the signing of the said agreement, it has been realized by the Government of India that the Antrix-Devas lease agreement on GSAT-6 and 6A would take away most of the total S band spectrum available. The S band spectrum is crucial for several strategic and societal services. The Integrated Space Cell of IDS, Ministry of Defence have projected a need for 17.5 MHz in S band for meeting the immediate requirements of Armed Forces, another 40 MHz during the 12th plan period and an additional 50 MHz during the 13th plan period. Armed Forces have also projected the need to build S bank satellite capacity through GSAT-7S, for national security related mobile communications. There are further demands for S band transponders from international security agencies viz., BSF, CISF, CRPF, Coast Guard and Police for meeting their secured communication needs. Indian Railways have also projected S band requirements for train tracking.
In view of these emerging requirements, there is an imminent need to preserve the S band spectrum for vital strategic and societal applications. Besides this, there were also certain concerns on the technical, commercial, managerial and financial aspects of Antix-Devas contract such as, severe penalty clauses for delayed delivery of the spacecraft and for performance failure/service interruptions, violation of ICC guideline of ‘non-exclusiveness' in leasing the capacity, the contract enabling Devas to sub-lease the capacity without any approvals which could even give rise to security concerns, etc.
It is evident that the two satellites together, if launched, would require about 70 MHz of the S band spectrum of 150 MHz allocated to ISRO for satellite in the orbit. This will result in serious consequences strategically affecting the needs of the defence and other departments concerned with national security, including para-military departments, Indian Railways, etc.
Opinion has been sought from me as to whether Antrix-Devas contract can be annulled by invoking any of the provisions of the contract in order to (i) preserve precious S band spectrum for strategic requirements of the nation and (ii) to ensure a level playing field for other service providers using terrestrial spectrum.
The core issue which arises for consideration is as to whether there are justifiable or legal grounds existing for termination of Antrix-Devas contract. For this purpose, one has to necessarily advert to the contract/agreement that has been entered into between Antrix and Devas on 28.1.2005. Article 2 of the said contract defines ‘lease capacity' as follows:
“In accordance with the terms and conditions of this Agreement, ANTRIX shall lease to DEVAS and DEVAS accepts such lease of 5 (five) C X S transponders each of 8.1 MHz capacity and 5 (five) S X C transponders, each of 2.7 MHz capacity on the Primary Satellite 1 (PS1) with technical performance and other specifications defined in Exhibit A, and/or any other available capacity as provided and/or mutually agreed to by the Parties in writing (hereinafter the ‘Leased Capacity'). DEVAS and ANTRIX agree that the Leased Capacity shall be utilized in accordance with this Agreement and its Exhibits. ……..”
The modus of termination has been specified in the agreement in clause 7. But I am afraid that the conditions stipulated in this clause cannot be invoked at this stage for the purpose of terminating the contract. The only other relevant provision for seeking recourse to terminate the contract under the given factual scenario viz., national needs and change in governmental policies, would be Article 11 of the contract, relating to ‘Force Majeure'. Article 11(a) provides that neither of the parties shall be liable for any failure or delay in performance of its obligations under the contract if the delay or failure is occasioned due to the force majeure as defined in the said Article and that it is incumbent upon either party seeking recourse to force majeure to give a notice of 7 days of the event of force majeure having occurred to the other party.
Article 11(b) of the contract defines the event ‘force majeure' in an inclusive manner. ‘Force majeure' has been defined to include any event, condition or circumstance that is beyond the reasonable control of the party affected (affected party) and that despite all efforts by the affected party to prevent it or mitigate its effect (including the implementation of business continuation plan), such event, condition or circumstance prevents the performance by such affected party of its obligations mentioned herein. The following events may be considered as force majeure events under the agreement:
(i) explosion and fire;
(ii) flood, earthquake, storm or other natural calamity or act of God
(iii) strike or other labour dispute;
(iv) war, insurrection, civil commotion or riot;
(v) Acts of or failure to act by any governmental authority, acting in its sovereign capacity; ( emphasis supplied by me)
(vi) Changes in law and regulations. ( emphasis supplied by me)
(vii) National emergencies.
It is noticed that when the agreement was entered into between Antrix and Devas, way back in the year 2005, the circumstance was vastly different than what it is today. The governmental policies with regard to allocation of satellite spectrum has undergone a sea change and there has been a tremendous demand for allocation of spectrum for national needs, including for the needs of the Defence, para-military forces, railways and other public utility services as well as for societal needs. There can be no dispute whatsoever that the Government of India is the owner of satellite spectrum space and any policy taken by the Government of India with regard to allocation and use of S bandwidth, including those which are subject matter of contractual obligations, would fall within the doctrine of force majeure, as envisaged in the very agreement between Antrix and Devas. However, I only wish to add one note of caution. It is always advisable that in the present case, instead of the Department of Space taking a decision to terminate, it would be more prudent that a decision is taken by the Government of India, as a matter of policy, in exercise of its executive power or in other words, a policy decision having the seal and approval of the Cabinet and duly gazetted as per the Business Rules of the Government of India. That would give a greater legal sanctity to the decision to terminate the contract in as much as the contractual provisions expressly stipulate that for the force majeure event, to disable one of the parties to perform its obligations under the contract, the act must be an act by the governmental authority acting in its sovereign capacity. Several reasons exist to resort to this sovereign power for preserving national interest. In my view, instead of the Department of Space directing Antrix to terminate the contract, it will be advisable from a legal perspective that the direction comes from the Department of Space on the basis of a governmental policy decision, as indicated above. I have nothing further to add.