December 5, 2021

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Air India sale does not impact petition to seek asset seizure, say Devas investors

Investors in Devas Multimedia have in a written submission to a US court said that the sale of Air India to the Tata Group does not impact their petition to seek seizure of the national carrier’s assets to enforce an arbitration award the satellite maker has won against India.

In a letter to judge Paul G Gardephe of the US District Court for the Southern District of New York, the shareholders argued against Air India’s motion to dismiss the petition and claimed that the Tatas would inherit liabilities of India and Air India.

“India’s transfer of Air India to Tata will do nothing to moot plaintiffs’ claim that their award should be enforced against Air India as an alter ego of India … Tata will take control of Air India with notice of plaintiffs’ claim on a portion of its assets,” the letter, dated November 15, read.

The assertion of Devas shareholders has come even as UK-based Cairn Energy has agreed to drop all litigation to seize India’s properties abroad, including those of Air India, after it accepted the government’s offer to settle a $1 billion tax dispute relating to the now-scrapped retrospective tax law.

Devas’ shareholders have argued that the privatisation of Air India will not impair the court’s ability to grant them relief. While Air India may no longer be an “alter ego” of India, when they filed the petition, the airline was still a government asset, their submission said.

Tata Sons did not comment.

But senior executives from the Tata Group said the proposed Air India acquisition has been looked at closely by several legal experts and adequate protections have been ensured from such claims.

“The group has been adequately protected by an indemnity clause, and Reps and Warranties in the final transaction given the possible risks arising from such claims. It does not concern the acquirer in any case. Our interests have been safeguarded,” an executive close to the development said.

Representations and warranties insurance are done in mergers and acquisitions to protect the buyer against losses arising from sudden claims resulting from developments prior to the deal.

The group has a team comprising M&A specialists from group operating companies such Vistara, Air Asia, Tata Steel and Indian Hotels, apart from the Tata Sons M&A team closing the final deal. An executive close to the matter said several claims ride on the assertion that Air India is part of the Indian government and consequently its assets can be attached to satisfy claims. “It won’t be easy for such claims in litigation,” he said.

The Tatas have also sought a sovereign guarantee against any pre-acquisition claims that Air India faces, he added.

The Devas shareholders argued that it is premature to determine that the sale of Air India is not related to India’s desire to avoid enforcement of any arbitral awards against it. “…the fact that these efforts are only coming to fruition now indicates that the planned sale may very well be related to this and other awards against India,” their submission said.

“India has shown itself willing to engage in virtually any tactic to avoid paying arbitral awards against it and its state-owned enterprise, Antrix, in connection with the Antrix-Devas contract, including seizing Devas’ bank accounts, forcing Devas into liquidation in India, and engaging in sham criminal investigations against Devas and its personnel,” it added.

Its shareholders urged the court that discovery in the case should be done immediately, and motions to dismiss the case should be denied, as the transfer of Air India’s ownership poses a risk that “evidence will be moved out of the jurisdiction, lost, or rendered unavailable if the sale goes through”.

Discovery is a formal procedure used by parties to a lawsuit to obtain information before the trial.

Shareholders in Devas Multimedia had filed a petition in the New York court in June this year seeking to seize the assets of Air India in the US as reparation for India’s failure to honour an $1.2 billion arbitration award won by the satellite firm in 2015.

The multiple litigation stems from the cancellation of a satellite deal between Antrix Corp — the commercial arm of the Indian Space Research Agency — and Devas Multimedia in 2011 that culminated in the arbitration award four years later.

Deutsche Telekom, an investor in Devas Multimedia, has also filed a case with the US Federal Court for the Western District of Washington, seeking India to pay its share of $135 million in damages.

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