Devas Antrix Case


The recent judgment of the Supreme Court (“SC”) in Devas Multimedia Private Limited v. Antrix Corporation Limited[1] (“the Antrix case”) has many interesting facets. It brings to light some interesting questions of law on the enforcement of foreign arbitral awards and the Bilateral Investment Treaties when the claimant company (Decree holder) is ordered to be wound up (for the first time in India)  on the grounds of fraud, which is against the public policy of India and most jurisdictions that are signatories to the New York Convention.

The judgment also examines the scope and ambit of Section 271(c) of the Companies Act, 2013 (“Act”), which has for the first time introduced ‘fraud’ as a ground for winding-up of a company. Another important question of law is whether such a judgment of the Apex Court of India will prevent the foreign courts, where enforcement of the said awards is ongoing (in USA, Canada, France, etc.), that may nonetheless enforce those awards in view of the discretion provided to the enforcing courts under Article V of the New York Convention.

The judgment also brings to the fore an important question of law about the evidentiary value of the audit reports after a fraud is discovered in relation to the affairs of the company. This question assumes importance in light of some of the recent corporate scandals that had significant ramifications for the duties and liabilities of statutory auditors and their perceived role in the eyes of the public.

To contextualise the issue, Devas — a joint-venture (“JV”) between Antrix, ISRO’s commercial arm, and Forge Advisors LLC — was established to deliver multimedia and information services via satellite to mobile devices tailored to the needs of various market segments within India.

The terms required ISRO and Antrix to invest in one operational S-Band satellite with a ground space segment which would be leased to the JV in return for annual lease payments and accordingly, the parties entered into agreements in 2005.

Thereafter, Devas obtained the necessary approvals and brought an investment of about INR 579 crore into India. However, later in 2011, Antrix terminated the agreements citing a force majeure clause that prompted the Indian Government to take a policy decision to not provide orbital slots in S-Band for commercial activities anymore.

Pursuant to the termination, Devas launched arbitration proceedings against Antrix before various fora and obtained favourable orders. Meanwhile, Indian investigation agencies initiated criminal investigation against Devas on the grounds of fraud, with the CBI contending that ex-officials of Antrix had illegally colluded with Devas to award the contract to it, despite the absence of  requisite technical and financial capacity.

In January 2021, Antrix sought the approval of the Ministry of Corporate Affairs (“MCA”) to launch winding-up proceedings against Devas on the grounds of fraud, as provided under Section 271(c) of the Act, which was subsequently granted. The NCLT, while noting that multiple kinds of fraud had been perpetrated by Devas at different levels of the deal, passed an order for winding up – which was subsequently confirmed by the NCLAT. Devas appealed these orders before the SC, under Section 423 of the Act, which allows the Apex Court to decide such matters only on the questions of law.

One ground of argument before the SC was that Antrix was estopped from pleading fraud at a later stage since the Auditor’s Reports that were filed by Antrix every year in the intervening period made no mention of any fraud committed on or by the Company.

In fact, the auditors of Antrix had certified that they have not discovered any fraud on or by Antrix during their audit. The Court accepted this contention as being factually correct and went on to hold that Antrix was not estopped from pleading fraud despite such lapses in its Auditor’s Report.

This piece will focus on the way in which the SC dealt with the import of the Auditor’s Report and the precedent it may set for auditor accountability in future cases of corporate fraud.

The Antrix case and its implications

The SC, while discussing the implications of reporting of fraud by auditors as contemplated under Section 143(12) of the Act, held that Chartered Accountants (“CAs”) and Auditors are neither experts in criminal law nor in the technology that formed the subject matter of the agreements between Antrix and Devas. Thus, their failure to report fraud would not act as a ground of estoppel against Antrix.

The SC explained that the statements of CAs are always supported by qualifications like “according to the information and explanations given to us in the course of our audit” or “to the best of our knowledge and belief and according to the information and explanations given to us”, thus showing that such audit reports are based on the information shared with the auditors by the concerned company or as per the information which has been culled out by auditors themselves “to the best of their ability”. The Court held that “the auditor’s report can neither be taken as gospel truth nor act as estoppel against the company”.

While it may indeed be argued that inaction on the auditors’ part to discover or report fraud cannot act as estoppel against the company as was held in the Antrix case, the Court’s observations vis-à-vis the evidentiary value of the auditors’ reports may have certain unintended consequences.

Firstly, the observations may have the effect of unwittingly diminishing the evidentiary value of such audit reports and diluting their sanctity. While as per the landmark English case of Re Kingston Cotton Mills,[2] an auditor is supposed to be ‘a watchdog and not a bloodhound’, the investing public often expects auditors to play a much larger role in unearthing corporate fraud and improving corporate governance practices.

This expectation becomes even more pronounced in light of recent corporate scandals, whose effects could have been avoided or mitigated had the auditors exercised a greater degree of oversight and professional judgment.

Secondly, these observations may also set back the clock on recent judicial and regulatory efforts to make the auditing profession more accountable by pinning liability on them in appropriate case of corporate frauds. This trend can be noticed in cases such as ICAI v. Mukesh Gang[3] where the Court held the auditor guilty of gross negligence and violation of auditing standards. The Court held that in view of the gravity of the professional misconduct displayed by the auditor, exonerating him would encourage others to indulge in similar unethical acts and raise questions about the integrity of the auditing profession in general.

Similarly, the legislative effort to make the auditing profession more accountable may also be witnessed in the Companies (Auditor’s Report) Order, 2020 (“CARO 2020”) that prescribes an extensive list of matters on which a statement should be made by the auditor, in the Auditor’s Report prepared in accordance with Section 143 of the Act.

This highlights the increased regulatory trends to ensure that auditors do not just remain mute spectators while corporate frauds are being played out but rather make an honest attempt to probe matters of concern, if any, and flag them to the concerned authorities.

Legal regime relating to the evidentiary value of Auditor’s Reports

As discussed above, the auditors have a statutory obligation to report cases of suspected fraud either to the Central Government or to the concerned company’s Board or Audit Committee, as the case may be, under Section 143(12) of the Act. Section 143(13) provides immunity to auditors for such actions taken by them in good faith.

Additionally, the various Auditing Standards provide guidance on the level of professional oversight that auditors are expected to exercise while conducting their audit. For instance, Auditing Standard SA 240 requires the auditor to maintain professional scepticism throughout the course of the audit and investigate inconsistencies found in response to his inquiries of either the management or those charged with governance.

The auditor is also required to inquire from the management and other stakeholders within the corporate entity, to determine if they have knowledge of any actual, alleged, or suspected fraud concerning such entity. They are also empowered to perform a retrospective review of management judgments related to significant accounting estimates of the previous year’s financial statements. The Auditing Standards accordingly indicate that the auditors are required to take a more proactive stance with respect to corporate fraud.

In Institute of Chartered Accountants v P.K. Mukherjee,[4] the SC held that the audit process was intended to protect the shareholders and the auditor is expected to examine the accounts with a view to informing the shareholders about the company’s true financial position. Thus, the auditor must act in the interests of the shareholders who are in the position of beneficiaries. Accordingly, the Court held that the auditor is under a “clear duty towards the beneficiaries “to probe into the transactions” and to report on their true character”.

In Hindustan Lever Employees’ Union v Hindustan Lever Ltd.,[5] it was held that an auditor must be independent of the company’s Board of Directors and is “expected to play the role of a watch-dog on behalf of the shareholders of the company”.

Concluding Thoughts

This post highlights the unintended fallouts of the SC’s observations when it refused to attach much significance to the role of auditors in a company that has been accused of engaging in fraud. While it is true that auditors are neither criminal lawyers nor trained technocrats, they do play an important role in ensuring financial hygiene in the dealings of a company, and in informing the shareholders about the true financial position of the company.

While auditors may not necessarily view themselves as being responsible for actively sniffing fraud, the public and the regulators expect  them to play a more proactive role in safeguarding the interests of the minority shareholders and general public, especially where large sums of public money is involved. This judgment of the Apex Court may give discomfort to all the stakeholders who take major investment decisions relying on the Audit Reports.

[1] Civil Appeal No. 5766 of 2021

[2] (1896) 2 Ch 279 at 288, UK Court of Appeal.

[3] 2016 (6) ALT 606.

[4] AIR 1968 SC 1104

[5] (1995) 83 Com Cases 30

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Photo of Bharat Vasani Bharat Vasani

Senior Advisor – Corporate laws at the Mumbai office of Cyril Amarchand Mangaldas. Bharat has over 30 years of experience at senior management level. His areas of specialization includes company law, corporate and commercial laws, securities law, capital market, mergers and acquisitions, joint…

Senior Advisor – Corporate laws at the Mumbai office of Cyril Amarchand Mangaldas. Bharat has over 30 years of experience at senior management level. His areas of specialization includes company law, corporate and commercial laws, securities law, capital market, mergers and acquisitions, joint ventures, media & entertainment law, competition law, employment law and property matters. He heads firm’s media and entertainment law practice.  He is highly regarded in Government circles and in various industry organizations for his proactive approach on public policy issues. Bharat was a member of the Expert Committee appointed by the Government of India to revise the Companies Act, 2013.

Prior to joining the Firm, Bharat was the Group General Counsel of the Tata Group.  He has been at the helm of and steered several large key M&A transactions pursued by the Tata Group in the last 17 years.

Bharat’s contribution to the legal fraternity has been recognized by the Harvard Law School’s Award for Professional Excellence in 2016. Bharat has won several other national and international awards for his various achievements. He had a brilliant academic record in law and first rank holder in all India company secretary examination. He can be reached at

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Associate in the General Corporate Practice at the Mumbai office of Cyril Amarchand Mangaldas. Varun can be reached at

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Associate in the General Corporate Practice at the Mumbai office of Cyril Amarchand Mangaldas. Rajashri can be reached at